TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Analysis: Retail stocks empty as Jokowi distributes rice to 22m families
Change Size
Workers package food in bags labeled as donations from President Joko “Jokowi” Widodo. (JP/Dhoni Setiawan)
A
s President Joko “Jokowi” Widodo’s ramped up the rice social assistance program for 22 million poor households in January ahead of the general election, premium rice disappeared from modern retailers. Responding to the scarcity, the President ordered the National Food Agency (Bapanas) and the State Logistic Agency (Bulog) to flood the market with rice from state reserves.
Roy Mandey, chairman of the Association of Indonesian Retailers (Aprindo), explained that members such as Alfamart and Indomaret had decided not to restock their shelves after they could not find supplies of affordable premium rice, as the commodity’s wholesale price had exceeded the government-set price ceiling (HET). At the same time, they could not obtain medium-grade rice from Bulog under the agency’s price stabilization (SPHP) program, which had been redirected to the social assistance program.
Bulog distributed around 850,000 tonnes of SPHP rice as of the end of January, but primarily for Jokowi’s rice social assistance program. Many alleged that the distribution of rice to 22 million households ahead of the election was intended to bolster the electability of presidential pair Prabowo Subianto and Gibran Rakabuming Raka.
President Jokowi has insisted there is no connection between the rice distribution program and the rice shortage at modern retailers.
Bulog CEO Bayu Krisnamurthi has attributed the shortage to high farm gate prices, due to a decline in domestic rice production over the last eight months as a result of impacts from the El Niño weather phenomenon. Bulog records show that farm gate prices for premium rice currently stand above Rp 15,000 per kilogram, significantly exceeding the HET of Rp 13,900 per kilogram as set by Bapanas.
Bapanas data from last Tuesday showed that the price of medium-grade rice had increased 0.43 percent to Rp 13,890 per kilogram, reaching a high of Rp 20,980 in Papua Highlands province and a low of Rp 12,550 in Jambi. Meanwhile, the price of premium rice had increased 0.76 percent to Rp 15,870 per kilogram.
The reports of rice scarcity at modern retailers prompted Jokowi to summon the Bapanas and Bulog chiefs as well as a number of ministers to address the problem. After learning that Bulog still had reserves of around 1.2 million tonnes of rice, the President instructed Bapanas and Bulog to flood the market with rice. Bulog was also told to increase the SPHP rice allocation by 150,000 tonnes to 200,000 tonnes to address the shortage.
Bapanas chairman Arief Prasetyo Adi said the state had sufficient rice stock, but acknowledged that most rice was sold in bulk per 50 kilograms. He told Bulog and its distributors to repackage the rice into 5 kg bags, as typically sold at modern retailers, and expedite distribution.
Bulog indeed has enough rice in its warehouses after the government tasked it to import 3 million tonnes of rice last year. According to the agency’s chief Bayu, President Jokowi has approved a plan to import 2 million tonnes of rice in 2024 to ensure it has enough reserves for the rest of the year.
Meanwhile, Arief said Bapanas would not increase the HET for rice because Bulog still had sufficient stock, and called on Bulog to push down the price of commercial rice below the HET while Aprindo reduced its margin. He expressed confidence that rice prices would normalize after the seasonal rice harvest in March.
What we’ve heard
Sources within the government mention that the increase in premium rice prices in several regions could worsen if the plan to import rice from Vietnam is canceled. Especially since there is also a shortage of rice supply in that country due to crop failure.
"The goods are indeed not available in Vietnam," said the source, explaining why rice from Vietnam has not arrived.
Meanwhile, the government plans to import 500 thousand tons of rice before the harvest season. This harvest season is estimated to peak in April-May this year, which is delayed from the initial prediction due to El Nino. That's why rice prices are rising because the supply is also tight.
Another source mentions that rice reserve stocks are dwindling because they are also being used for social assistance needs distributed by Jokowi not long ago. Due to the increasing international demand, import rice prices also rise. "The calculations are innaccurate because they thought they could immediately get imported rice," said the source, explaining why Bulog has been aggressively releasing rice for social assistance despite shortages.
On the other hand, retail traders still have rice stocks from suppliers. However, they are reluctant to release them to modern retailers because the prices have exceeded the highest retail prices. They are unable to distribute to modern retailers because the rule prohibits selling above the regulated price. Meanwhile, the prices from suppliers are already above the regulated price.
On the other hand, retail market traders still have to bear shipping costs almost twice the profit that can be obtained if the rice is released at the regulated price. It's no wonder that some entrepreneurs and traders propose to increase the regulated price for rice.
Rice stocks are also decreasing in milling because some mills are holding back production. Higher paddy prices than the regulated purchase price cause absorption to be hampered. Bulog cannot buy because the price is above the regulated purchase price.
Disclaimer
This content is provided by Tenggara Strategics in collaboration with The Jakarta Post to serve the latest comprehensive and reliable analysis on Indonesia’s political and business landscape. Access the latest edition of Tenggara Backgrounder to read the articles listed below:
Politics
- Quick counts show Prabowo victory
- Ethics violations haunt Gibran’s election as VP
- House supports Village Law revision ahead of elections
- PDI-P leads legislative race with Golkar, Gerindra close behind
Business and Economy
- Updated rooftop solar panels rulings eliminates net metering
- KCI to replace Japanese train imports with Chinese trains
- Rumors of potential merger between GoTo, Grab resurface
