May 27, 2013

Indonesia will impose a price floor on soy acquired domestically, in order to protect local farmers and reduce possible inflation of food prices.

The country's deputy trade minister also said that the country's beef import quota would climb. Although the moves are unlikely to have a major impact on international markets for soy and beef, they underscore investor concerns over the Indonesian government's increasing control over food markets in the country as it struggles to balance the interests of farmers and consumers.

The government has been criticised by international trading partners as it often uses import tariffs or quotas to protect domestic agriculture.

Indonesia, a country of 240 million which meets 70% of its annual needs of the oilseed through imports, now links traders' imports of soy to the volume of the oilseed they buy at home.

Although Indonesian soy imports are relatively small compared to China, the world's top buyer, as wealth increases and eating habits change, shipments are likely to steadily climb.

Indonesian producers of tofu and tempeh threatened to go on strike ahead of the start of the Muslim fasting month of Ramadan last year, in a bid to reduce soy prices. As part of efforts to tackle rising global food prices, Indonesia temporarily scrapped its soy import tariff and extended the role of state procurement body, Bulog, beyond rice in order to build bigger food stockpiles.

Registered soy importers, including Bulog, will not have limits on shipment volumes, Krisnamurthi said. Bulog will also be allowed to import an extra 3,000 tonnes of beef on top of the 80,000 tonnes 2013 quota set last year, to meet rising demand ahead of Ramadan.

Consumers have been critical of government food policies, after it slashed import quotas for beef, which then helped drive up prices in Java and caused a corruption scandal.