Indonesia will raise sugar prices to help farmers

The government plans to increase the minimum price farmers get for table sugar in an effort to encourage growers back into the industry. But farmers say the planned increase will not be sufficient to stimulate the industry if imports are not curbed.

Currently, the base wholesale price for table sugar is Rp 5,100 (45 cents) per kilogram, which growers say is about equal to their production costs. Sugar farmers say steadily increasing labor and fertilizer expenses are the main reasons for increased costs.

“We will soon hold a meeting about the plan to increase the base sugar price,” Achmad Mangga Barani, secretary general of the Indonesian Sugar Board, or DGI, said on Tuesday in Jakarta.

Achmad would not say how much the planned price increase would be, adding that the decision would have to be made carefully because sugar was a basic necessity for most Indonesians.

The nation’s sugar industry has struggled for decades, with small-scale farmers responsible for as much as 50 percent of national output. In one sign of improvement, however, the country last year reached sugar self-sufficiency. About 63 percent of the 2.74 million tons of sugar produced in Indonesia last year was produced from cane grown by small-scale farmers, with 37 percent coming from state-owned sugar companies.

Achmad said that the price increases were related to the Ministry of Trade’s ban on all imports of table sugar, which first came into effect in January last year. Sugar for use in industries like food processing and pharmaceuticals can only be imported by registered or authorized importers.

“Sugar output this year will be able to cope with demand,” Achmad said.

“Therefore we must make the sugar price attractive to farmers to continue planting sugar.”

He acknowledged that the amount of sugar plantation areas had decreased recently because of the drop in sugar prices at the end of 2008. At that time, the market price for table sugar dropped to Rp 4,900 a kilogram, below the government-set purchasing price.

The lower price prompted farmers to switch to other crops, causing sugar plantations to shrink from about 433,000 hectares in 2008 to 413,000 hectares this year. Achmad said that the drop in plantation area would not severely affect output because most sugar plantations had been increasing cane yields.

“Average sugar content is now reaching 8.27 percent,” he said, compared with the previous year’s 7 percent.

Arum Sabil, chairman of the Indonesian Sugar Cane Farmers Association, or Aptri, said that instead of just increasing base sugar prices, the government should also regulate the circulation of sugar meant for industry and ensure it does not illegally enter the retail market.

“It will not help us much if the government only raises the sugar price while imported refined sugar is still circulating,” he said.

Imported table sugar is generally cheaper than locally produced sugar, selling for as low as Rp 4,500 a kilogram.

Adig Suwandi, corporate secretary of state-owned sugar producer PT Perkebunan Nusantara XI, said the new base price should be at least Rp 5,800 a kilogram since farmers’ production costs were Rp 5,100 a kilogram.

Last year, the nation’s farmers produced 2.74 million tons of table sugar, compared with total domestic consumption of about 2.7 million tons. This year, the Ministry of Agriculture aims to raise output to 2.84 million tons.

source: thejakartaglobe