September 17, 2013

 

Indonesia's anti-monopoly body probes soy trade

 

 

Following the recent price hike and a strike by small-scale makers of tempe and tofu, Indonesia's anti-monopoly regulator, KPPU will conduct a three-month investigation into the country's rapidly growing soy trade, which could open the soy market to more players and lead to government policy changes.

 

Junaidi, head of public relations at the KPPU said, "We began monitoring the soy market during the first half of the year and this became more intense during the recent price hikes."

 

According to USDA data, Indonesia buys in 70%-80% of its soy needs, mainly from the US, and is set to become Southeast Asia's biggest importer in 2013-14 with a record 2.1 million tonnes.

 

Importers require an import permit, which is issued by the government. The market is currently dominated by a handful of companies. These include FKS Multi Agro Tbk, which has about 60% of the market share according to industry sources, Sungai Budi Group, with about 20% and Cargill Inc. with around 10%.

 

This year, Indonesian soy prices have spiked by more than 15% to trade at around US$0.95/kg, while domestic stocks of the oilseed have fallen to multi-year lows at about 300,000 tonnes, industry sources say.

 

Global soy prices in recent weeks have risen to trade near 11-month highs due to concerns over dry weather in the US, while Indonesia's rupiah has fallen to a near four-and-a-half year low, thus making imports more expensive.

 

Junaidi said that the KPPU's investigation will look at the system of issuing import permits by the Indonesian Trade Ministry and soy traders which control more than 50% of the total import market in Indonesia.

 

Meanwhile, the government has sought to encourage domestic output. However, policy changes over the past six months, such as forcing traders to buy domestic supplies and imposing a floor and ceiling price for buyers and sellers, have added to market uncertainty.

 

Imports have slowed, and the Indonesian Joint Cooperatives of Tempe Tofu Makers went on strike last week to protest against rising soy prices. Although the government has removed import quotas, it has maintained the controversial system of issuing import permits, which traders say is too slow to react to demand spikes and at risk of corruption.

 

The plan to ditch its import tariff for soy last month was rejected by the government even though the proposal was backed by the trade ministry.

 

Trade Minister Gita Wirjawan says that 1.1 million tonnes of soy import permits have been issued for the year to date, with suppliers in Paraguay, Argentina and Brazil sought.