June 28, 2013

 

 

As the agency poised to sign the first of many deals to supply domestic food producers, Indonesia's state procurement body Bulog is set to resume soy imports for the first time in 15 years.

 

As part of reforms agreed with the International Monetary Fund in the midst of the 1997-98 Asian financial crisis, Bulog was stripped of several monopolies in trading food commodities and left with only rice.

 

But after global food prices spiked last year, the Indonesian government temporarily scrapped its 5% soy import tariff and agreed to extend Bulog's role beyond the single grain in order to build bigger food stockpiles.

 

"Bulog and GAKOPTI (Indonesian joint cooperative of tempeh and tofu producers) will sign a soy sales contract for 21,900 tonnes," GAKOPTI Chairman Aip Syarifuddin said on Thursday (Jun 20), adding that it would be for imported supplies only. Tempeh, a pressed soy cake rich in protein, is a staple of the Indonesian diet.

 

Indonesia's soy imports are relatively small compared to top buyer China, but as wealth increases and eating habits change, shipments are likely to steadily climb. Total soy imports into Indonesia will hit 1.8 million tonnes this year, according to industry estimates.

 

The country meets about 70% of its annual needs of the oilseed through imports, mainly from the US. It was not clear from where Bulog would be importing soy for this first deal. Bulog did not respond to requests for more information but a source close to the matter confirmed a deal would be signed within one week from Thursday.

 

The move by Bulog is unlikely to have a major impact on international soy markets, but it is likely to cause concern among Indonesia's top soy importers FKS Multi Agro Tbk , Sungai Budi Group and Cargill Inc. Cargill was not immediately able to say how any GAKOPTI-Bulog deal might impact its imports of the oil bean.

 

GAKOPTI members will be able to buy Bulog's soy at a price of IDR7,450 (US$0.75) per kilogramme, said Syarifuddin, adding that similar deals for soy may be struck in the future. The price is equivalent to about US$20.40 a bushel.

 

Last year a devastating drought across the US grain belt curbed global supplies and pushed benchmark Chicago soy futures to a record high. Chicago soys are still being supported by razor-thin US supplies with old-crop prices quoted at US$15.34-3/4 a bushel, a premium of about US$2.59 a bushel over the new-crop values. US soy prices have come under pressure this year on forecasts of a rebound in production.

 

The first Bulog soy supplies are expected to become available in August, said Syarifuddin, whose GAKOPTI members buy about 1.6 million tonnes per year. Late last year, Bulog officials sounded out US government officials about securing soy imports. In May, Indonesia's top soy importer FKS Multi Agro said the agency had not been able to make any inroads yet in the import market.