MY 2014/15 first crop delays will push back the MY 2014/15 third crop harvest to MY 2015/16. Considering the potential loss, Post estimates MY 2014/15 Indonesian paddy harvested area down to 12.080 million hectares. On the other hand, Post estimates that MY 2014/15 Indonesian rice production will remain stable at 36.3 MMT due to higher expected yields. Increasingly strict import policies will slow MY 2014/15 Indonesian rice imports to 1.25 MMT, a marginal increase. Imports are expected to decline to 1.1 MMT in MY 2015/16.

Production

The first crop of paddy for MY 2014/15 in major production areas is delayed, in line with BMKG reports that the onset of the 2014 rainy season was delayed until December 2015. Typically, irrigated farms are planted to paddy during the first crop cycle (October – February), followed by paddy on the second crop cycle (March to June), and ended by growing paddy or secondary crops such as corn, mungbean, soybean, peanut, or sweet potato during the third crop cycle (July – October). However, in MY 2014/15, most farmers on Java started the first crop cycle in mid-December 2014 due to water shortages (late rainfall). The delayed first crop is expected to push back the harvest of MY 2014/15 third crops, especially on irrigated low land areas. Furthermore, BMKG reported that the sea surface temperature during January and February 2015 ranged from normal to warm. This implies that rainfall intensity will not be as high as in the early 2014, when the northern coastal areas of Java experienced flooding. Therefore, Post revises the MY 2014/15 Indonesian rice harvested areas to 12.08 million hectares compared to the previous estimate of 12.16 million hectares. With carry-over from the MY 2014/15 third crop, as well as assuming favorable weather and no significant pest and disease incidents, Post forecast that MY 2015/16 Indonesian paddy harvested areas will rebound to 12.16 million hectares.

Overall MY 2014/15 yields are estimated to remain higher than MY 2013/14 due to the growing use of high yielding varieties such as Ciherang, Sinta Nur, Inpari, Memberamo, and Mekonga. Other factors aiding yield increases include an absence of flooding and no reports of major pest and disease outbreaks. More and more farmers are adopting the paddy planting technology called "Jajar Legowo". The Jajar Legowo cropping system plants paddy with a pattern of several rows interspersed with an empty row. Plants that should be planted in an empty row are inserted in row crops. Initially, Jajar Legowo is applied to areas with many pests and diseases. In blank rows farmers can make shallow trench. The trenches can be used collect snails which are harmful to paddy. Later on, the cropping pattern evolves, providing higher yields as a result of increasing populations and optimization of growing space for paddy. This cropping system also provides more air and sunshine circulation. In addition, efforts to control weeds and fertilization can be done more easily. Farmers using the technology can achieve a potential increase of 10 – 15 percent in yield.

As of February 2015, there were a few small and sporadic paddy harvests ongoing on Java. The first main harvest period is expected to take place between late March 2015 and April 2015. Irrigated land has started the first paddy crop planting, while upland areas of Java are being planted to corn. The second harvest is expected to occur in late August 2015.

In efforts to achieve food self-sufficiency targets, The Ministry of Agriculture has appointed PT. Sang Hyang Seri and PT. Pertani, two state owned companies, to provide high yielding variety seed to be distributed at subsidized rates to farmers.

The Ministry of Agriculture is taking additional steps to ensure the success of rice self-sufficiency policies. MOA has requested assistance from Indonesian national army to monitor the distribution of subsidized fertilizer, help farmers repair tertiary irrigation canals, and to control pest and disease incidents that may occur.

Despite lower harvested areas, Post's MY 2014/15 Indonesian paddy production estimate is expected to reach 57.165 MMT based on growing demand for high-yielding seed varieties, land conversion to non-agricultural uses, and assuming normal weather. Post also expects MY 2015/16 paddy production to increase to 57.717 MMT based on additional carry over from MY 2014/15 third crops.

Trade

The Indonesian National Logistics Agency (BULOG) has set its procurement target at 3.2 MMT of milled rice equivalent for MY 2014/15. This is higher compared to the 3 MMT target set in MY 2013/14. As of December 2014, BULOG realized 2.5 MMT of the procurement target of MY 2013/14, with an ending stock of 1.79 MMT, which includes approximately 250,000 tons of government rice reserve. However, in the middle of March 2015, BULOG revised its MY 2014/15 procurement target from 3.2 to 2.5 MMT. This decision is a follow up to the GOI decision to increase government purchasing price (Harga Pembelian Pemerintah, HPP) for paddy and rice as stated in Presidential Instruction No. 5/2015 stipulated on March 17, 2015. The average increase of the HPP, which is set at an average of 10 -12 percent from the previous HPP, is considered lower than BULOG's expectation of a 15 percent average increase of HPP.

BULOG can only buy paddy or rice from farmers when the market price is lower or equal to the GOI's official purchasing price (Harga Pembelian Pemerintah, HPP). According to presidential instructions, BULOG can buy paddy or rice that meets the following criteria and using the following HPP:

Indonesia: Government Purchasing Price for Paddy and Rice 2012-Present

Inpres 2012

Inpres 2015

Quality Requirement

Wet Paddy

Dry Paddy

Rice

Wet Paddy

Dry Paddy

Rice

Moisture Content, Max

25%

14%

14%

25%

14%

14%

Empty Husks/Dirt, Max

10%

3%

-

10%

3%

-

Broken, Max

-

-

20%

-

-

20%

Price at farmer's level

Rp. 3,300

-

-

Rp. 3,700

-

-

Price at mill's level

Rp. 3,350

Rp. 4,150

-

Rp. 3,750

Rp. 4,600

-

Price at Bulog warehouse

-

Rp. 4,200

Rp. 6,600

-

Rp. 4,650

Rp. 7,300

BULOG normally meets 60 percent of its procurement target during the first main harvest period. With the delay in the MY 2014/15 first harvest, BULOG has only begun domestic procurement. As of March 31, 2015 BULOG procurements totaled 30,000 MT, far below 320,000 MT procured during the same period of last year.

In the past, the GOI instructed BULOG to maintain a minimum secure stock level of 2 MMT by the end of the year. With the current HPP, BULOG may find difficulty in meeting its procurement target as the delayed harvest, combined with inflation, will push paddy prices above the HPP. June is usually the most important month for BULOG domestic procurement objectives. Assuming that BULOG will be able to reach the procurement target from domestic farmers, the GOI will still need to consider imports to maintain BULOG's stock at their prescribed levels.

Indonesian regulations restrict imports of rice one month prior to, during, and two months after the main harvest period. Indonesian regulations only permit BULOG, the Indonesian state trading company, to import medium quality rice while private companies can import specialty rice (jasmine rice, basmati rice, sushi rice, rice for diabetics and rice seed, for example). Indonesian rice prices are considered the highest in the international market.

Post expects that MY 2014/15 imports will increase to 1.25 MMT from to 1.225 MMT in MY 2013/14. Medium grade rice is expected to make up 400,000 MT, with the remainder as specialty rice imports.

Post also expects that Indonesia may impose additional import restrictions in MY 2015/16, leading to a lower import forecast of 1.1 MMT. Post notes that the GOI's rice self-sufficiency aspirations have resulted in import restrictions on rice, including specialty rice. The Ministry of Agriculture has not issued any import recommendations for japonica rice since the fourth quarter of 2014, claiming that certain local varieties can be substituted for restaurant grade japonica rice. The Ministry of Agriculture continues to issue import recommendations for other specialty rice varieties.

Consumption

In MY 2014/15 BULOG will allocate 2.795 MMT of rice for the Raskin program to 15,530,897 poor families. Each family will receive 15 kg of rice/month for 12 months at the price of Rp. 1,600/kg. As of February 2015, BULOG distributed a total of 210,204 kg of rice under the Raskin program.

2013 Indonesia National Economic Survey (Susenas) data showed an average decline in rice per capita consumption of 1.62 percent per annum. The decline in rice consumption is due to some switching (especially at those middle income class) to wheat flour-based foods such as instant noodle and bread. The price of a pack of instant noodle currently is about Rp. 2,000/pack ($0.15/pack) and can be eaten without any side dishes, compared to the price of rice of Rp. 10,580 – 11,400/kg ($814 - $877/MT).

Based on population growth and other data, Post revised MY 2014/15 Indonesian rice consumption to 38.6 MMT from the previous estimate of 39.2 MMT. Post expects Indonesian rice consumption to increase to 38.65 MMT in MY 2015/16, in line with population growth.

Stocks

Post revises MY 2014/15 Indonesian rice ending stocks to 4.451 MMT, slightly higher than the previous estimate of 4.101 MMT, based on consumption revisions. Furthermore, Post forecasts MY 2015/16 Indonesian rice ending stocks to 3.551 MMT, based on lower imports and higher consumption.

Prices

Due to the delayed harvest, the current price of wet paddy and rice are above the HPP. Current farm gate prices of wet paddy in Java range from Rp. 3,600/kg ($277/MT) to 4,500/kg ($346/MT) compared with Rp. 2,900/kg ($223/MT) to Rp. 4,300/kg ($331/MT) in the same period of MY2013/14. The average price of medium quality rice at Cipinang wholesale market also decreased from Rp. 10,800/kg ($831/MT) in March 1, 2015 to Rp. 9,200/kg ($708/MT) in March 30, 2015. Average daily rice supplies to the Cipinang rice wholesale market in Jakarta increased to 3,876 MT in March 2015 from 2,006 MT in February 2015, as harvesting in major production areas takes off.

Policy

In an effort to achieve the MY 2014/15 paddy production target of 73.4 MMT, the GOI set the maximum retail price of subsidized fertilizer on 27 November 2014. These prices apply only to small holder farmers possessing no more than 2 hectares of land for 2015.

Urea : Rp. 1,800/kg

SP-36 : Rp. 2,000/kg

ZA : Rp. 1,400/kg

NPK : Rp. 2,300/kg

Organic fertilizer : Rp. 500/kg

Indonesia: Planned Subsidized Fertilizer Demand by Sub Sector, 2014 and 2015.

Sub Sector

Fertilizer Type (MT)

2014

2015

Urea

SP-36

ZA

NPK

Organic

Urea

SP-36

ZA

NPK

Organic

Food Crops

2,481,552

520,639

514,103

1,362,272

595,989

3,071,382

567,317

713,097

1,857,441

721,512

Horticulture

195,819

41,930

40,154

206,077

71,884

181,378

45,961

61,191

165,344

53,991

Estate Crops

521,113

136,461

224,922

389,288

109,859

677,705

197,985

264,473

509,338

134,097

Livestock

102,663

20,960

20,821

42,363

22,268

76,789

12,888

11,239

17,877

90,401

Aquaculture

116,853

40,010

-

-

-

92,746

25,849

-

-

-

Total

3,418,000

760,000

800,000

2,000,000

800,000

4,100,000

850,000

1,050,000

2,550,000

1,000,001

Source: MOA Reg. No. 123/Permentan/SR.130/11/2013 and MOA Reg. No. 130/Permentan/SR.130/11/2014

Farmers receive subsidized fertilizer based on the fertilizer demand included in the Farmers Group Definitive Demand Plan (Rencana Definitif Kebutuhan Kelompok, RDKK). The Ministry of Agriculture reports that based on the 2015 national budget allocation, subsidized fertilizer received a total of Rp. 28.5 trillion rupiah (equivalent to 9.5 MMT of fertilizer). The proposed demand by farmers based on RDKK for 2014 is 15.2 MMT. There is concern that the allocation of subsidized fertilizer will not be sufficient to cover farmers demand for one year.

S&D Rice, MilledIndonesia

Rice, Milled

2013/2014

2014/2015

2015/2016

Market Begin Year

Jan 2013

Jan 2014

Jan 2015

Indonesia

USDA Official

New post

USDA Official

New post

USDA Official

New post

Area Harvested

12,100

12,100

12,160

12,080

0

12,160

Beginning Stocks

6,476

6,476

5,501

5,501

0

4,451

Milled Production

36,300

36,300

36,500

36,300

0

36,650

Rough Production

57,165

57,165

57,480

57,165

0

57,717

Milling Rate (.9999)

6,350

6,350

6,350

6,350

0

6,350

MY Imports

1,225

1,225

1,300

1,250

0

1,100

TY Imports

1,225

1,225

1,300

1,250

0

1,100

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

44,001

44,001

43,301

43,051

0

42,201

MY Exports

0

0

0

0

0

0

TY Exports

0

0

0

0

0

0

Consumption and Residual

38,500

38,500

39,200

38,600

0

38,650

Ending Stocks

5,501

5,501

4,101

4,451

0

3,551

Total Distribution

44,001

44,001

43,301

43,051

0

42,201

1000 HA, 1000 MT, MT/HA