Production Increases, Yet Prices Remain High: Portrait of the Rice Price Anomaly in Indonesia

Anomalies in Indonesia’s Rice Market

Rice prices in the third quarter of 2025 (July, August, September) have not declined from those in the second quarter, and remain above the annual average.

This condition occurs despite Statistics Indonesia (Badan Pusat Statistik or BPS) predicting higher rice production than in 2024, and the continuation of the Government’s Market Operation policy. This phenomenon raises a question: If rice supplies are increasing, why aren’t prices declining?

This article summarizes findings from the CIPS Food Monitor: Q3 2025 Report, which elaborates on the latest data and government policies to present recommendations for achieving long-term price stability.

Latest Data for the Third Quarter of 2025: Prices Remain at Elevated Levels

Overall, rice prices in the third quarter of 2025 continue the trend from the previous quarter, rising above the annual average.

Consumer and Wholesale Prices:

Consumer prices rose 2.93% year-on-year (y-o-y) to IDR 15,800/kg in September 2025, up from IDR 15,400/kg in September 2024.
The highest month-to-month (m-t-m) increase for consumer prices occurred between July and August, increasing 1.92% from IDR 15,600/kg to IDR 15,900/kg.
The month-to-month (m-t-m) increase in wholesale prices parallels that of consumer prices, with the highest increase occurring between July and August, rising 1.37% to IDR 14,750/kg.

Producer Prices:

On a year-on-year basis, September 2025 shows a 7.97% increase compared to September 2024.
There was a month-on-month price increase for two consecutive months, 4.67% from July to August, followed by another Rp100 increase in September.

The rise in domestic prices mirrors the trend observed in the second quarter of 2025. Notably, the year-on-year (y-o-y) increase in producer prices is significantly higher than that in consumer prices. The trend also coincides with the 1.3% increase of the producer price index (PPI) in the agriculture and livestock sectors, from 159,11 to 161,29 between the second and third quarters of 2025. Thus, high production costs may explain the increase in rice prices during the third quarter of 2025, reflecting the upward trend in producer prices.

This indicates that high production costs are the primary driver of elevated rice prices in the third quarter of 2025.

Market Operations: Temporarily Effective, Limited for Long Term

To curb rising rice prices, the Government, through the National Food Agency (Badan Pangan Nasional or NFA) and Bulog, relies on market operations and a price ceiling (Harga Eceran Tertinggi or HET) to set consumer prices. Although HET policies can lower prices in the short term, they will impose burdens on rice producers if production costs do not decline significantly. If the HET does not cover production costs, rice producers may refrain from producing rice, which in turn will decrease rice supplies.

Rising production costs lower the effectiveness of market operations in reducing consumer prices. Price control policies are less agile in price adjustment due to complex bureaucratic processes. Not to mention if production costs–outside of Bulog’s scope–continue to rise. Further attention should be given to reducing production costs rather than relying solely on market operations. Strengthening the competitiveness and productivity of rice producers is the key to lowering rice prices in the long term.

Strengthening Productivity and Ease in Production

Long-term efforts to lower rice prices should focus on improving productivity among rice producers, including farmers and rice mills.

Below are the main recommendations from CIPS:

Investment in agricultural technology, including high-quality seeds and mechanization;
Modernize the rice milling industry.
Fixing logistics infrastructures to lower distribution costs; and
Expansion of farmers’ access to capital and markets.

Policies that focus on improving production and distribution efficiency will be key to ensuring rice prices stability. This approach enables rice producers to increase their output while lowering production costs.

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