The weakening of the rupiah exchange rate, which reached around Rp17,000 per US dollar in mid-March, has renewed concerns about the stability of domestic food prices.
Exchange rate fluctuations put pressure on the national food system, particularly because Indonesia still relies on imports of several strategic commodities, such as soybeans, wheat, and garlic. When the currency weakens, the cost of importing food materials and production inputs may rise, affecting consumer prices.
The weakening Rupiah shows how global economic turbulence can directly intersect with domestic food security. In response to this case, a lecturer in Agricultural Socioeconomics at Universitas Gadjah Mada (UGM), Dr. Hani Perwitasari, assessed that the situation requires close attention, as it could put pressure on the national food system.
From an agribusiness perspective, exchange rate fluctuations have varying impacts on food prices in the domestic market. Hani stated that the extent of the impact depends greatly on the type of commodity and its domestic availability. Commodities with sufficient supply tend to remain more stable despite exchange rate pressures. Conversely, limited supply can increase the potential for price hikes at the consumer level.
“Exchange rate fluctuations can affect food price stability, varying from 2 to 8 percent depending on the type of food,” she said on Wednesday (Mar. 25).
Vulnerability to the weakening Rupiah also differs among food commodities. Hani explained that products that are difficult to substitute and highly dependent on specific supplies tend to be more sensitive to exchange rate changes. In such conditions, cost pressures can be passed more quickly to selling prices. The impact is then directly felt by the public through rising daily food prices.
“The most vulnerable commodities include meat, eggs, and milk, which are difficult to substitute, making them more sensitive to the impact of Rupiah depreciation,” she explained.
This situation cannot be separated from the national food structure, which still relies on imports. She noted that when domestic production cannot meet demand, imports become the option to maintain supply. However, this dependence makes the food system more vulnerable to external shocks, including exchange rate fluctuations. The greater the import share, the higher the risk of pressure on domestic prices.
“The higher the import level, the more vulnerable the system is to exchange rate volatility,” Hani said.
In addition to directly affecting food prices, the weakening Rupiah also impacts production costs in the agricultural and livestock sectors. According to her, several production inputs are still linked to global markets and are therefore sensitive to exchange rate changes. Rising input costs ultimately increase the total production costs borne by producers. This condition may encourage price adjustments at both the producer and consumer levels.
“Exchange rates affect production costs, especially when these inputs are tradable goods, causing prices and total costs to increase,” she added.
In the short term, price control measures are essential to mitigate the impact of rupiah depreciation. Hani said the government needs to ensure the availability of accurate data on national food production and demand. Proper monitoring will help in determining appropriate policies, including import decisions when supplies are insufficient. At the same time, price stabilization must be maintained to avoid harming both producers and consumers.
“If supplies are lacking, imports are necessary; if not, imports are unnecessary, so policies can be made more precisely,” she explained.
These short-term efforts must be accompanied by long-term strategies to strengthen domestic food production. Hani added that support for farmers is key to sustainably increasing production capacity. Access to financing, subsidies for inputs such as fertilizers and seeds, and protection through agricultural insurance need to be strengthened. Price stability at the farmer level is also important to keep production economically attractive.
“The role of all parties, including consumers, is important because choosing domestic products will encourage the strengthening of national food production,” she concluded.
Author: Triya Andriyani
Post-editor: Rajendra Arya
Photo: ThinkStocks