This paper describes the impacts of rice price fluctuations and price shocks due to crises on domestic households in Indonesia. In the long term the country was able to reduce poverty and undernourishment, because of its steady and strong economic growth.
A typical household spends nearly half of its total food intake on rice. Therefore, high rice prices make especially the poor vulnerable to price increases. In order to estimate how and to which extend rice price volatility affects demand, the daily calorie intake is focused with regard to a price increase of 10 % and 30 %.
Based on the assumption that people are food insecure a total calorie intake of 2,100 calories/day/person is taken into account as poverty line. Usually households consume less rice if the price is on a higher level. In Indonesia richer households have a more price-elastic demand if rice prices increases than poor households. On the contrary, those who are net consumers or producers of rice as well as governmental supported poor households have a relatively price-inelastic demand for rice.
This fact is different for households which differ in income level and location. This paper comes up with the conclusion that for rich urban households rice is a Giffen good and that they consume more of it when prices are high while the consumption of poorer rural households suffers. The same procedure applies for rural households.
Table of Contents
1 Introduction
2 The State of World Rice Market
2.1 Global trade and Indonesia´s position in it
2.2 Rice price volatility and trade effects
2.3 Indonesia´s rice prices and policy efforts for stabilization
3 Food Security in Indonesia
3.1 Economic growth and poverty
3.2 Rice production and consumption
3.3 Impact of rice price increase on calorie intake
4 Conclusion
Objectives and Topics
The paper aims to analyze the influence of world rice price volatility on Indonesia's domestic rice market, specifically investigating how price instability affects food security, daily calorie intake, and consumption patterns across different household income levels.
- Analysis of international rice market dynamics and Indonesia's trade position.
- Evaluation of governmental policy responses and stabilization efforts.
- Examination of the long-term impact of economic growth on poverty and malnutrition.
- Assessment of how rice price increases specifically affect calorie intake for diverse urban and rural households.
Excerpt from the Book
3.3 Impact of rice price increase on calorie intake
A culturally conditioned large share of rice in the consumer budget is responsible for some spillover effects which change consumer’s expenditures on other commodities if the rice price is rising. This paper is focused on the daily calorie intake of rice and seeks to quantify to what degree Indonesian households lower their demand, and substitute rice consumption with other food commodities if the rice price fluctuates.
Using direct and cross-price effects of a modeled demand system, Dodge and Gemessa (2012) found out that an increase in rice price is closely linked to a declining rate of total calorie intake for rice. Following this calculation method, a typical Indonesian household responds to a 10 % rice price increase with a declining demand of 3.6 %. As Figure 12 shows, richer households have a more price-elastic demand if the rice price increases than poor households, because the gap between status quo and two price spikes is widening with higher total expenditure percentile.
Summary of Chapters
1 Introduction: This chapter outlines the importance of rice as a stable crop in Indonesia, sets the research goal of analyzing the effects of market volatility on food security, and describes the government's role in buffering domestic prices against world market shocks.
2 The State of World Rice Market: This chapter examines the global rice market structure, identifies the top producers and exporters, and discusses the factors contributing to price volatility and the trade effects on domestic markets.
3 Food Security in Indonesia: This chapter evaluates the relationship between economic growth, poverty, and rice consumption, highlighting the vulnerability of different demographic groups to price fluctuations and their impact on daily calorie intake.
4 Conclusion: This chapter summarizes the key findings regarding economic crises, the impact of government stabilization programs, and the specific consumption responses of households to rice price shocks.
Keywords
rice price volatility, rice Indonesia, food security, rice price stabilization, rice trade, household demand, calorie intake, poverty, economic growth, price elasticity, Giffen good, domestic market
Frequently Asked Questions
What is the core focus of this research paper?
The paper explores the impacts of fluctuating world rice prices on Indonesia's domestic market, specifically looking at how these shocks affect the food security and daily calorie intake of households.
What are the central thematic fields covered?
The study centers on international agricultural trade, market price volatility, food security policy, and socioeconomic household responses in Indonesia.
What is the primary research question?
The primary goal is to investigate how rice price instability leads to market uncertainties and to what extent these instabilities affect food security and the dietary intake of the Indonesian population.
Which scientific methodology is utilized?
The author analyzes historical data, policy documentation, and relies on existing demand system models (specifically those by Dodge and Gemessa) to quantify the impact of price changes on household consumption.
What topics are discussed in the main body?
The main body covers the global rice market context, Indonesia's historical policy interventions, the relationship between economic growth and poverty, and empirical assessments of rice consumption patterns based on expenditure levels.
Which keywords best characterize the work?
Key terms include rice price volatility, food security, rice price stabilization, price elasticity, and household consumption patterns in Indonesia.
How do richer and poorer households differ in their response to rice price increases?
Richer urban households may treat rice as a Giffen good, increasing consumption when prices rise, whereas poorer rural households are forced to significantly reduce their consumption due to budget constraints.
Why does the author consider urban households more vulnerable to price spikes?
Urban households are more vulnerable because they do not produce their own rice for subsistence and typically start from a position of higher food insecurity compared to rural agricultural producers.
- Quote paper
- Kordula Pfeiffer (Author), 2013, Volatile Rice Prices, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/265293
