Jakarta, IO – Sugarcane milling season is already halfway completed. Since the end of April, farmers have started harvesting the cane and processing it at the sugar refineries. This season is the culmination of months of hard work, from planting the cane to waiting until it is are fully mature.
Alas, instead of celebrating, the farmers are faced with apprehensions. Year after year, sugarcane farmers are haunted by the plummeting prices of sugar. This misery has tortured them endlessly. The farmers’ weak bargaining position places them merely as price takers.
Since the beginning of 2023, farmers have been anxious about the specter of sinking sugar prices – which has now come to pass. Prices seemed to rally in May and June 2023. However, in July 2023, sugar auctions were repeatedly canceled, as a result of unfavorable bidding prices, which languished around IDR 12,000/kg, with a tendency to sink even lower.
Such a price is frankly considerably below the basic cost of production which, according to the Indonesian Sugarcane Farmers Association’s (APTRI), is IDR 13,649/ kg. This sugar price calamity does not seem to reveal any happy ending in the near future; it is predicted to persist at least until October 2023. Farmers thus now face a dilemma; they can sell at a loss or face ruin if they hang onto their harvests.
An analysis will reveal how market and distribution pipelines are likely already overloaded. APTRI calculations show a market flooded with sugar inventory, dating from the beginning of this year, as can be verified from a look at stock as of early 2023: sugar for consumption reached 2.3 million tons, taking into account “industrial” (or refined) sugar, of which around 300 thousand tons entered the consumption sugar market, piling onto stock from the beginning of the year, domestic sugar production and actual imports from 2022. If the initial 2023 stock sat at 2.3 million tons, and domestic production this year marked 2.5 million tons, imports would clearly not be needed, as domestic demand is only 2.8 million tons. Even if the Government version of 3.4 million tons of demand is relied on, imports would be still be unnecessary.
Alas, Government authorities seem to be relying on a different calculation, as the National Food Agency (Bapanas) reported stocks of sugar for consumption numbered only 1.11 million tons at the beginning of 2023. With an annual demand of 3.39 million tons, and a 2023 domestic production total estimated at 2.74 million tons, the Government was impelled to decide on a raw sugar import quota of 1.04 million tons, equivalent to 991 thousand tons of sugar for consumption – a raw sugar import quota lower than that of 2022, which marked 1.37 million tons, or equivalent to 1.309 million tons of consumption sugar. Actual imports from January to May 2023 reached 293,400 tons, according to Bapanas data.
Data discrepancies have become a cause for serious concern since the authorities rely on such data as a foundation for policy decisions. When data is inaccurate, bad policy will follow suit – and vice versa. The Government has exerted efforts to compile data on sugar into Neraca Komoditas (literally translated as “Commodity Balance”) – figures to be relied on as a standard reference. Unfortunately, Neraca Komoditas negates the role of producers – in this case farmers – in its formulation of a supply balance. Such data is also considered confidential, and is thus inaccessible to the public, honestly a critical point of moral hazard.
The trend of plunging auction prices indicates that the market is saturated with sugar. This is not necessarily true, as the market of sugar for consumption may be subject to strong demand from small and medium industries. Why is this? Because small and medium industries are using refined sugar as a raw material for food and beverage production, thanks to its lower price. As raw sugar prices on the world market go upward, refined sugar prices also rise, even matching the price of sugar for consumption.