Jakarta, IO – The characteristics of rice production in the past 50 years have not changed much. Even if there was a change, it was insignificant. First, rice farming is cultivated by farmers on small plot of land. In the 1970s, two-thirds of rice farmers cultivated less than half a hectare of land (Geertz 1963, Timmer 1975). Currently, according to the 2018 Inter-Census Agricultural Survey, 9.8 million (75 percent) of the 13.1 million rice farming households own less than 0.5 hectares of land. They are known as smallholder farmers.
Second, the planting period depends on weather and climate to form a steady harvest pattern: the main harvest season (February-May, 60 to 65 percent of total national production), dry season harvest (June-September, 25 t0 30 percent of total national production) and scarcity season (October-January). Harvest pattern disruption has resulted in price fluctuation. The price of unhusked/milled rice drop during main harvest season and go up sharply during scarcity season. Farmers are still facing uncertainty because they have very low bargaining power in the trade, while the need for liquidity is high.
The combination of fluctuating rice production, inelastic supply, and monopsonistic rice markets makes price fluctuations at farmer level quite high and unpredictable. So, in addition to production risk, farmers also face price risk. This makes rice farming very risky. Production and price fluctuations are also a risk for rice traders (and state logistics agency Bulog partners). However, due to high bargaining power, the risk is passed by traders to high marketing costs. A productivity paradox ensues. The biggest portion of the added value of increasing the productivity of farming is enjoyed by those who are not farmers. As a result, the real income of farmers is increasingly lagging behind those in the non-agricultural sector.