February 26, 2004

 

 

Indonesian Soybean Markets Review and Outlook

 

Soybean

 

Although several factors continue to limit growth of soybean production in Indonesia, the Ministry of Agriculture (MOA) is still striving to boost production. In 2004, MOA plans to subsidize prices of seeds and fertilizer for soybean production.  With this assistance, MOA hopes that yields can eventually reach more than 1.2 tons/ha. 

 

Furthermore, MOA expects Indonesia to become self-sufficient in soybeans by 2006.  However, this expectation is too optimistic, as agronomic conditions are unsuitable for growing soybeans in many regions of Indonesia.  Soybean production during marketing year (MY) 2003/04 (Oct 03 ¨C Sept 04) is expected to total 820,000 tons, a modest 5 percent increase compared to MY 2002/03.  MY 2004/05 production is forecast at 840,000 tons.

 

Breaking an upward trend, consumption of soybean products (in the form of tofu and tempeh) was down about 10 percent to 2.08 million tons in MY 2002/03 due to a significant increase in wholesale bean prices.  The local price increase stemmed from both a doubling of freight costs from the U.S. as well as higher U.S. soybean prices.  In addition, it is suspected that consumers substituted poultry meat and eggs, whose prices were more stable in 2003, for soybeans. 

 

However, as a result of the Avian Influenza outbreak, poultry consumption in MY 2003/04 is expected to decline; thus, soybean consumption is forecast to increase 4 percent to 2.16 million tons, and continue growing to 2.2 million tons in MY 2004/05.

 

Total soybean imports during MY 2002/03 were down about 10 percent to 1.27 million tons.  (Note:  Imports in CY 2002 totaled 1.43 million tons and 1.23 million tons in 2003.)    This decline is attributed to high stock levels, significant price increases, lower demand, and slightly higher domestic production.  Imports were strong during the first quarter of MY 2002/03, but when bean prices and freight costs increased, imports slowed. 

 

With both the U.S. BSE case and Avian Influenza having an unpredictable impact on the market, traders are adopting a ¡°wait and see¡± approach to soybean purchases.  Reflecting expectations for a rebound in demand for tofu and tempe, soybean imports are forecast to increase 10 percent to 1.36 million tons and reach 1.4 million tons in MY 2004/05.   

 

U.S. soybeans are expected to continue dominating imports, holding a 97 percent market share, with the remaining share being met by imports from South America.  The GOI continues to discuss the possibility of raising the import duty for soybean from zero to 30 percent.

 

Soybean Meal

 

Soybean meal is used for about 25 percent of the total compound feed production and is satisfied exclusively by imports.  Imports of soybean meal increased 26 percent to 1.7 million tons in MY 2002/03, in line with the recovery of feed mill industry.  When the Washington State BSE case occurred in December 2003, the GOI banned all products derived from ruminants, including meat bone meal (MBM).  Although MBM could not be substituted totally for soybean meal, it was expected that demand for soybean meal would increase about 5 to 10 percent. 

 

However, this expectation changed after the announcement of AI outbreak in Indonesia.  In just one month (January 2004), meal demand declined 50 percent.  Some feed millers have reportedly stopped operations and are not purchasing any raw materials and are struggling to sell their stocks as quickly as possible.

 

As a result of the AI situation, imports of soybean meal are forecast to decline to 1.36 million tons, back to the same level as imports during MY 2001/02.  Brazil was the largest supplier of soybean meal (54 percent) followed by the U.S. (31 percent) and Argentine (10 percent), while China held zero, due to the FMD case in PRC that occurred last year. Given the relatively large market share held by South America countries, the U.S. could increase market share if it could offer more competitive prices and quality.

 

Soybean Oil

 

Demand for soybean oil in Indonesia is gradually increasing.  The oil is targeted for high-end consumers, such as five star hotels and restaurants, and small quantities are also sold in upscale supermarkets.  However, Statistics Indonesia reported that imports of soybean oil for MY 2002/03 were stagnant at 16,000.  Imports are forecast to increase slightly to 18,000 tons and 20,000 tons in MY 2003/04 and MY 2004/05, respectively.  Malaysia and Thailand are still the major suppliers.

 

 

Source: USDA