July 26, 2018

Wheat imports to Indonesia continue to weaken

Wheat imports into Indonesia only rose by 4% year-on-year (y-o-y) to 5.97 million tonnes in the first half of this year. The growth stands below expected margins and means that the trend of declining wheat imports into Indonesia (which started in 2016) still persists.

Lower consumer purchasing power and the weak rupiah are blamed for the weak import rates. However, according to the latest data from Statistics Indonesia (BPS), wheat imports into Indonesia amounted to US$1.73 billion in the first half of 2018. This is an increase of 28.1% (y-o-y) from US$1.35 billion in the same period a year ago.

Ratna Sari Lopes, Executive Director of the Indonesian Flour Producers Association, said: "Not all wheat imports are used as raw material for flour. Actually, nowadays, quite a lot of wheat that is imported into Indonesia is used to feed livestock."

The Indonesian Feed Millers Association has been increasing wheat imports considerably in recent years, from just 200,000 tonnes of wheat in 2017 to 1.5 million tonnes in the first half of this year.

Calculating the overview figures for the entire 2017, Indonesia imported 11.3 million tonnes of wheat – 8.5 million tonnes were used for the production of flour while the remainder went to livestock.

Sribugo Suratmo, Deputy Chairman of the Indonesian Food and Beverage Association explained that flat wheat imports are in line with stagnant production and sales in Indonesia's food and beverage industry so far in 2018.

He added, "Food and beverage factories indeed raised production in the context of the Ramadan month and subsequent Idul Fitri celebrations. However, after these festivities were over, production rates eased due to persistent subdued purchasing power in Indonesia as well as the weak rupiah exchange rate that has depreciated around 7% against the US dollar since the start of 2018, thus making imports more expensive."

With the upcoming Christmas and New Year season, traditionally a peak period for wheat imports, stakeholders are anticipating to see if the figures will increase significantly.