Agriculture Reference
In-Depth Information
FIGURE 6.3
Price disparity between farmgate and retail price of rice
Price (Rp per kilogram)
4,000
Urban retail price of rice
3,500
Farmgate paddy prices
3,000
2,500
2,000
1,500
1,000
500
0
1993 1994 1995
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
been absorbed mostly by trading and processing activities, not by the farmers
who have remained weak price takers. In the near future, rice farming could
lose its attractiveness among younger farmers, hence affecting the expected
profitability it could generate. The incentive issues for farmers have become
even more complicated as declining profitability of rice farming should be ex-
pected to provide an incentive to move toward diversification into more prof-
itable farming practices, such as horticulture, estate crops, and livestock. The
Food-for-the-Poor program and similar targeted policies have benefited rice
consumers by protecting them from paying high retail prices, which could pre-
vent more absolute poverty in the country. Indonesia is in need of a new com-
prehensive policy to speed up agricultural development, especially to maintain
strong food reliance for the country, regardless of the organizational format of
BULOG.
The Indonesian experience in implementing floor price and subsequently
procurement price policy has faced serious problems since the economic crisis.
All three successors of President Suharto could not implement the policy well
enough to meet food security objectives. In the era of President Abdurrahman
Wahid in 2000, the floor price was not effective in providing a guarantee for sta-
bilization (Table 6.6). Similar situations occurred in subsequent years, when the
farmgate prices of rice in most areas have been well below the government's
procurement prices. Using the data from the rice-price monitoring team, from
about 6,367 samples, the observation suggests that 50.3 percent of farmgate
prices of rice fell below the reference price, mostly because of the low quality
of rice. A one- to two-month delay in the planting season (because of a longer
dry season) in 2002 contributed to a high water content of 25 percent, which
