Indonesia Braces for Red Hot Chili Pepper Prices

The price of bird's eye chili peppers is blazing hot across Indonesia, exposing a lingering problem in the country's food production and distribution system that the government still struggles to overcome. (Antara Photo/Reno Esnir)

By : Dion Bisara | on 1:31 PM January 07, 2017
Category : Business, Commodities, Featured

Jakarta. The price of bird's eye chili peppers is blazing hot across Indonesia, exposing a lingering problem in the country's food production and distribution system that the government still struggles to overcome.

Data compiled by the Jakarta Food Information portal shows that prices of the commodity stood at Rp 121,000 ($9) per kilogram on Friday (06/01) – four times higher than in October.

Local media reports during the week also highlighted unusually high prices in other regions. The chili peppers, commonly used fresh for Indonesian sambal, traded at Rp 250,000 a kilogram in Samarinda, East Kalimantan, and Rp 200,000 a kilogram in Raja Ampat, Papua.

Chili prices accounted for about an eighth of the country's headline inflation last year. Failure to reign in prices could complicate the government's efforts achieve its inflation target for this year, already under threat by higher energy prices and a strengthening United States dollar.

Chili prices often spike after a prolonged rainy season, which hampers supply. Chili plants cannot tolerate excessive moisture as they become more prone to parasites and disease during the rainy season. In addition, damp air causes harvested chili peppers to spoil faster during storage and distribution.

The problem is exacerbated by the government's self-sufficiency policy, which bars imports of the commodity, said the Center for Indonesian Policy Studies (CIPS), an independent think tank.

"If we only rely on local production, then food prices will also continue to be affected by erratic weather conditions in our country," Hizkia Respatiadi, a CIPS researcher on trade and social welfare, said in a statement on Friday.

Hizkia said chili peppers imported from Malaysia cost around Rp 80,000 per kilogram in Singapore.

"It is time the government takes advantage of international trade to bring down food prices," he said.

However, the government remains adamant that the country can still meet domestic demand without resorting to imports.

The latest estimate by the Ministry of Agriculture shows that the country should have had a surplus of between 4,900 and 7,000 metric tons of bird's eye chili every month between November 2016 and January 2017, said Spudnik Sujono Kamino, director general for horticulture at the ministry.

But farmers decided not to harvest their yields because the cost of paying workers was higher than the price they could expect to get from middlemen, Spudnik said. On the other hand, the prices middlemen are prepared to offer farmers are affected by a considerable reduction in the weight of the chili peppers during transportation, as well as the fact that the product spoils at a faster rate during the wet season.

To address the issue, the Ministry of Trade has tasked state-owned trading company Perusahaan Perdagangan Indonesia to buy bird's eye chilies at fair prices from regions with surpluses, such as Gorontalo and Makassar, both in Sulawesi, and distribute the product to other regions, said Oke Nurwan, director general for domestic trade at the ministry, as quoted by Antaranews.com.

The Agriculture Ministry has also set up several chili production centers in Java, Sulawesi and Lombok where farmers receive state funding to act as swing producers, whose supply can be used to balance market prices,  Spudnik said.

Agriculture Minister Amran Sulaiman also launched a private cultivation program in November, aimed at encouraging all households in the country to cultivate their own chili plants.

All the efforts are aimed at securing a consistent supply, but it may be a case of too little, too late for traders in city markets, who are stuck with an expensive commodity that a fewer number of consumers are interested in buying.

"It's not supposed to be like this. If the government acted sooner, the price would not have spiked this high," said Bangun Kurnia, a vegetable trader in Tangerang, Banten.

Additional reporting by Aditya L. Djono

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