The lower production of key crops in Indonesia this year coupled with the global rice shortage may threaten food security and boost prices, as the country counters the risks of global weather uncertainty amid the global economic slowdown, local media reported on Thursday.
Economists urged local authorities to strengthen domestic supply so prices and people's purchasing power in the domestic consumption-reliant economy could remain stable, while imports, especially rice, should be the last resort, given the volatile international prices.
Indonesia's rice production is forecast to slide 1.63 percent, dropping 1.08 million tons to 65.39 million tons this year over declines in farmland area and productivity, the Central Statistics Agency (BPS) announced on Tuesday.
Extreme weather had decreased production and hampered supply of rice in Indonesia from the end of last year to January this year, shooting inflation to a 21-month high of 7.02 percent in January.
Corn production was also predicted to be down by 5.99 percent, or 1.1 million tons, to 17.23 million tons, as well as soybeans by 4.08 percent, or 36,960 tons, to 870,070 tons, both due to smaller farmland area despite increasing productivity.
"The consequence would be soaring prices. By cycle, prices would increase significantly from November through January, and inflation will be higher because the contribution of volatile food prices to inflation is at 35 percent," Bustanul Arifin, an economist at the Institute for Development of Economics and Finance (INDEF) was quoted by the Jakarta Post as saying.
The government has been in talks with several countries, including Thailand and Vietnam for importation of rice. Both of them have signed deals with Indonesia over their availability to export one million tons of rice to Indonesia annually.
Indonesia's annual inflation eased to 4.42 percent in October as core inflation dove on sliding gold jewelry prices during the month, but rice, which weighted heavily on the nation's inflation basket, has begun to pressure the headline inflation, contributing 0.08 percent to consumer prices increase.
The country's prices of medium rice increased 6.54 percent from a year earlier to 7,951 rupiah (0.88 U.S. dollar) per kilogram in October, BPS data shows.
"This is affecting our food security. Moreover, external developments are uncontrollable, for instance [flooding in] Thailand affects food supply not only for Indonesia but for the international market," said Latif Adam, an economist at the Indonesian Institute of Sciences (LIPI).
Indonesia Logistic Agency has over 1.5 million rice stockpile and aims to raise it by up to two million tons this year, Coordinating Minister for Economic Hatta Rajasa has said.
Indonesia's population of 240 million needs 139 kilograms of rice per capita, while corn and soybean consumption was respectively at 13 million kilograms and 2.4 million kilograms per year.
From January to September this year, the country imported 1.87 million tons of rice, 2.77 million tons of corn and 1.51 million tons of soybeans.
"Imports make us reliant on external factors that are uncontrollable, especially with climate anomalies," Adam said.