Soybean debacle highlights government mismanagement

Rendi Akhmad Witular, The Jakarta Post, Jakarta

At the start of his presidential term four years ago, Susilo Bambang Yudhoyono promised to put the agriculture sector at the top of his agenda with the aim of reaching self-sufficiency in producing strategic commodities.

A ceremony costing US$50,000 was even held in mid-2005 to promote his administration's seriousness to revitalize the sector, which is the income backbone for more than 70 million people living in rural areas around the country.

These efforts, however, proved to be futile. The recent soybean debacle, which sent the price of the commodity spiraling out of control, clearly signaled mismanagement in the country's agriculture and trade sector.

"There is a growing ineptitude within the administration to foresee problems. They should have been able to anticipate the skyrocketing price of soybeans and prepare the necessary measures to weather it," said agriculture analyst H.S. Dillon on Wednesday.

Indeed, the government should have spotted a growing trend that food, especially agriculture produce, would become more expensive globally; as demand rises faster than the supply, which is becoming limited due to decreasing farmland and bad harvests.

The increase in soybean prices, which began to climb steadily to $13 a bushel since early January last year at the Chicago Board of Trade, should have kick-started the country's agriculture and trade authorities into action.

Soybean futures at the bourse jumped 83 percent over the past year on increased demand for cooking oil and alternative fuels, according to Bloomberg.

Although soybean is still considered a "secondary commodity" by local farmers, its role stretches far beyond that.

The commodity is the main ingredient in traditional tofu and tempeh -- a food high in protein which is mostly sold by small businesses and consumed by those who cannot afford to buy meat.

The local market price of soybean has jumped to Rp 7,200 per kilogram from Rp 2,750 (0.28 U.S. cents) in January last year, forcing small business owners to shut down operations as consumers can no longer afford the products.

Indonesia consumes two million tons of soybeans annually. Only 30 percent of the demand is supplied locally, while the bulk is imported primarily from the U.S., where soybeans have been heavy subsidized for decades.

"Our farmers have been discouraged from planting soybean because there are no incentives provided by the administration that will enable them to compete with imported soybeans. It's a policy of 'let it be'," said House of Representatives member Didik J. Rachbini.

Aside from the influx of cheaper imported soybeans, a decline in the country's soybean production has also been driven by the fact that profits from the crop are not as lucrative as that of corn, which yields more per acre.

Indonesia enjoyed a high soybean output prior to the financial crisis of late 1997, when the country managed to at least balance the demand and supply of the commodity.

However, after bowing to pressures from the International Monetary Fund and the World Bank, who demanded the country open up its trade sector in exchange for a huge financial bailout, local soybean production began to decline.

Following the assistance, cheaper or even underpriced soybeans from the U.S. began flooding the domestic market, trapping the nation from reaching the self-sufficiency long dreamed of by Yudhoyono.

Vice President Jusuf Kalla threw in the towel even before putting up a fight, acknowledging it would be too much of a daunting task to boost local soybean production, as it would require huge incentives.

"Farmers are only able to net a Rp 3.5-million profit per hectare of soybeans, whereas with corn they can net Rp 8 million. So it is difficult to increase the production of soybeans at home," he said Tuesday.

Minister for Agriculture Anton Apriantono seemed to have no initiative at all in taking immediate action to address the problem faced by existing soybean farmers.

The minister turned a blind eye toward the demands of a group of soybean farmers from East Java and the local administration back in June last year, when they complained of limited farmland and a lack of incentives.

One of his staff members even commented that Anton preferred to help a group of farmers linked to his Prosperous Justice Party over others.

In the trade sector, Minister for Trade Mari Elka Pangestu spent most of her days traveling overseas -- for what she claimed was the opening up of new international markets and promotion of Indonesia's products -- rather than taking care of domestic affairs.

It was not until after thousands of tofu and tempeh producers staged a massive rally in front of the Presidential Palace on Monday that she finally came up with a policy to scrap the 10-percent soybean import duty.

"Again, it is a lack of anticipation. Their (government) hearts and minds are just not with the people. The president has a doctorate degree in agriculture and his ministers are also knowledgeable. But they only take action when the house is already burning," Dillon said.