The Impact of El Nino on the 2023 Rice Balance
Bustanul Arifin
Kompas English, 8 August 2023
Phenomena an extreme El Nino drought in 2023 has occurred, according to the predictions of agroclimatology experts. The current El Nino is expected to continue until the end of its cycle, namely mid-2024. The climate phenomenon known as the Indian Ocean Dipole (IOD) is currently occurring normally in the Indian Ocean, causing drought to affect most of Indonesia’s food production centers.
The positive expectation is that even if the IOD phenomenon heads towards negative until August 2023 – which means the sea surface temperature of Indonesian waters will warm up and form clouds – some areas in Indonesia will still experience rainfall. The Meteorology, Climatology, and Geophysics Agency (BMKG) has released a report stating that below-normal rainfall of 20-50 millimeters (mm) is expected in some rice production centers in South Sumatra, Lampung, Java, Bali, West Nusa Tenggara, and Sulawesi until July 2023.
Even in August-September 2023, rainfall in the main center of rice production will be below 20 mm. There is a forecast for a very long dry spell, with more than 15 consecutive dry days. A similar forecast has been delivered by the Center for Climate Resilience and Management Studies of Southeast Asia and the Pacific at the Bogor Agricultural Institute (CCROM-IPB), stating that the main rice-producing center of Indonesia is experiencing drought. The International Research Institute for Climate and Society (IRI) at Columbia University in the United States also released a forecast of drought in Indonesia from mid-2023 until February 2024.
There is a slight difference that is somewhat relieving. CCROM-IPB predicts that rainfall in southern Sumatra, South Sulawesi, and West Java will be quite low, but still above 50 mm due to the IOD factor that is leading towards negative as explained before.
This article analyzes the impact of El Nino on the 2023 rice balance and other accompanying trends. Also recommendations on production strategies and policies, rice value chain, and climate change adaptation.
Impact on rice balance
Based on production and harvest area estimates using the Sampling Area Framework (KSA) method carried out by the Central Statistics Agency, the national rice balance has started to enter a deficit again since July, August, and September 2023. The deficit of rice during the three months is estimated at 420,000 tons after five consecutive months of surplus, amounting to 4.35 million tons. The surplus during the dry season occurred due to high harvest performance in March and April, resulting in a production of 8.89 million tons of paddy in March and 6.24 million tons of dry-husked rice in April.
Meaning, the impact of El Nino has not yet shown significant effects on the 2023 harvest season. Moreover, retail rice prices in March-April 2023 were quite stable at around Rp 13,400 per kilogram. Since the end of June 2023, rice prices have gradually increased to Rp 13,650 per kilogram and remained at Rp 13,550 per kilogram at the beginning of August 2023. Meanwhile, the plan to import rice by Perum Bulog for 2 million tons until early August 2023 has only realized 1.15 million tons. Bulog has started to have difficulties in finding rice after India banned rice exports to secure its domestic rice stocks.
India’s extreme decision to ban exports has rattled international rice prices. The global average price of rice has increased dramatically from US$514 per tonne in June 2023 to US$547 per tonne in July 2023 for Thaii quality 5 percent broken.
In fact, the selling price of rice in Thailand and Vietnam rose by around US$50 per ton. A very significant increase during the El Nino dry season as it is today. The report from the United States Department of Agriculture (USDA) in July 2023 shows that global rice production is estimated to decrease from 513.7 million tons in 2022 to 512.5 million tons in 2023 due to the El Nino phenomenon.
During the same period, India’s rice production increased from 129.5 million tons to 136 million tons, Thailand’s from 19.9 million tons to 20.2 million tons, and Vietnam’s from 26.7 million tons to 27 million tons. Meanwhile, China’s production decreased from 149 million tons to 146 million tons, Myanmar’s from 12.4 million tons to 11.8 million tons, Pakistan’s from 9.3 million tons to 5.5 million tons, and others. The USDA also predicts that Indonesia’s rice production will decline by 1.16 percent, slightly lower than BPS’s forecast of a 2.13 percent decline.
In the context of rice balance management, the remaining quota of almost 900,000 tons of rice imports still needs to be fulfilled by Bulog before the end of 2023, in addition to the task of procuring rice and paddy from domestic farmers. The total procurement of rice by Bulog from the domestic market until early August 2023 recorded 771,000 tons. A total of 672,000 tons of rice have been distributed for the food supply and price stabilization program (SPHP), including 640,000 tons for food assistance, 42,000 tons for budget group distribution, 2,000 tons for emergency response, and others. Total rice stocks as of 4 August 2023 were recorded at 854,000 tons, consisting of 795,000 tons of government rice reserves (CBP) and 59,000 tons of commercial stocks. This position will continue to be monitored by rice traders, including speculators trying to take economic rents.
In critical conditions like now, Perum Bulog needs to be more tactical in managing stocks and domestic procurement. The lag in procuring rice domestically during the previous harvest season – at least compared to other large private sectors – should not be compensated by forcibly procuring during the current dry season and El Nino phenomenon. If that is done, the price of rice is feared to increase even more wild and could have a very significant socio-economic impact, especially in an election year.
Production strategy and value chain
The El Nino phenomenon has occurred, so there is no need to deny or search for excuses to refute it. The mitigation strategy to accelerate planting, utilize swampy land, and establish boreholes and pumps in several mandatory production centers must continue to be carried out and closely monitored. Therefore, production support for farmers, from the availability of seeds to subsidized fertilizers in 2023 should not decrease. Moreover, next year, the government plans to change fertilizer subsidies into direct fertilizer assistance to farmers (BLP), which requires special socialization and assistance. Several academic studies and general equilibrium models have predicted that climate change will decrease food production by 8-10 percent in 2030 if no policy responses or adaptation strategies are implemented.
Starting now and in the next few years, the government must be at the forefront of guiding farmers in developing rice and other food seeds that are drought tolerant or more adaptive to extreme El Nino climate change and excessively wet La Nina monsoons. In the context of food distribution, improved digitalization of the value chain should be able to overcome the problem of the slow flow of information and transaction support to move together to face El Nino or extreme climate change which are increasingly occurring.
At the micro level, the government, together with the private sector and the community, needs to take special steps, such as preparing and providing emergency food and clean water supplies if extreme drought hits households, especially food farmers. In certain conditions, certain criteria need to be established, especially to provide discretion for local governments to take strategic and tactical actions without having to wait for national disaster command or other statuses.
Bustanul Arifin, Professor of the University of Lampung, Senior Economist at Indef, and Chairman of Perhepi
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