February 18, 2013

Indonesia's wheat prices unaffected by global grains downward trend

Since the beginning of this year, the downward trend in grain prices in the international market did not affect the price of wheat in Indonesia.

Currently, the price of wheat in the country is from IDR135,000-145,000 (US$14-15) per sack (equivalent to 25 kilogrammes).

Chairman of the Indonesian Association of Food Industries (Aspipin), Budiyanto, said fluctuations in foreign wheat prices do not automatically affect the price of wheat in the domestic market. "Every company has a sufficient stock of flour for some time, so it will not take effect in a short time," said Budiyanto to KONTAN, Thursday (Feb 14).

The price of wheat on the Chicago Board of Trade (CBOT) futures for delivery in March 2013 was in the range of US$7.3 per bushel or 8.75 decrease compared to last year, still in the range of US$8 per bushel.

Decline in grain prices in the international market cannot be separated from the dry weather conditions that hit the US, Russia, Argentina, Australia and some countries producing corn and soy.

Aspipin noted that domestic flour needs to reach six million tonnes per year. Of these, 15% is imported, while the rest comes from domestic production. Since the government imposed a provisional duty security measures (BMTPS) for wheat flour by 20%, which took effect on December 5, 2012, only a few of the imported wheat flour entered the Indonesian market. As a result, local wheat prices are still potentially uphill.

Ratna Sari Loppies, Executive Director of the Indonesian Flour Producers Association (Aptindo) said the price of wheat in the domestic market would not be too much if the effect of international price fluctuations takes place immediately.

However, based on the experience of the members of Aptindo, the price of wheat in the country still has the potential to shrink even if the effect of international price decline takes a while. After all, every company has a stock of wheat that can be used for a few months so that the price of wheat remains relatively stable.

"At the time of Eid, there is no increase in the country's wheat," Rachael said without giving further details. Based on data showed by Aptindo, Indonesia annually imports an average of four million tonnes of wheat and wheat flour as much as 500,000 tonnes.