The Ministry of Agriculture Says Large Mills Control the Majority of National Rice Production

JAKARTA, KOMPAS – The Ministry of Agriculture has stated that the majority of national rice production is dominated by large milling companies. Most of this rice is absorbed as raw material for premium rice production.

The Special Staff of the Minister of Agriculture for Policy, Sam Herodian, stated on Friday (29/8/2025) that currently, the number of small and medium rice mills in Indonesia is 124,506 units. Meanwhile, the number of large mills is 1,056 units.

Although their numbers are fewer compared to small and medium mills, large mills control 60 percent of the total annual rice production in Indonesia. They absorb the farmers' rice primarily to produce premium rice.

"This is what we see as one of the root causes of the rise in rice prices and the demise of small rice mills at a time when national rice production and government rice reserves at Perum Bulog are abundant," he stated during a Focus Group Discussion (FGD) titled "National Rice Surplus and Safety" organized by the Alumni Association of IPB University in a hybrid format in Bogor, West Java.

Of the total annual rice production in Indonesia, 60 percent is controlled by large mills. They absorb this rice primarily to produce premium rice.

Sam explained that national rice production in 2025 is expected to be abundant. The Ministry of Agriculture estimates that rice production could reach 33 million tons.

Furthermore, the United States Department of Agriculture (USDA) and the Food and Agriculture Organization (FAO) estimate Indonesia's rice production in 2025 to be 34.5 million tons and 35.6 million tons, respectively. In addition, the government's rice reserves (CBP) at Perum Bulog as of August 26, 2025, reached 3.93 million tons.

However, Sam continued, at a time when national rice production and the Government Rice Reserve (CBP) are abundant, rice prices are actually rising. One of the triggers is the competition for purchasing dry harvested grain (GKP) from farmers at prices higher than the government purchase price (HPP) of Rp 6,500 per kilogram (kg).

Large-capital rice mills are able to purchase unhusked rice at higher prices than small and medium mills. This is what causes many small rice mills to cease operations for a time, or even shut down completely.

"Sadly, the premium rice is produced not in accordance with quality standards, and is even sold above the HET (highest retail price). We found several premium rice products being sold that contained 30-50 percent broken grains, exceeding the quality standard for broken grains of 15 percent. This is essentially deceiving consumers," he said.

Not only that, the Focus Group Discussion (FGD) also revealed the fact that large rice mills dominate the rice distribution network, including in modern retail. From the problem of control over paddy and the rice distribution network, several proposals emerged.

Some of these include rice absorption zoning, premium rice digitalization, consumer literacy, and strengthening small-scale mills.

Agricultural economics observer Prima Gandhi stated that recently, many large rice milling and rice businesses have withdrawn premium rice from modern retail networks. This is due to their fear of massive legal actions being taken in several regions.

"This has resulted in a shortage of several premium rice brands in modern retail stores. This indicates that they truly dominate the modern retail network," he said.

On the other hand, Gandhi stated that they also have significant capital to access farmers' rice, even across provinces. It is not surprising that when rice production begins to decline after the harvest of the first planting season, they are able to purchase rice at high prices.

Not only that, one large milling company is capable of producing the paddy into premium rice with various brands. To address this issue, the government needs to reorganize the national rice management from upstream to downstream.

"For example, the government could regulate the zoning of rice paddy purchases. The government could also digitalize the trade of premium rice from upstream to downstream using traceability technology. In this way, the government can trace the origins of the rice paddy until it becomes the rice sold to consumers," he said.

Gandhi also proposed that the government strengthen consumer literacy about rice, particularly regarding how to differentiate between medium and premium rice.

Oligopoly practices have developed in the national rice market structure.

In the Focus Group Discussion (FGD), the Head of the Food, Energy, and Sustainable Development Center at the Institute for Development of Economics and Finance (Indef), Abra Talattov, expressed the view that oligopoly practices have developed within the structure of the national rice market. One indicator of this is the dominance of large rice milling and rice companies that control national paddy production as well as the rice marketing network.

In the midst of this situation, the government needs to support small rice milling efforts. This can be achieved by enhancing the capacity and quality of production through the rejuvenation of milling machines and drying facilities, as well as facilitating access to microcredit.

Abra also urged the government not to focus solely on increasing the production of rice or unhusked rice. An increase in rice productivity is also necessary, considering that its growth since the reform era or since 1998 has only been around 5 percent.

Indef noted that the national average rice production in 2017 reached 5.4 tons per hectare. Then, in 2023 and 2024, the average production decreased to 5.28 tons and 5.25 tons per hectare, respectively. Indonesia's average rice productivity still lags behind Vietnam, which achieved 6.11 tons per hectare in 2023.