Indonesia moves to stabilize rice prices

The government is to release some of its national rice stock to help ensure the stability of rice supplies and stabilize prices, which have crept up 5 percent lately.

The release of rice stocks will continue until at least the next harvest in February, Coordinating Minister for the Economy Boediono said, when the country’s production of the staple food commodity is expected to be restored to sufficient levels.

"We will go all out in putting additional supply onto the market, first to protect consumers, and, second, to prevent the possibility of higher inflation," Boediono said Monday after a ministerial meeting on the matter.

The price of rice usually goes up during droughts and after harvest time, he added, but an average rise of 5 percent within just one week is considered unusually high.

The government had therefore tasked the State Logistics Agency (Bulog) to release additional supplies from the national rice stock according to each region’s needs.

"We have instructed every local administration to assess the situation in their respective areas, and release any necessary additional supplies," he said.

"The (central) government can itself carry out direct action, but only in certain extraordinary cases. The stability of rice prices in each region is primarily the responsibility of each governor and regent or mayor."

Trade Minister Mari Elka Pangestu said seven provinces had so far asked for additional rice supplies, the last being North Maluku. The province may face a rice scarcity due to the failure of the harvest there recently.

The Central Statistics Agency (BPS) noted that the surge in the price of rice was particularly pronounced in West Java and North Sumatra.

In West Java’s capital, Bandung, the price of rice has risen over the course of one week by between Rp 4,900 (53 U.S. cents) and Rp 5,000 from between Rp 4,100 and Rp 4,300 previously.

There are indications that the price rises are not only due to a shortage of supplies as a result of this year’s prolonged dry season, but also because of hoarding by traders hoping to take advantage of minimum-wage hikes next year.

Boediono declined to reveal how much additional supplies would be released from the national buffer stock, or to what level it wanted to see the rice price come down to.

He also declined to say whether further rice imports were needed.

"Our stocks are sufficient, and if they run low in the future, we will make them enough," he said. "All options are still open, we’ll assess the needs later, even exporting rice is an option."

Indonesia’s rice consumption may reach 32.13 million tons this year, a study by the Agricultural Ministry has revealed, with production, however, only amounting to 30.39 million tons.

The government imported 210,000 tons of rice in September to help cover the shortfall, and maintain the national buffer stock at a minimum of 1 million tons.

A latest joint report produced with the World Bank showed that the recent rise in Indonesia’s poverty rate was largely due to a 33 percent rise in rice prices over the twelve months following last year’s fuel price hikes. Buying rice accounts for as much as a quarter of total spending among the country’s poor.

The report, therefore, suggested a lifting on the ban on rice imports to secure rice supplies and bring about lower prices.