Food is a basic societal need. It is ironic for an agrarian country to be struggling with food problems, while nearly all countries are busy with efforts to achieve sustainable development goals.
By
Enny Sri Hartati
·4 minutes read
Food is a basic societal need. It is ironic for an agrarian country to be struggling with food problems, while nearly all countries are busy with efforts to achieve sustainable development goals. Some of them are even fighting win the competition toward the fourth industrial revolution or Industry 4.0.
If managing food alone is burdensome, the hope of improving the quality of life of the people will more difficult to realize. Food sufficiency is among factors in determining the quality of human resources (HR). Unfortunately, one-third of Indonesian children are malnourished. One of the reasons for this, of course, is problems in fulfilling people\'s food needs. The stability of food prices is also one of the determining factors.
In fact, food prices (volatile foods), in addition to energy prices, have become a dominant contributor to inflation. More than 70 percent of the incomes of about 40 percent of the lower-middle class are used to meet food needs. That’s why every time food prices increase, people’s purchasing power is affected. It also affects the purchasing power of farmers, because despite being food producers, they have also become consumers.
Moreover, every harvest season or before the holiday, food prices always increase. Eventually, the low inflation rate becomes a paradox to the decline in people\'s purchasing power.
In order to make food prices affordable and stable, farmers must sell their crops at low prices. However, if economic incentives in the agricultural sector disappear, the productivity of the agricultural sector will decline further.
In fact, the main formula of price stabilization is simple and clear, namely maintaining the balance of supply and demand. Food is a basic necessity and the demand must be inelastic. The prices will not significantly affect the demand. It means that the trend of the demand can be accurately calculated, with an adjustment of the population growth. In other words, the keys to achieve price stability are clear, namely stock or supply management and food diversification efforts.
The main factor in food management is, of course, lies in the upstream sector, namely the increase in food production. The standard formula in increasing the production is also very clear, namely, the efficiency of input factor and economic incentive for the output price.
Throughout history, farmers\' land in Indonesia has been limited. The Inmas and Bimas food intensification programs carried out a long time ago were able to achieve self-sufficiency in food production partly due to the effectiveness of seed and fertilizer subsidies, agricultural extension and good irrigation system. The institutional engineering through the establishment of cooperative village units (KUDs) can also help overcome the problems of smallholders.
Do not assume
The government\'s purchasing price (HPP) for farmers should not be determined only based on the assumption. Farmers\' production costs will be efficient only with several conditions. For example, there should be a fertilizer subsidy, good and timely distributed seeds, good irrigation system, and effective farming counselors, who can assist farmers with appropriate technology, as well as assistance in the form of farming equipment to farmers.
The highest retail pricing should be effectively determined under the market mechanism and healthy competition. If the market fails to achieve healthy competition, the government should intervene. Through the existence of a buffer stock agency, Bulog, the government has a price stabilization instrument, such as through market operation using government stocks. Therefore, even if there are people who dominate the supply, they will not be able to become a price fixer. Of course, the results will be different if market operations are carried out only as an “affordable market project”.
In line with the improvement in inter-region connectivity and advancement of technology, food supply should be better managed. Monitoring the data of supply and demand for commodities in the regions would help map out the potency of each region and determine the crop and harvest cycles of each commodity.
With good coordination, crop and harvest cycles can be properly managed to facilitate continuity of supply and prevent a sharp fall in prices at the farm level during harvest season.
Supported by data on the inter-region commodity balance, the regional inflation control team (TPID) can carry out their task optimally. The TPID team not only monitors inflation but also anticipates its potential and recommends ways to control it.
Enny Sri Hartati, Executive Director, Institute for Development on Economics and Finance