Key View
- We forecast that rice production will decrease in Indonesia in 2025/26, by -0.4% y-o-y, as favourable climate conditions are offset by higher fertiliser costs, while recent government measures offer mixed results.
- We expect the Indonesian government to continue its efforts on self-sufficiency in the medium-to-long term, while challenges including the preference for production of more climate-resilient and less input-intensive crops and a shrinking agricultural labour force remain.
Indonesia Rice Update: Output Set To Shrink Amid Economic Challenges
Indonesia, one of the world’s largest rice producers, faces a paradoxical challenge as its rice output is set to decline despite favorable climatic conditions. Favorable weather initially suggested a promising yield; however, economic constraints are overshadowing this potential. The agricultural sector grapples with budget cuts and escalating production costs, impacting the overall output.
Budget reductions have limited government support for essential farming inputs like fertilizers and advanced agricultural technologies. Additionally, rising costs for necessities like seeds and machinery are straining farmers, leading many to cut back on production. The financial strain on farmers is exacerbating an already tight situation, making it difficult to capitalize on the climate’s potential benefits.
These economic challenges are crucial for policymakers to address, as rice is a staple for Indonesia’s large population. Solutions may include revisiting budget allocations or providing financial support to farmers to sustain rice production levels. Addressing these issues promptly is essential to ensure food security and maintain economic stability in Indonesia.
