Coronavirus and Food Alert

The global trade chain is the most sensitive to the coronavirus pandemic.

KOMPAS/Lasti Kurnia

SOEs Minister Erick Thohir (center), SOEs Deputy Minister Budi Gunadi Sadikin (right), Bulog Managing Director Budi Waseso (second right), Bulog Director of Operations and Public Services Triwahyudi Saleh (second left) and Bulog Commercial Director Mansur (left) review Bulog warehouses , in Kelapa Gading, Jakarta, Wednesday (3/4/2020). Erick Thohir ensured that the Bulog rice stock was sufficient for the needs before Lebaran and the anticipation of panic as a result of the corona virus.

In early March 2020, the global stock market lost more than US$6 trillion due to the worst economic condition since 2008. An agreement on the export of agricultural products from the United States to China worth $80 billion for 2020 and 2021 will likely not be realized because of the threat of the coronavirus (R Mc-Crimmon, Morning Agriculture, 11/3/2020). In several countries, the inspection of food processing plants has also been delayed and could increase food safety risks. Most developed countries are tightening goods inspection, both at the entrance and exit. Both of these steps have the potential to cause a drastic reduction in exports or imports.

Decline in exports and state income

The total value of Indonesia\'s agricultural commodity exports in 2019 was $26.3 billion and has continued to decline in the past three years. It is estimated that the value of these exports will decline again in 2020 and become the lowest in the past 10 years. Of the export value of $26.3 billion, the export of plantation commodities reached $25.0 billion or 95.1 percent of Indonesia\'s total agricultural commodity exports. Meanwhile, the remaining 5 percent comes from food crops, horticulture and livestock. Palm oil exports are the largest component and reach $16.6 billion or 63.1 percent of total agricultural commodity exports.

The decline in commodity imports is expected to trigger domestic prices.

Palm oil exports from Indonesia are volumetrically estimated to decline in 2020. On the other hand, the current world price of palm oil is also under pressure so that the country\'s foreign exchange from palm oil is estimated to decrease by around 25 percent. Likewise, exports of other agricultural commodities.

Imports of eight main commodities, namely wheat, soybean, cane sugar, corn, rice, garlic, cassava and peanuts will also decline. The decline in commodity imports is expected to trigger domestic prices.

Agriculture and food trade between Indonesia and China is estimated to be the most affected by the coronavirus. The trade value of the Indonesian-Chinese agricultural commodities reached $5.92 billion, with a surplus of $1.86 billion for Indonesia. The value of Indonesia-China trade for agricultural commodities is estimated to decline by more than 30 percent.

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From the domestic side, the coronavirus outbreak will affect workers in the food processing sector and the agricultural sector. The temporary closure of universities, schools, offices, business downturns, and restaurant visitors, as well as meetings involving the masses, will have a significant effect on the food and agriculture sectors.

KOMPAS/TOTOK WIJAYANTO

Workers unload rice that had just arrived at the Cipinang Rice Main Market, Jakarta, Monday (10/2/2020). The Central Statistics Agency (BPS) noted that rice production in 2019 was 31.31 million tons, down 7.75 percent from the previous year\'s production of 33.94 million tons.

Food price governance

Food prices are one of the important factors related to political stability, especially in low and middle income countries, including Indonesia. An increase in food prices that are too high can cause political turmoil, riots, and even regime change.

Temporary data shows that global food prices are even under pressure. The FAO food price index in February 2020 decreased 1 percent compared to January, but remained 8.1 percent higher than the previous year (FAO Food Price Index, 15/3/2020). The world vegetable oil price index fell 10.3 percent, cereals fell 0.9 percent, and meat 2.0 percent. Conversely, the price of rice on the international market increased, the price of milk and its derivatives rose 4.6 percent, and sugar increased 4.5 percent. The decline in food prices on the international market for several commodities is increasingly caused by falling demand due to hampered trade in agricultural and food products. In developing countries where food import dependency is high, it is estimated that food prices will fluctuate.

In Indonesia, the six commodities estimated to increase in prices are soybean, cane sugar, corn, beef, animal feed, garlic, and horticulture, especially onions and imported fruits. An increase in the prices of animal feed will cause an increase in the prices of chicken meat and eggs. Hampered and late imports of meat will also increase the prices. It is estimated, starting April 2020, the three commodity sources of protein will increase in prices. Price increases could be more than 10 percent in the next few months.

Two main staples, namely wheat and rice, are not expected to experience turmoil this year. The prices of processed food from wheat are estimated to be stable because the raw material component of the finished product is not too significant. Wheat prices could rise if the coronavirus outbreak spreads and wheat exporting countries hold stocks to secure domestic reserves.

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Rice prices have been relatively stable in the last weeks after the coronavirus outbreak occurred in Indonesia. Based on the study of the Indonesian Farmers\' Seed Bank Association, an anomaly occurred in the grain and rice price movements in 2019 and early 2020. The highest grain price even occurred in August 2019, namely Rp 5,160 per kg of harvested unhusked rice (GKP) and continued to decline until February 2020 (Rp 4,769 per kilogram of GKP). Meanwhile the price of (husked) rice reached its highest peak in December 2019 and continues to decline until now. With the entry of the harvest season at the end of March and April, the price of rice is expected to decline. Prices will then remain stable until October 2020.

Recommendation

Preparation of food stocks for cities or regions that will be locked down must be done optimally. Moreover, there must be guarantee for the smooth operation of the food logistics system to and from the regions. For example, Wuhan and several other cities in Hubei are now starting to experience food shortages and medical supplies after being closed for more than a month. Unloading activities in Wuhan port fell sharply by 93 percent, while loading activities decreased 85 percent (The Conversation, 13/3/2020).

Indonesia will also experience a decline in food trade with other countries in the world. It is certain that the trade value of both exports and imports will decline in the range of 25 percent and food trade with China will decrease by more than 30 percent. The country\'s foreign exchange from exports of agricultural products will also decline in the same range. Protection efforts and assistance especially for farmers directly affected by the decline in exports need to be done.

The food logistics system will be affected for the first time due to tighter monitoring processes at ports, both inter-regional and market entrances. The government needs to support and develop the large-volume food transportation system, for example by train, river and sea transportation, to reduce human contact.

If the coronavirus outbreak is increasingly spreading, the national food production process will be disrupted, causing a decline in production. The fall in production and also the fall in food imports will reduce domestic food stocks. Assistance to farmers to maintain and increase production is urgently needed. The Chinese government is currently subsidizing farmers for the purchase of smart-agriculture equipment to reduce contact among farmers and make agriculture a top development priority at present. It is hoped that the Government of Indonesia will also take the same steps.

Stock and price monitoring needs to be intensified.

Excessive stocks of export commodities will cause the prices of some of these commodities to decline and reduce farm income. Palm oil conversion to fuel -- not just biodiesel -- needs to be pursued immediately. For horticultural commodities, the decline in horticultural imports will have a positive impact on domestic horticultural farmers as demand for domestic products increases.

Food prices for several commodities are expected to increase. Stock and price monitoring needs to be intensified. Analysis and mapping to detect areas or regions with potential food insecurity need to be done immediately. The logistics system and food reserves in the regions must get special attention.

Right now, truly accurate food stock data is needed. The Statistics Indonesia (BPS) is expected to be the sole agency for conducting studies and releases of food data because it has the smallest sectoral interests. BPS capacity and funding need to be increased immediately. Along with stock data collection, the government needs to immediately enlarge the main food stocks so that price control can be done. Food stocks in each region also need to be increased.

Kompas

Dwi Andreas Santosa

It is estimated that the coronavirus outbreak in Indonesia will reach its peak in April-May 2020 and after that new cases will decline. The recovery phase until the coronavirus outbreak really stops is estimated to be more than six months after the peak or around October-November 2020. At that time, slowly the food problems related to the coronavirus outbreak will experience improvement. The coronavirus outbreak is expected to be able to unite all components of the nation\'s children. Only with unity, obedience, and mutually encouraging and loving, the coronavirus outbreak will soon end in Indonesia. Slowly all aspects of life will return to normal. Hopefully

Dwi Andreas Santosa, Professor and Chairman of the Biotechnology Center, IPB; Chairman of the Indonesian Farmers\' Seed Bank Association (AB2TI).