Indonesia's rice prices catch fire

Rice prices in Indonesia have risen 6-to-8 percent in recent weeks and are still climbing because of a surge in oil prices, but the country has adequate stocks to meet local demand, a senior government official said on Thursday.
Djoko Said Damarjati, director-general for agricultural products processing and marketing development, said Jakarta is unlikely to lift a ban on rice imports - in place until the end of 2005 - unless domestic prices rose further.
"We won't import rice unless prices climb to 3,500 rupiah a kg," Damarjati told Reuters in an interview. "We are still some distance away from that level. We are looking at ways to stabilise the domestic market."
The price of medium-grade rice, which sold at 2,800 rupiah a kg two months ago, has risen to about 3,000 as a surge in oil prices - which hit a record $68 a barrel on Thursday - makes transportation and grain handling operations costlier.
The views of Indonesia's rice industry officials echo those of leading wheat trade officials who are considering raising flour prices to tide over the crisis following a surge in oil prices. The country imports all its wheat requirements.
Damarjati said although there was no immediate plan to import rice, any move to bring in the food grain in the future would face hurdles due to the rupiah's sharp fall against the US dollar.
The rupiah fell to a new 3-1/2-year low of 10,415 per dollar on Thursday, hit by dollar demand from local firms seeking to hedge against record high oil and to repay overseas debt.
Rice is a staple in Indonesia, the world's fourth most populous country with a population of 220 million.
Indonesia was self-sufficient in rice in the 1980s, but became a leading importer of the food grain after that since millions of hectares of rice fields were converted into industrial parks and housing complexes.
One of Asia's top rice importers until 2003, Indonesia imposed a ban on imports beginning last year when the Southeast Asian nation produced a bumper rice crop of 54 million tonnes.
The ban was extended until the end of this year although imports are allowed for two provinces - Aceh and North Sumatra - to help victims of the Asian tsunami last December.
Damarjati said unhusked rice output in 2005 would be 800,000 tonnes lower than 2004 levels. Earlier, trade officials had said production could fall by 500,000-600,000 tonnes this year.
"We are looking at availability of rice closely but we are not worried. We have carryover stocks of 1.6 million tonnes from last year. We should still be having more than a million tonnes of surplus after meeting demand from the reduced crop," he said.
Stocks at the beginning of this year stood at 2.3 million tonnes. Rice-growing areas harvest between one and three times a year, depending on the type of rice, climate and irrigation.