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As per sources, it has been narrated by the Indonesian Agriculture Ministry officials that the country’s rice production is safe despite the on-going dry weather conditions due to the El Nino weather pattern. The Ministry is expecting 7% y/y an increase in paddy rice production to around 75.2 million tons in 2015 from around 70 million tons in 2014. However, it has been observed that the output may be below to 75.55 million tons estimated by the statistics agency in July. It was also informed that some 52,000 hectares of rice crops have failed as of August due to drought which is around 250,000-300,000 tons may get lost in this current year.

Further, in this regard, it was noted that the government needs to monitor the impact of drought on rice prices and inflation.It was reported that Indonesia’s state weather agency is predicting that the rainy season would be delayed this year and the drought conditions would peak from October to the beginning of next year due to the El Nino pattern.

In this context, it was also stated by the Agriculture Minister that the government has already distributed 20,000 irrigation pumps to farmers, made more than 1,000 reservoirs and dug 1,000 wells in anticipation of the El Nino this year. Further, it was reiterated that “imports are only  the last option”.

Recently, the officials of the Finance Ministry for Budgeting observed that the Indonesia government has allocated about Rp 3.5 trillion (around $258 million) to support rice production during the drought conditions. In this total  allocated amount, around Rp 1.5 trillion (around $105 million) would be reportedly used to ramp up the rice reserves at Bulog and the remaining Rp 2 trillion (around $153 million) will be used to help stabilize the  prices.Meanwhile, the analysts are predicting that Indonesia may have to import about 1.6 million tons of rice this year to maintain stocks and stabilize prices. 

According to the sources, the Global rice prices are estimated to increase by 10-20% in the next few months as the El Nino induced drought is expected to lower production prospects in Asia. However, the USDA estimation indicates that Indonesia is to produce around 36.3 million tons of rice, basis milled (around 57.17 million tons, basis paddy), and to import around 1.25 million tons of rice in MY 2014-15 (October – September).