Fransiscus Welirang, Director, Indofood, on how best to diversify food sources and obtain food security

Fransiscus Welirang, Director, Indofood, on how best to diversify food sources and obtain food security

Issues related to food security are a result of the way in which we define and think about food security. In the past, the National Food Logistics Agency was preoccupied only with the logistics of delivering six basic commodities. However, since 2003, when the agency became Perum Bulog, its priorities changed and now it is essentially only concerned with controlling and stabilising the price of one commodity: rice.

The cost and availability of rice is now how this country defines food security, as it is the staple food of the people. However, we must recognise that for the future of this nation we cannot depend on a single commodity. The concept of food security must be defined more complexly, much like the input and intake of carbohydrates and protein that is necessary to meet our nutritional needs. To address the issue of food security our aim should be to diversify our food supply so that we are not dependent on a single source.

The first step in doing this is education. We need the citizens of Indonesia to recognise that there are more choices available to them. This will create demand and thereby provide incentives for the agricultural industry to diversify and produce other sources of carbohydrates and proteins, which will ultimately ease our dependence on staple commodities like rice.

That, of course, is easier said than done, as the mindset of the people is still very much fixated on rice. Indonesia’s current diet is generally composed of a carbohydrate mix of 70% rice, 20% flour-based products and 10% from other sources. Clearly too much dependence in placed on the production of rice, and we need to strike a more equitable balance by producing greater volumes of products such as flour and corn. The argument for corn is that not only does it provide an additional food source for human consumption, but it is fit for animal consumption as well. Tubers are also another optimal choice, as are additional wheat-based products such as the aforementioned flour. These groups are basic commodities that can easily be introduced to the nation’s food chain with the proper encouragement.

The government has a very important role to play in terms of supplying the incentives as a means to create variety in the food supply. It has to strike a balance between the price of rice with any new product which is being introduced to the market. The agro-industry operates in seasons and this creates two types of transactions: horizontal transactions, with farms dealing among themselves to make up volumes, and vertical transactions, where produce goes either directly to the consumer or to the processing industries.

During the harvest, farmers are in a very weak position, while during the off-season farmers are in a very strong position, which results in price fluctuations throughout the year and leads to the issue of market price discovery. A mechanism must be created, as has been done in many other developed countries, whereby a standard quality is defined as a means to properly and equitably achieve market price discovery.

It would be advisable for the government to promote the use of standardised contracts so as to encourage a more equitable price balance and reduce both buyers’ and sellers’ exposure to additional risk factors. However, while the government should be encouraged to establish standardised contracts, the process of price discovery must still be left to the free market. Additionally, standardised contracts should only apply to staple commodities such as rice and corn.

In the end, food security is essentially about mitigating risk. Standardised contracts are an instrument that would simplify the business environment and protect the farmer and the buyer by placing both on equal footing. This is a very basic feature but a very important one. Unfortunately, because Indonesia is located in a tropical climate we are vulnerable to erratic and unforeseeable climate changes. Should anything happen in this region, where most rice-exporting countries are located, we would be placed in quite a dire situation. The international market is very precarious, and that is why it is imperative we begin to diversify our food supply as a means to ensure improved food security.

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The Report: Indonesia 2012

Industry and Retail chapter from The Report: Indonesia 2012

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