Global Rice News

**Rice Causes Inflation Surge in Indonesia**

In October, rice played a significant role in contributing to inflation in Indonesia, according to Statistics Indonesia (BPS). The staple food accounted for 0.58 percentage points of the 2.56 percent growth in the annual consumer price index (CPI) recorded last month. This marks an increase from the previous month’s rate of 2.28 percent. Pudji Ismartini, an official from BPS, explained that rice has a large impact on inflation due to its substantial portion in the CPI calculation.

Retail prices for rice showed a year-on-year increase of 19.12 percent, while unhusked rice experienced an even higher surge of 27.95 percent. The central bank, Bank Indonesia, unexpectedly raised its benchmark interest rates by 25 basis points to 6 percent in a preemptive measure, despite inflation still being within the target range of 2 to 4 percent. Higher interest rates typically weaken consumer demand and lead to lower prices. However, Pudji stated that interest rates would have limited effect on rice prices due to the lack of substitutes in Indonesia. Rice is considered an inelastic commodity, meaning that price changes have minimal impact on demand.

BPS previously reported that annual inflation for rice had reached its highest level, with disruptions in rice production globally contributing to the increase. Leading rice exporters such as India, Thailand, and Vietnam experienced a decline in production due to the El Niño phenomenon and drier weather patterns. These challenges were also faced by many rice-producing regions in Indonesia. The Meteorology, Climatology, and Geophysics Agency (BMKG) issued a warning about potential extreme weather in the archipelago, indicating the possibility of a delayed planting and harvest season along with reduced domestic stocks.

To combat the impact of El Niño on domestic rice production, the Indonesian government has been importing rice and currently holds a reserve of approximately 1.7 million tonnes. However, President Joko Widodo stated that this may not be sufficient, and the government plans to import an additional 2 million tonnes of rice next year to strengthen the country’s rice stockpiles. By doing so, Indonesia aims to minimize the effects of the El Niño phenomenon on its rice supply.

**Source**