July 23, 2013

Indonesia intends to remove import duty on soy

In order to temper food market inflation, Indonesia wants to do away with the 5% import duty on soy starting August.

US soy futures have risen by as much as 28% in the last month as the US faces its worst drought in 56 years.

This decision was made following a protest by tofu makers, who halted production to protest against rising prices spurred by the oil seed's rally record. The local bean prices surged 33% in the last three weeks to about IDR8,000 (US$0.78) per kilogramme, or US$841/tonne.

"About 23,000 members in Banten, Jakarta and West Java provinces, who halted output this morning will soon resume production," said Sutaryo, the head of business of The Confederation of Indonesian Tofu and Tempeh Makers Cooperatives.

The Finance Ministry will issue a ruling this month that will be effective without delay, Coordinating Minister for the Economy Hatta Rajasa said. The Trade Ministry has also held talks with importers to limit margins, he told reporters. But, the removal of the import duty is temporary, he added.

Indonesia imports most of its soy from the US. It consumes 2.2 million tonnes of soy/year, but the country is only able to produce 700,000 tonnes/year.

"We need at least one million tonnes of imported soy/year," Rajasa said.

Trade Minister Gita Wirjawan is of the belief that soaring soy prices are attributable to adverse weather in Brazil and Argentina, which are among the world's largest soy producers.