Food Crisis in 2020

KOMPAS/P RADITYA MAHENDRA YASA

A farmer harvests rice in Salam District, Magelang, Central Java, Friday (3/4/2020). Sustainability of planting and harvesting is part of food security amid the long-standing corona virus outbreak.

When opening a limited meeting on April 13, President Joko “Jokowi” Widodo underlined that the COVID-19 pandemic could cause a world food crisis.

The statement was based on a warning from the World Food and Agriculture Organization (FAO) that the coronavirus pandemic could have an impact on food scarcity. Is it true that the world will experience food shortages and crises? How does this affect the availability and stocks of food in Indonesia? So what should be done to mitigate the impact of the coronavirus outbreak on the fulfillment of food needs in Indonesia?

News of the threat of a world food crisis due to the novel coronavirus first appeared based on the statement of Maximo Torero, FAO\'s head of economy, when interviewed by the BBC, The Guardian and other media at the end of March. On April 4, the FAO also made an official statement encouraging countries to anticipate the impact of COVID- 19 in the context of humanitarianism and food crisis. This statement then grew into big news in various international media, including in Indonesia.

Also read : Save the Food Producers

In political economy, there is a "bad news hypothesis" that is driven by the demand for the news market. Someone will feel better if they do not lose a single rupiah than they get one rupiah because the first one has a stronger marginal utility effect. In one study, the media tends to announce a decline in employment 20 times more than employment growth.

With regard to the potential for the global food crisis, world cereal production even increased from 2.5675 million tons (2018) to 2.7194 million tons (2019). In March 2020, global cereal stocks increased by 2.4 million tons to 866 million tons, making the stock-to-use ratio in a very safe position, namely at 30.9 percent (FAO, March 2020). There was an increase in wheat and rice stocks and production, while corn stocks declined. Special in rice exporting countries, there was a decline in stocks in Thailand, but there was an increase in stocks in India.

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World wheat production in 2020 is relatively unchanged and is similar to the record wheat production in 2019. In Europe total wheat production will fall in 2020. This decline is not due to the coronavirus outbreak, but because of excessive rainfall and warmer winters, which reduce the areas of planting and production. But the decline in wheat production in Europe was balanced by an increase in production in Russia, which is currently the world\'s leading wheat exporter. Asia also noted the potential for increased wheat production, especially India, in 2020.

Looking at the history, the main trigger for the food crisis is production disruptions which reduce agricultural production and raise food prices. The 2007-2008 food crisis began with a drought in a number of world food producing countries which caused production to fall so that prices rose sharply. The FAO Food Price Index (CPI) was in the 135th position in early 2007 and continued to increase nearly every month, reaching a peak of 222 in June 2008. The food crisis caused unrest in 12 countries all over the world.

In the 2009-2010 period, food prices fell due to increased production and stockpiles but jumped again in 2011 and reached a record high of 240 in February 2011. Increases of food prices caused massive unrest in 15 countries in the world and regime changes in several Middle Eastern and North African countries that was known as the Arab Spring.

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The current condition is different. World food prices during the pandemic (January-March) continued to decline. The Food Price Index fell from 183.0 in January to 180.0 and 172.2 in February and March, respectively. The sharpest decline occurred in the Vegetable Oil Price Index from 176.3 in January to 139.1 in March. The price decline occurred in all commodities.

The prices of milk and its derivatives and sugar rose in February but fell again in March. Thus, there is nothing to worry about in the world food stocks in 2020.

Food trade crisis

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.

The coronavirus outbreak continues to have an impact on the world food system. The most affected chain is food trade because of the closure of the regions and disruptions of trade in food commodities. On the other hand, several countries currently even apply export restrictions. Kazakhstan, the world\'s largest wheat producer, has banned exports of wheat flour, wheat grains, onions, carrots and potatoes. Russia, the world\'s biggest wheat exporter, might also carry out export restrictions as it had done in 2010. Vietnam, the third-largest rice exporter in the world, is currently also delaying rice export contracts.

The problem of world trade may emerge in the next few weeks or months with an increasing number of countries imposing territorial restrictions. The flow of agricultural commodities in and out is increasingly tight and many countries take measures to secure their domestic stocks. Trade barriers will trigger panic among big players in global food trade.

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If one of the big players makes a decision that harms the main food supply, the condition will be more difficult and will cause a chain reaction. This can cause extreme food price volatility. On the contrary, it will be safe if all countries are able to guarantee the international food supply chain, do not impose export or import restrictions, and food commodities can move freely across national borders. The world food crisis will not occur because the main prerequisite, namely food scarcity due to falling production, does not exist.

Also read : Coronavirus and Food Alert

KOMPAS/P RADITYA MAHENDRA YASA

A farmer crosses a paddy field which is planted with seeds around the Banyubiru sub-district, Semarang Regency, Central Java, Tuesday (07/4/2020). The area is mostly tidal land in the Rawapening area.

Condition and mitigation in Indonesia

Indonesia\'s food system at present is practically fully integrated with the world food system, which is characterized by very low import tariffs and even zero percent for most agricultural commodities. The quota system being applied also had no significant impact on Indonesia\'s dependence on several imported food commodities.

Imports of agricultural products have continued to increase since 2013 until now. In 2019 the trade surplus in agricultural commodities was only US$8.6 billion, the lowest for the past 13 years. The highest import and trade balance deficit occurred in the food crops subsector with a deficit of $6.8 billion in 2019, followed by the horticultural subsector $2.1 billion, and the livestock subsector $1.2 billion. The subsector that has experienced a very sharp increase in imports over the past four years is horticulture, from $1.5 billion to $2.6 billion.

There are eight commodities with an average import volume above 300,000 tons per year, namely rice, corn, wheat, soybeans, cane sugar, cassava, garlic and peanuts. There has been a surge in imports of these commodities in the last 10 years. In 2009, the volume of imports of the eight commodities was 8.8 million tons and jumped to 27.6 million tons in 2018 and slightly decreased to 25.3 million tons in 2019. If there were global trade shocks, it would directly affect Indonesia.

For rice as the most important food commodity in Indonesia, production and stocks are guaranteed to be safe until October. However, the government must really pay close attention to the potential decline in rice production this year. National rice production in January-April was only 10.84 million tons, or equivalent to the rice and lower than the same period in 2019, namely 13.63 million tons of rice (BPS, March 2020). The planting season has shifted almost one month and has the potential to reduce the planting areas of the second planting season. If this happens, for three consecutive years the national rice production continues to decline.

KOMPAS/Lasti Kurnia

SOEs Minister Erick Thohir (center) 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 addition to disruptions to national rice production, the current total stocks of rice of the State Logistics Agency (Bulog) are also relatively low, or only 1.42 million tons (15/4/2020). Up to 1.36 million tons of the stocks are government rice reserves, which are dominated by imported rice of 0.74 million tons, while domestic medium rice is only 0.56 million tons.

On the other hand, Bulog procurement for unhusked rice and rice this year also faces obstacles, even though large food reserves held by Bulog becomes the guarantor of the national food stability, so that the government needs to support it. The current prices of unhusked rice are higher than the government\'s purchase price (HPP), Rp 4,200 per kg of unhusked rice (GKP).

Based on a survey of the Indonesian Farmers\' Seed and Technology Bank Association (AB2TI) in 28 regencies of rice production centers, the price of unhusked rice at the farm level in March was Rp 4,311 per kg, higher than March 2019 of Rp 3,982 per kg. In April, the price of unhusked rice remained high. In July, it should have been able to be accurately calculated the estimation of the production this year to determine whether it is necessary to add stocks from overseas.

Kompas/Totok Wijayanto

Dwi Andreas Santosa

Another important thing, domestic food logistics must be guaranteed so that it can run well. The community can also play an important role in maintaining national food amid the current coronavirus outbreak. Avoid panic and do not hoard food. It is time that care, solidarity and social solidarity are restored in Indonesia. If that is done, we will be able to get through all of this in a good way.

Dwi Andreas Santosa, Professor and chairman of the Biotechnology Center of Bogor Agriculture Institute; chairman of the Indonesian Farmers\' Seed and Technology Bank Association (AB2TI)