June 29, 2011


Indonesia to overtake Japan as top Asian wheat buyer in 2011



Indonesia will be crowned top Asian wheat importer this year, as higher incomes turn Southeast Asia's largest economy into a fast-food nation, helping to keep global prices on the boil.


As affluent Indonesians turn away from rice, their country is vying with Japan to be Asia's leading wheat buyer, while the latter battles economic crisis in the wake of a devastating earthquake and an ageing population boosts protein in its diet.


"We are coming up on a par with, or even more than, Japan," said Franciscus Welirang, chairman of the Indonesian Wheat Flour Mills Association, known as Aptindo. "It could be this year that we overtake."


With Indonesia's imports of the staple set to rise more than 10% this year and 3% a year in the period to 2015, the trend could even carry Indonesia to second place among the ranks of the world's largest importers this year.


Listed firms that could gain from any rise in Indonesian wheat consumption include Indofood Sukses Makmur, Singapore's Wilmar International, and Malaysia's PPB Group.


Indonesia, which relies entirely on imports for its wheat, gets around 60% of supplies from Australia, with Canada, and the US accounting for about 30%.


Global wheat output is set to show a small deficit this year, with stocks meeting any shortfall as output hits around 663 million to 673 million tonnes, analysts say.


The surge in Indonesian imports for the rest of this year coincides with a recent plunge in global wheat prices on improving crop weather in the West while Australian exports could jump nearly 9% to a record in 2011-12.


"In such a finely balanced market, any change in supply or demand will have an outsized impact on prices," said Deepak Gopinath, director at Trusted Sources Research. "The continued rapid growth of Southeast Asian wheat imports will be bullish for wheat prices over the medium term."


That growth will help moderate the price drop seen for the coming months, after wheat prices hit 2-1/2 year peaks near US$9.00 a bushel in February on tight supplies and robust demand from Middle East and North African importers.


Front-month July contract wheat futures on the Chicago Board of Trade were flat at US$6.24 a bushel, after posting its fourth-straight week of losses last week to around the lowest in a year. Analysis showed CBOT wheat would fall to US$4.02-1/4 per bushel over the next three months.


Southeast Asia now accounts for about 12% of global wheat imports, up from 9% in 2009. While wheat imports by neighbouring Vietnam, Thailand, and Malaysia have held under three million tonnes over the past decade, Indonesian intake has almost doubled.


This is due in part to a wheat consumption push by the Indonesian government, in an effort to avoid an over-reliance on the staple diet rice of which it is not a major exporter like many of its neighbours.


"Asia is a new market and one of the big issues in terms of food security," said Jonathan Barratt, managing director of Commodity Broking Services in Sydney.


"We're looking for increased production but it is not meeting the new demand from emerging economies - that's the problem because it's moving outside traditional food sources."


Behind Indonesia's rapidly rising wheat imports stands a booming economy, set to rise about 6.5% this year, boosted by domestic consumption and mineral exports.


"The increasing westernisation of diets throughout Southeast Asia over the past couple of years, has certainly driven feed wheat demand," said Michael Creed, an agribusiness economist for National Australia Bank.


Aptindo Indonesia recently forecast wheat imports would grow 10% this year to 5.1 million tonnes.


According to forecasts by the USDA, Indonesia is already ahead in Asia in the trade year July 2010 to June 2011, with wheat and flour imports at 6.1 million tonnes compared to 5.5 million tonnes in Japan.


USDA data showed 2009-10 imports for Indonesia and Japan at 5.36 million tonnes and 5.5 million tonnes respectively. It adds that Indonesian wheat consumption is estimated to rise to 5.8 million tonnes in 2010-11, versus 5.25 million in 2009-10.


Analysts say Indonesian wheat imports are seen rising about 3% annually in three to five years, with huge scope for further growth, given that its annual consumption of wheat per capita of 18 kg puts the country among the world's lowest.


Indonesia will import 700,000 tonnes of wheat flour this year, said Aptindo, 60% from Turkey. The USDA forecast that Indonesia will rank third among global importers in 2010-11, behind Egypt and Brazil.

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