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September 7, 2012

 

Indonesia to lift grain stocks four-fold to cap food prices

 

 

In order to defend against food inflation due to rising prices of commodities, Indonesia's state procurement agency Bulog plans to lift rice stocks up to four-fold from current levels and boost sugar, soy and corn stocks.

 

"The aim is to stabilise the prices both at consumer and producer levels," said Deputy Trade Minister Bayu Krisnamurthi. "Currently we have rice stocks of 500,000 tonnes, and we will increase them to 1.5-2.0 million tonnes."

 

Bulog usually maintains rice stocks at between 1.5 million and two million tonnes by buying from domestic suppliers or exporters within the region, with a preference for the former.

 

Corn and soy would be imported by Bulog and registered importers only, Krisnamurthi said, similar to the import permit system used for rice and sugar. He did not say how many importers would be registered, or whether they would be state or privately owned entities.

 

US corn and soy futures have soared to record highs for the year in both August and September, after the worst drought in 56 years started pushing prices upwards about 2-1/2 months ago.

 

In the face of rising commodities prices, the Indonesian government said last month that it would expand the role of Bulog in order to build bigger food stockpiles. Indonesia imported 1.9 million tonnes of rice last year, mostly from Thailand and Vietnam, and has ambitious plans to maintain stocks of about 10 million tonnes by 2014.

 

Domestic sugar, soy and corn stocks should equal 6-7% of national consumption, Krisnamurthi said. Such a move would require increased investment in Indonesia's limited warehousing infrastructure to prevent food commodities from spoiling.

 

According to industry estimates, Indonesia will consume about 2.7 million tonnes of soy, nine million tonnes of corn and 4.5-5 million tonnes of sugar this year. The government of the world's fourth most populous nation scrapped a 5% import duty on soy for the whole of 2012 after domestic producers of staple foods tofu and tempe threatened to strike in July over rising prices.

 

The Indonesian Tempe and Tofu Makers Cooperative Federation said building soy stock levels would do little to curb rising prices.

 

"The problem we are facing now is not a supply matter but the unstable price, which tends to keep increasing almost everyday," said Aip Saifuddin, chairman of the industry body. He added that current soy stocks totalled about 200,000 tonnes.

 

Sugar stocks are around 550,000-600,000 tonnes. Data on corn inventories was not immediately available.

 

"Even the government does not have any national corn consumption figures," said Desianto Budi Utomo, secretary general of Indonesian Feed Mill Association. "It is difficult to determine how much the ideal corn buffer stock would be."

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