Sugar Growers Urge Government To Prevent Price Swings

White sugar is retailing for about Rp 8,000 (79 cents) per kilogram despite the fact that the supply-boosting milling season — which usually leads to a price of Rp 7,000 — has begun, industry officials acknowledged on Thursday.

But that didn’t stop them from asking for financial help at a symposium on sugar conducted by the Indonesian Chamber of Commerce and Industry (Kadin).

There should be plenty of sugar. After decades of struggle, the country reached self-sufficiency in 2008, producing 2.74 million metric tons of white sugar that year, compared with total domestic consumption of about 2.7 million tons. This year, the Agriculture Ministry is seeking to raise output to 2.84 million tons.

Abdul Wachid, chairman of the Indonesian Sugar Cane Farmers Association (Aptri), said that domestic retail market prices were connected closely to factors like international prices and government policy.

Sugar currently trades internationally at about $430 per ton, Abdul said on Thursday, which translates to a domestic auction level of Rp 7,340 per kg and a retail price of Rp 8,000.

“There is a tendency for the international price to increase to $460 in October as the close of the milling season nears,” Abdul said.

“As the international market price increases, if the government doesn’t do anything to stabilize domestic prices then the price could increase more in the retail market in the coming months.”

In April, however, producers complained that imported sugar was considerably cheaper than locally produced sugar, selling for as little as Rp 4,500 per kg.

To protect local farmers, the government allows only registered or authorized importers to import refined or raw sugar for distribution to firms in the food and beverage, pharmaceutical and other industries. Smuggling of cheaper imported sugar, which is popular with consumers, is a perennial problem.

Wachid urged the government to put policies in place to stabilize retail prices by, for example, providing financial support. “The ideal stable price should not burden either sugar cane growers or sugar consumers,” he said.

Wachid said he believed that the ideal sugar price would be Rp 6,000 per kg at the farm level and Rp 7,500 retail. Such rates would be possible, he added, only if the government became involved.

“It’s all right if the government gets involved in setting sugar prices since sugar’s one of the nine major food items that Indonesians most need, along with rice and cooking oil.”

Adig Suwandi, the secretary of state-owned plantation firm PT Perkebunan Nusantara XI, agreed that farmers would benefit from a pricing scheme.

The industry has been agitating for higher prices for several months. Currently, the average domestic production cost is Rp 5,100 per kg. Building in a 10 percent profit would result in a farmgate price of Rp 5,610 per kg. However, the Trade Ministry set the base price at Rp 5,350 in April.

source: thejakartaglobe