A Record Harvest, So Why Aren’t Rice Prices Falling?
- Center for Indonesian Policy Studies
- 3 hours ago
- 3 min read
(Guidance: Point out the cursor and click on the graph to see price details)
Indonesia’s rice market in the second quarter of 2025 (April, May, June) remained relatively stagnant, even experiencing minor increases, despite coinciding with a record-breaking domestic harvest.Â
Statistics Indonesia (Badan Pusat Statistik or BPS) projected an impressive total rice production increase of 14.49% between January and July 2025, reaching 21.76 million tons, with a record-high of 13.95 million tons recorded between January and April 2025. Favorable climatic conditions, including above-average rainfall since the end of 2024, contributed to this abundant supply, minimizing previous production deficits.
This raises the central question of Q2: why are rice prices stagnating despite the abundance of supply?
The second quarter of 2025 showed stagnation across all rice price categories in Indonesia.
Consumer prices remained high throughout Q2 2025, with PIHPS data showing a month-to-month (m-t-m) increase of Rp150, from Rp15,250/kg at the end of May to Rp15,400/kg at the end of June. On a Year-on-year (y-o-y) basis, consumer prices remained stagnant from Rp15,350/kg in June 2024 to Rp15,400/kg in June 2025 (around -0.3%). Wholesale prices also remained relatively stagnant at Rp14,350/kg, rising only Rp100 m-t-m from May 2025, and declining y-o-y from Rp14,800/kg in April 2024: a drop of Rp450 or approximately -3.0%. Meanwhile, producer prices held steady at around Rp12,550/kg from April to June 2025, a Rp100 m-t-m increase from March (Rp12,450/kg), but still down Rp500 y-o-y from Rp13,050/kg in April 2024 (around -3.8%).Â
This domestic price stagnation contrasts with global trends, where international rice prices fell sharply from Rp9,721/kg in April 2024 to just Rp6,996/kg in June 2025, a y-o-y drop of Rp2,725 or -28%. The modest domestic price decline over the same period (-0.3%) indicates a weak transmission of global prices to the local market.
BULOG’s aggressive absorption scheme can explain the discrepancy between domestic and international price drops. From the abundant national production, BULOG absorbed more than 2 million tons since the start of the year and built up rice reserves exceeding 4 million tons. This is the highest level since 1969. Most of this rice surplus did not reach the open market, thereby suppressing the expected price reduction. These reserves are intended to stabilize farmgate (gabah) prices and to serve as a supply for market operations, but the distribution rate lags behind the absorption rate. As a result, consumer prices inched upward despite the record harvest and falling international prices.
Moreover, a large-scale rice assistance program distributed 10-kilogram rice packages to 18.27 million low-income households, directly influencing consumer demand patterns.
Government action during this period of stability and harvest surplus
The aforementioned measures by BULOG were intended to halt rice imports in 2025 and were justified by the government based on sufficient domestic reserves. While current price stability is maintained, short-term affordability and long-term market efficiency in Indonesia require a shift toward open trade. When international prices drop sharply, as they did in Q2 2025, import restrictions actively hinder the transmission of cheaper prices to domestic consumers. As such, trade serves as a shock absorber, enabling faster response to price and supply shocks.Â
However, long-term food security cannot rely on imports alone: it should be supported by increased domestic production, improvements in logistics and storage infrastructure, and reform of a distribution system, which intermediaries and state-owned enterprises dominate. These structural challenges continue to generate inefficiencies and raise costs for both farmers and consumers. True resilience requires the development of transparent market mechanisms, the embrace of open trade to ensure diverse and responsive supply sources, and the dismantling of bureaucratic obstacles that hinder efficient distribution and competitive pricing.
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