Indonesia marks promotion to top wheat importer with further purchase

12.02.2018

Indonesia marked its nomination as the world’s top wheat importer with a further order of the grain – from the Black Sea, underlining the region’s expansion into the Asian market, at the expense of Australia and the US.

A flour miller in Indonesia bought 50,000 tonnes of 11.5% protein Black Sea wheat for shipment in March, for $225 a tonne including cost and freight, Reuters reported.

The news came hours after the US Department of Agriculture upgraded its forecast for Indonesian wheat imports in 2017-18 by 1.0m tonnes to 12.5m tonnes – overtaking the 12.0m tonnes expected to be purchased by Egypt, “traditionally” the biggest buyer.

The USDA cited “economic growth and increased wheat feeding” as behind its Indonesia import upgrade.

‘Population and incomes are rising’

Indeed, Indonesia’s wheat imports have been growing based on both “food and feed demand”, the USDA said.

“Population and incomes are rising and diets are moving towards Western trends of pastries, instant noodles, and poultry” in the country, where the number of flour mills has swollen from five to more than 30 over the past 20 years.

As for feed, “even though there are feed wheat import restrictions, lower-priced milling wheat is still an affordable ingredient to process into feed rations”.

Unlike Egypt, which produces some 8m tonnes of wheat domestically a year, Indonesia’s own wheat output remains essentially nil, exposing it in full to imports to meet the rising demand.

‘Ukraine robbing Australia of its major market’

Historically, this has represented a boon in particular to Australia, to which Indonesia has become the top wheat export market, at some 4m tonnes a year, with Canada in second place.

Besides geographical proximity, Australian white wheat is preferred by many Indonesian noodle makers, for reasons such as colour, colour stability and texture properties.

“However, competitively priced black Sea wheat continues to put pressure on high-quality suppliers by offering wheat at a much lower price,” the USDA said, noting that Ukraine had usurped Australia as the top wheat supplier to Indonesia so far this season.

“Not only is Ukraine robbing Australia of its major market, Russia has now made an entrance into Indonesia,” taking third place in the origin table, demoting Canada to fourth place, and the US to fifth.

‘Less competitive globally’

Indeed, the USDA flagged the dent to US export prospects from domestic price rises in January “on concerns over drought conditions in hard red winter wheat areas”, notably the country’s southern Plains.

“These strengthening prices make US wheat less competitive globally in light of abundant competitor supplies,” the USDA said, noting that prices of hard red winter wheat “surged $16 a tonne to $240, while soft red winter jumped $11 a tonne to $183”.

The Black Sea is expected to underline its strong grip on world trade later with results of a tender by Egypt’s Gasc grain authority, which has so far bought 5.2m tonnes of wheat at tender – 4.2m tonnes of it from Russia.

And of the rest, all but 60,000 tonnes of French wheat has been bought from the Black Sea origins of Romania and Ukraine.


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