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November 2, 2008
As prices for U.S. soybeans rise, so does hunger in Indonesia
The country relies on imports to produce staples such as tempeh and tofu. But
with costs soaring, producers and vendors are cutting back or going out of
business.
With the dollar a day he earns scrounging for scrap metal and paper, Jumadi
can't buy his family beef or even chicken. But until now, the rail-thin
scavenger could at least afford soy.
His wife and two children snacked on slabs of fried fermented soy, known as
tempeh, and tossed the cake-like staple into bland bowls of noodles and soup.
The soy provided protein, and it was cheap.
Not anymore. The cost of tempeh and tofu has doubled, driven by the soaring
price of soybeans imported from the United States.
"What kind of life is this?" complained the 25-year-old, who like many
Indonesians goes by only one name, as he stood outside his home, a plywood
shack buzzing with flies. "I just eat crackers now."
The cost of soy is spreading hunger on the main island of Java, where millions
of poor and working-class families depend on tofu and tempeh. It is also
devastating an entire local industry based on soy products. Hundreds of
factories have closed, thousands of people have taken to the streets to protest
soy prices and at least one soy vendor killed himself after falling into debt.
The lessons of the soy crunch, however, go far beyond Indonesia.
Over the last decade, Indonesia went from growing more than half its soy to
relying on the U.S. for 70% of it. Now the poor among this country's 220
million people are going hungry because of changes thousands of miles beyond
their shores. It is the same story for dozens of countries that came to depend
on richer nations for cheap food, only to find themselves squeezed when prices
started rising.
"There has been a drastic change in prices, and these smaller countries have
little to say. They basically have to take it," said Abdolreza Abbassian, a
grain economist with the United Nations' Food and Agriculture Organization.
"They were exposed to the negative sides of globalization, rather than the
positive."
Soy has long been a staple in Indonesia. But in the 1990s, farmers complained
that it was too expensive to grow because the government did not provide cheap
seed or low-interest loans. At the same time, they could not compete with
cheaper, better soy from countries like the United States, where farmers had
advanced technology and government subsidies.
Ruslan, who farms 7 1/2 acres in Ponorogo in East Java, planted soybean for two
decades. But in the late 1990s, the 50-year-old farmer began growing melons,
corn, onions and chiles instead.
"I got out of the soybean business because the cost of production was so high
that I was not making any profit," he said. "Since I switched to corn and
melons, I've always had a good profit."
Because of farmers like Ruslan, Indonesia's soy production dropped over the
last nine years from 1.4 million tons to about 700,000. The country stopped
fixing prices for imported soy and this year eliminated import tariffs on
soybeans.
At first the imports worked fine. Beans were big, prices were low, and people
were happy.
But Indonesia was dependent on the soy fields of the U.S. And it paid the price
when the Mississippi River flooded in June, leaving thousands of acres of
soybeans waterlogged. By July, soybean futures were up 82% over the previous
year, although they have come down since.
Indonesia also felt the ripples from a new demand for alternative fuels. About
20% of soy now goes to make biodiesel in the U.S., up from almost nothing three
years ago, the FAO said. And the demand for corn to make ethanol has prompted
U.S. farmers like Larry Gleason and Tim Henning to switch away from soy.
Gleason, his three brothers and their dad split 3,500 acres in central Illinois
evenly between soy and corn until last spring. Now 70% goes to corn.
"It's like any other business: You try to find where you're going to make the
most money," Gleason said.
Because of the demand for ethanol, the U.S. expanded corn production by 23% in
2007, the World Bank found. At the same time, it reduced soybean fields by 16%.
Henning calculated last spring that corn brought $75 to $85 more profit per
acre than soy. So in 2007, he planted 50 more acres of corn on his 800-acre
Minnesota farm and that much less soy. At a time when costs have risen for
fuel, fertilizer, machinery and land, Henning is trying to squeeze what money
he can from the earth.
"A number of years ago, the farmer got blamed because corn and bean prices were
too cheap and farmers overseas were going broke," said Henning, 50. "Now, they
are saying the prices are too high and people can't afford to buy the food. So,
we kind of feel we are in a 'damned if you do, damned if you don't' situation."
Fuel costs are making it more expensive not just to grow soy, but also to
transport it to faraway places like Indonesia by truck, rail and ship. Prices
have gone up further because of a shortage of containers from the booming
demand from India and China, said Mike Steenhoek, executive director of the
Iowa-based Soy Transportation Coalition.
The cost of shipping soy from the Midwest to ports in the Pacific Northwest and
onward to Asia has increased from $32 a metric ton two years ago to $80,
according to Mark Klein, a spokesman for Minnesota-based Cargill Inc., one of
four companies that import soybeans to Indonesia.
"You add it all up, and to take a bean from the Dakotas/Minnesota to the Far
East is now $1.90 a bushel more than two years ago," Klein said. "That tells
part of the story."
The story of the soybean ends back in Indonesia, in cities like Bandung, famous
for its tempeh and tofu industry.
Streets in the West Java city are lined with shops selling crispy tempeh
crackers and vendors with small carts offering meatball soup with tofu to
passing motorists. Hundreds of mom-and-pop operations make tofu and tempeh.
Young men fry soy in vats of oil or ferment the pea-size beans in wicker
baskets.
With slim profit and no cash on hand, few were prepared when soy prices started
rising steadily in August 2007. Since then, soybean prices have jumped to a
record high.
The price of kerosene and cooking oil rose at the same time. Almost 300
producers in Bandung shut their doors this year.
"If the price keeps going up, maybe the tofu and tempeh industry will
disappear," said H. Akil Dermawi, who heads Bandung's tempeh and tofu
cooperative. "We know the global economic situation doesn't support micro
businesses like tofu and tempeh makers."
One such maker is Syahroni, who came to the West Java town a poor farmer. Over
the last decade, he built a successful business selling tempeh to 150 vendors
in the city and converted a ground floor room in his Bandung house into a
factory.
But since January, he has had to raise his prices 25% to cover rising costs,
and he has reduced the size of his tempeh portions. He promptly lost a third of
his customers, and profits fell by half.
"In the past, this was profitable. You can see I bought a house," said the
34-year-old father of two. "But now, it's difficult to even buy food for my
children. Last year, I could go on a holiday. Now, I can't go anywhere."
Slamet, a street vendor who sold cubes of tofu from a cart in the village of
Cidemang a few hours outside Jakarta, the capital, fared even worse.
For nine years, he worked the town's main street. He brought in a few dollars a
day, enough to feed his two children and afford a simple two-room house near
the main market.
But as prices peaked in January, he fell 2 million rupiah ($220) in debt,
became depressed and stopped eating. His wife came home Jan. 14 to find him
hanging by a rope in one of the family's two bedrooms. He was 45.
"He couldn't take the higher prices," said his wife, Nuriah, breaking down in
tears inside the family's house. "He said there was no point in selling. Now,
there is no one to bring in money."
The day he killed himself, thousands of people converged on Jakarta to demand
that the government provide relief from rising soy prices. The demonstrations
sent a chill through a government that still remembers how protests over food
prices sparked the overthrow of the Suharto regime more than a decade ago.
The government responded by providing subsidized cooking oil and rice to 19
million households and offering subsidized soybeans to more than 100,000 tofu
and tempeh producers. It also launched a plan to spend more on agriculture and
offer incentives like cheap fertilizer, but Indonesia will not be able to meet
its own demand for soy until at least 2015.
There is now talk of giving the state the power to set the price for imported
soybeans, which worries Ali Basry, the American Soybean Assn.'s country
representative. Basry said the rising prices are simply a reflection of market
forces.
"Suddenly, the government is trying to calm the situation by putting a subsidy
on the bean price," he said.
But tofu and tempeh producers want fixed prices and accuse importers of
profiting from the volatility. They are convinced the problem remains the
country's dependence on imports.
"My customers get angry because the pieces of tofu are smaller," said
Sukarndar, a 38-year-old vendor in Jakarta who buys freshly baked brown tofu
daily at a neighborhood factory and resells it for a few cents at a nearby
market.
"I tell them the soybeans come from America," he said, his voice rising in
anger. "It is not our fault. I'm being oppressed because of prices in the
United States."
The Associated Press
http://www.latimes.com/news/nationworld/world/la-fg-soybean2-2008nov02,0,7916251.story
Copyright 2008 Los Angeles Times
