Wednesday, September 27, 2023 | 06:31 WIB

Rice, wheat, and misplaced diversification

First, rice and wheat are highly substitutable, with a “cross-elasticity” of 0.6 (Amang and Sawit, 2001). However, Indonesian consumers seem to perceive rice as an inferior commodity. A 1% increase in people’s income is followed by an increase in four consumption expenditure in the range of 0.44-0.84% (Fabiosa, 2006). This has accelerated the shift in consumption from rice to wheat. When Indonesian consumers eat bread, rice farmers will pay the price. These farmers will suffer more, because the rice commodity has started to be considered as second-rate. 

Second, the winning status of wheat among Indonesian consumers, reflected in massive imports, will create a loss of economic opportunities in the country – the loss of foreign exchange. 

Third, by importing wheat, Indonesian consumers also import risks to the physical and mental health of the people. 

Surprisingly, because of wheat’s accessibility and low price, people’s consumption patterns changed rapidly, particularly those with low incomes. It only happened in Indonesia, and not in other Asian countries. While it seems positive from a diversification standpoint, this diversification is completely misplaced, because what happened is that consumption shifted to imported foods instead of local ones. 

Ideally, food diversification should aim at local food, which is not impossible. However, shifting the diet pattern requires policies that reach both upstream and downstream, are radical, consistent and in favor of domestic interests. Indonesia has many local food selections: sorghum, sago, cassava (mocaf), corn, sweet potatoes, breadfruit and others. Basically, all local foods that are ready to enter the market and meet the needs of industrial four can be an option. 

So, why does it have to be four? Flour can enable fortification and also be easily processed into various snacks. At least five points are needed for the food diversification map to survive and thrive. 

First, make sure the downstream market fetches attractive and lucrative prices. The market can then encourage farmers and upstream business players to meet demand. If industry is obliged to meet domestic content levels (TKDN), the Government must promote ones that use wheat four, to absorb the local four supply. This requirement should be adjusted to domestic four production capacity. 


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