Friday, May 02, 2008 ,Vincent Lingga, The Jakarta Post, Jakarta
Contingency measures to increase food buffer stocks and improve price stabilization are necessary but not enough to address the skyrocketing price of rice in the international market.
The most outstanding change in food grain markets since early 2007 is that sky-high food prices have been taking place amid relative abundance, not at a time of severe scarcity caused by crop failure. That means the steep price hikes have been driven mostly by demand.
Most analysts agree that the present upward price trend will likely be a permanent development due to the cascading impact of the following factors: climate uncertainty, steady rise in demand, high oil prices that make fertilizer much more costly, farmland conversion into other industrial uses and the misguided subsidized biofuel craze in the United States and Europe.
No wonder the clearest message of this trend is that, like oil, the era of cheap food has ended.
The steep price hikes to as high as US$1,000/metric ton last week should therefore prompt the Indonesian government to redesign the concept of its food security which has thus far focused on ensuring an adequate supply of rice at affordable prices to all people at all times.
The government should not let itself be misled into past grave mistakes of going all out at all costs to achieve rice self-sufficiency.
It is rather impossible for such a vast archipelago state with a population of around 230 million and an annual national rice consumption of 32 million tons -- which will keep growing -- to secure rice self-sufficiency.
Indonesia did achieve rice self-sufficiency in the mid-1980s but only for one or two years. Even this unsustainable achievement was the culmination of more than 15 years of huge investment in irrigation, agricultural extension services and studies, generous subsidies for fertilizer, pesticides and farm loans and the work of the National Logistics Agency (Bulog) to manage buffer stocks and a price stabilization mechanism.
The oil windfall that made all these huge investments possible has dried up as the country has instead become a net oil importer.
In the absence of new technology breakthroughs and of any significant expansion in rice land outside Java due to lack of irrigation networks, there seems to be few better alternative policies for the government than to step up food crop diversification programs through integrated agriculture development.
Even irrigation networks in Java, which accounts for more than 70 percent of the national rice output, have been crumbling due to lack of maintenance, Pantjar Simatupang of the Centre for Agro-Socioeconomic Research told a seminar at the Centre for Strategic and International Studies last Thursday.
However vital rice is, the blunt reality is that rice growers never find themselves among the highest earners in the rural areas, especially in Java where most farmers till less than 0.5 hectares of land. Moreover, more than 80 percent of the whole population are net rice consumers.
Food security therefore should only be part of a broad-based agriculture development program with the ultimate objective of increasing rural household incomes both from farm and off-farm activities.
The concept thus aims at empowering the farmers' economy and the rural community through the development of rural and farm infrastructure. This is quite strategic as more than 55 percent of the total population still lives off farming in rural areas.
The focus of the program should be on farmers' income, which needs a good balancing act of securing food security and a steady rise in farmers' earnings. Better earnings will enable people and the farmers to diversify their diets away from rice.
Bayu Krisnamurthi, deputy of the coordinating minister of the economy for agriculture and marine affairs, was right in observing last week that the clear and present danger now was not an acute food shortage. The real problem is the weak purchasing power of many people who have to spend as much as 25 percent of their income on rice alone.
Krisnamurthi said the per-capita supply of all carbohydrate-rich food commodities (rice, cassava, tubers, maize, sago, etc.) amounts to about 1.2 kilograms/per capita per day while a balanced daily diet only calls for 300 grams/capita.
The problem, though, is that misguided diversification programs have succeeded only in making wheat (bread and noodles), which is not grown locally, the second-most widely consumed staple after rice.
The vulnerable food situation is similar to what the country is now facing in the energy sector. Decades of misguided energy policy made the nation dependent mostly on fossil fuels despite the availability of other energy sources such as geothermal, coal and solar power.
Too much emphasis on rice no longer provides much room for additional employment and income growth because productivity gains in this food grain have diminished, especially in Java.
The government should instead accelerate integrated agricultural development by pouring more investment into such basic rural and farm infrastructure as roads, market places, transportation and processing facilities, financial networks and research stations designed to meet area-specific conditions as well as farm technical extension services.
Better farm and rural infrastructure will enable farmers to diversify their crops into higher value commodities such as horticulture, fruits and other perennial crops.
If the government is really serious about revitalizing the agriculture sector that still employs more than 50 percent of the labor force, it is the rural and farm infrastructure that should become the focus of its investment.
The Rp 20 trillion ($20 billion) allocated in subsidies for farm loans, fertilizers and seedlings this year is paltry compared to the almost Rp 200 trillion appropriated for wasteful subsidies for fuel and electricity.
