Indonesian wheat imports up on demand from feed mills

05.08.2016

Indonesian feed mills continue to face difficulties meeting feed corn demand.
 
Indonesia’s market year 2015-16 wheat import is forecast at 8.9 million tonnes, up from the previous estimate of 7.6 million tonnes, the U.S. Department of Agriculture’s (USDA) Foreign Agricultural Service (FAS) said in a July 28 report. The increase is mainly driven by higher demand from feed mills. It is therefore expected that U.S. wheat exports to Indonesia will increase slightly to 700,000 tonnes in market year 2015-16.

Indonesian feed mills continue to face difficulties meeting feed corn demand due to 2015-16 weather related production declines and the Indonesian government’s restriction on corn imports. In response to low local supplies and import barriers, feed mills are substituting corn with imported feed wheat. The Indonesian Flour Mills Association (APTINDO) said there are 22 feed mills importing feed wheat, resulting in a feed wheat import surge since September 2015. Global Trade Atlas and APTINDO data indicate that wheat imports from July 2015 to May 2016 have reached a total of 8.2 million tonnes, up from 6.7 million tonnes between July 2014 and May 2015, the report said.

The Indonesian government recognizes that the uptick in feed wheat imports poses a threat to the country’s corn self-sufficiency policies. In response, its Ministry of Agriculture stopped issuing import recommendations for feed wheat starting in June 2016. Indonesia’s Ministry of Agriculture shutdown of feed wheat imports, combined with weak exchange rates is expected to slow Indonesian wheat import growth from an average annual rate of 6% to7% to approximately 5%, the report said. At these levels, Indonesian wheat imports are expected to contract to 8.5 million tonnes in market year 2016-17.

In line with increasing feed wheat imports, the report revises the market year 2015-16 feed and residual wheat consumption estimate to approximately 1.3 million tonnes, compared to the previous estimate of 450,000 tonnes. But market year 2016-17 feed wheat consumption is expected to decline to 550,000 tonnes based on the discontinuation of feed wheat import recommendations. Market year 2015-16 food wheat consumption is estimated to increase by 4.2% to 7.5 million tonnes, compared to the previous estimate of 7.2 million tonnes. This increase reflects population growth, several new-to-market instant noodle brands, and the growth of the high-end retail bakery segment, the report said. Market year 2016-17 food wheat consumption is forecast to grow to 7.7 million tonnes.

Indonesia’s corn production for market year 2015-16 is estimated at 9.3 million tonnes, down from 9.4 million tonnes. The decrease is due to favorable weather that prompted farmers to grow paddy in the place of corn in rain-fed areas and feed mills’ preference for imported wheat.

The decline of corn and favorable weather increased Indonesia’s rice harvest area to 12 million hectares from 11.8 million hectares. As a result, the FAS said market year 2015-16 rice production will increase to 36.2 million tonnes from 35.6 million tonnes. Considering higher production estimates, the report expects market year 2015-16 Indonesian rice imports will decline to 1.8 million tonnes compared to the initial 2 million tonnes.



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