Indonesian Soybean, Meal Imports Growing
JAKARTA - May 8/02 - STAT -- Soybean production is expected to remain under pressure in Indonesia in the coming year, resulting in a projected 10% increase in soybean imports to around 1.65 million metric tons (MT) during the 2002-03 marketing year.
Last year's soybean production in the country was pegged at 920,000 MT by the U.S.a agricultural attache here, with this year's output expected to slip to 900,000 MT, reflecting the fact farmers in the country see soybeans as secondary crop.
"Although the Ministry of Agriculture (MOA) has an intensification program to boost development of soybeans to reduce dependence on imports," the U.S. agricultural attache said, "several important factors limit Indonesian farmers' ability to expand production: unfavorable climate for growing soybeans, low yields, high costs of production compared to rice and corn, poor quality of seeds, pest problems, inadequate storage, and so forth."
On strategy considered to help boost local production is to raise duties to the 27% allowed under WTO rules in an effort to push the price of imported beans well beyond those of locally grown merchandise, thereby stimulating demand. This is not seen as a likely event because imported and local soybeans are used in different markets. Imported soybeans are used to make tempe, while locally produced merchandise is used to make tofu.
Although soybeans, in the form of tofu and tempe, is still the cheapest source of protein for Indonesians (compared to eggs and meat), the slow recovery of the economy continues to hamper purchasing power. As a result, consumption of soybean products is forecast to remain stable in 2001-02, despite increases in population and growing food industries. With expectations for faster economic growth, in 2002-03 consumption is forecast to increase about 4%. The proportion of imports comprising total consumption is expected to reach 65%.
Indonesia once imported soybeans from several countries; however, during 2000-01 the U.S. had 100% market share. U.S. soybeans dominated imports due to the Foot and Mouth Disease related ban on grain imports from producers in South America, price competitiveness, and a general preference for U.S. beans.
The GSM program was also heavily used, financing around $327 million in sales in fiscal 2001. However, due to a change in policy from the Government of Indonesia, as of April 2002, the program has not yet been announced for fiscal 2002. Nonetheless, for the current marketing year, U.S. soybeans are still expected to dominate imports.
There is no functioning crushing facility in Indonesia, so all soybean meal is imported. Given expectations for growth in compound feed demand, in 2001-02 Indonesia's soybean meal imports are expected to increase approximately 6% to 1.4 million MT. Similar growth is forecast for 2002-03. For 2000-01, imports have been revised upward to 1.32 million MT, 28% higher than the previous marketing year. The poultry industry is the primary user of soybean meal, but shrimp and fish producers also use it.
In 2000-01, the U.S was the biggest supplier of soybean meal with 67% market share, followed by India (31%), and Argentina (2%). The foot and mouth related ban on imports of corn and soybean meal negatively effected imports from Argentina. Although Argentina is currently offering meal at competitive prices and the ban has been rescinded, importers remain cautious in view of the possibility that the ban may be reinstated at any moment.
Purchases of U.S. soybean meal still hinge critically on the availability of the GSM-102 program. Prices of meal from India are generally lower than U.S. prices, but importers would prefer U.S. meal if GSM-102 were available. The preliminary data show that during the first seven months of the marketing year (October 2001 B April 2002), U.S. market share has fallen to 47% from the previous year's 57%, while India's market share has increased. However, after supplies from India dwindle sometime in late April, traders will once again look to U.S. supplies.
Imports of soybean oil remains relatively insignificant relative to total domestic oil consumption. Consumption is estimated at only 14,000 MT in 2002-03, on par with 2001-02. There is no soybean crushing plant in Indonesia.
A small but vocal number of consumer groups continue to pressure the Indonesian government to implement labeling regulations on products containing genetically-enhanced components. One consumer group recently conducted and publicized a study that alleged several consumer products on the market contained GMOs derived from soybeans.
While a mandatory GMO labeling regulation exists, Indonesia has not yet implemented the requirement as a tolerance level has not yet been defined and verification capability must be strengthened. Recently, however, the government announced that products with GMO content above a 5% threshold level would require labeling. Nonetheless, no verification/testing protocol has been established nor has the 5% threshold policy been officially announced. Furthermore, no accredited laboratories yet exist to thoroughly analyze GMO content.
Indonesia is evaluating "Round up Ready" soybeans for a determination on planting domestically. They have passed the bio-safety evaluation, but have not yet cleared the food safety assessment. The food safety assessment is being held up as GOI is still designing a protocol for food risk assessment on GMO products for human consumption.
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