Indonesia’s January Drought, Lower Rice Production and Higher Imports

February 2, Jakarta – This season, Indonesian farmer Wardiyono started planting his small rice field in January instead of November as usual. This shift was in response to an exceptionally strong El Nino weather phenomenon causing months of drought. After three weeks, he is concerned because the parched crop has not received enough rain.

In January, it usually rains every day. This year is different,” 58-year-old Wardiyono stated over the phone from the Klaten regency in Java, which lies south of Surakarta. He reported that there have been days when it has been totally dry and days when there have just been brief downpours.

The lack of moisture and planting delay in the world’s fourth-largest rice consumer, Wardiyono’s experiences suggest that a lower-than-expected rice harvest and larger imports in 2024 are likely. Because Java, the main rice-growing region of the country, has seen less precipitation than usual, the Indonesian government anticipates a one-month delay in the country’s typical March–April peak harvest.

Because of decreased output in major exporters Thailand, Vietnam, and India, lower rice production in Indonesia could restrict supply at a time when prices are already almost at their highest point since 2008.

El Nino’s Impact on Agriculture and Chemical Industry Updates:

El Nino hampered the 2023 harvest, so the London-based International Grains Council predicts another drop in Indonesian rice production this year, according to IGC expert Peter Clubb. “El Nino has significantly impacted Indonesia, resulting in significantly less rainfall,” he stated. This weather phenomenon not only affects agriculture but also has broader implications for the chemical industry, particularly in the production and supply chain of agrochemicals and fertilizers.

Initial estimates that Indonesia would produce 32 million metric tons of rice in 2024 have been challenged by forecasts that indicate the country will produce 2.25 million tons of rice in January and February, 46% less than in the previous year.

Indonesia’s main rice crop is usually planted in October, when the wet season officially begins, and harvested in February or April. The nation grows two types of rice, with 55% of the total yield coming from harvests held during the October to April rainy season.

The farm ministry reported that the area planted with rice in the fourth quarter of 2023 decreased to 2.91 million hectares (7.2 million acres), below the aim of 3.53 million hectares (8.7 million acres). This loss is indicative of what is projected to happen in 2024.

According to Zulharman Djusman, the head of the farmers and fisherman group KTNA, rain is necessary for irrigation on about 35% of Indonesia’s 7.46 million hectares (18.43 million acres) of rice-growing land.

Potential Impacts on the Industry:

Less output would result in more imports; according to officials, Indonesia has already cleared 2 million tons in 2024, of which a quarter is anticipated to arrive by March. 3.06 million tons of rice were imported in 2023, almost a record.

This likely result in increased prices for Indonesian consumers as the price of rice has been growing since late 2023 in Thailand, the second-largest exporter in the globe, and Vietnam, the third-largest, following a brief reprieve due to dryness in important supplying countries.

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Economic Considerations:

The average price of rice in Indonesia was 14,763 rupiah ($0.9356) per kg in January, which is approximately 15.6% more than it was a year earlier. Such economic shifts can have cascading effects on various industries, including the chemical sector, where agrochemicals, fertilizers, and other products play a pivotal role in supporting agricultural productivity.

Some of the burden has been relieved by a government handout program that was introduced last year and provides 10 kg of rice per month to 22 million lower-income households; lower-middle class households are not included in this program.

Challenges Faced by Farmers and the Chemical Industry:

Many farmers who planted seedlings in November in the West Java regency of Indramayu are still waiting for rain and are rushing to borrow money so they can replant, according to Ayip Said Abdullah of the farmers’ advocacy group People’s Coalition for Food Sovereignty. “They have spent money to sow rice seedlings, which didn’t grow,” Ayip stated.

Note : Volume in million metric tons; Source : Statistics Indonesia

As we navigate through these challenges, it’s crucial to stay tuned for further developments, not only in agriculture but also in the chemical industry, as the interconnected nature of these sectors may reveal additional impacts and opportunities.

(15,780.0000 rupiah = $1)

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