February 23, 2023

 

Indonesia pushes imports of lower quality wheat as feed supply tightens

 

 

Indonesian grain buyers are boosting imports of lower quality wheat, as a decline in corn output in 2023 following a severe drought tightened the country's animal feed supplies.

 

Wheat imports into Indonesia are likely to climb at least 10% in 2024 from around 10.87 million metric tonnes last year, according to Singapore-based grain traders.

 

"Indonesia millers have been buying larger volumes of wheat mainly from the Black Sea region," a Singapore-based trader at an international house said. "Some of the wheat is of lower quality and it is expected to be used in animal feed."

 

Indonesian importers have signed contracts to buy around 300,000 metric tonnes of lower quality wheat in recent weeks, largely from Ukraine and Russia, at US$260-$270 per tonne, including cost and freight, for February-March shipment, traders said.

 

"These deals are for prompt shipments," a second trader said in Singapore, underscoring the urgency to ship cargoes amid tight feed grain supplies. "For flour, Indonesian buyers usually sign deals two to three months in advance. These shipments are for feed industry as local corn prices are more than double the price of imported wheat."

 

Locally produced corn is currently quoted at around US$550-$600 per metric tonne, compared with imported feed wheat priced around US$260-$270 a tonne, traders said.

 

The National Food Agency's price monitoring website showed average corn prices for chicken farmers on Monday at  Rp8,700 (US$0.5566) per kilogramme, about 47% higher than a year ago.

 

"This is due to El Nino and prolonged drought that occurred in the second half of 2023, which delayed corn planting," said Desianto Budi Utomo, chairman of the Indonesian Feedmills Association. "It is estimated that corn production in the first quarter of 2024 would not be optimal to meet feed mill demand."

 

Corn prices are more than 70% above government reference levels, which are likely to push up egg and chicken prices.

 

Some small farmers have started culling birds, officials said, which could tighten poultry supplies ahead of the Muslim holy festival of Ramadan in March.

 

On February 19, Indonesia assigned procurement company Bulog to import 500,000 tonnes of corn to supply feed millers in an effort to cool prices, although traders said that was unlikely to reduce wheat purchases given the high level of feed prices.

 

Higher Indonesian demand for imported wheat comes amid ample global supplies, with the Chicago benchmark Wv1 down more than 10% in 2024 and in negative territory for a second year in a row.

 

Indonesia's corn production is forecast to rise 8.3% to 14.58 million tonnes in 2024, according to officials, after drought last year reduced output by 12.5% from 16.53 million tonnes in 2022.

- Reuters