Post estimates that MY 2014/15 Indonesian corn production will increase to 9.4 MMT, compared to 9.1 MMT in MY 2013/14. The increase is due to more area planted with hybrid corn seed, as well as expansion in the place of soybean area. Production is expected to increase to 9.6 MMT in MY 2015/16. Despite the increase in production, MY 2014/15 Indonesia corn imports are estimated to be stable at 3.5 MMT. In line with increased production, MY 2015/16 Indonesian corn imports are forecast to decline to 3 MMT.

Production

Despite forecasts of a weak El Nino in November, favorable weather prevailed in 2014. Farmers in upland areas were able to plant corn during the second cropping season, while a third corn crop was harvested on Java's irrigated lowland areas. Farmers report that most of the corn planted in upland areas was harvested by late February and early March 2014. Indonesia's first corn season normally takes place from November to February (49 percent). The second season takes place from March to June (37 percent), while the third runs from July to September (14 percent). No significant pest and disease incidents were reported during the last two corn crop cycles of MY 2013/14.

MY 2014/15 corn harvested area is estimated to increase at the expense of soybean area. Farmers are less interested in growing soybean due to lower yield and margins compared to corn. Furthermore, in an effort to increase corn production, the Indonesian Ministry of Agriculture is cooperating with Indonesian Ministry of Forestry and Environment to allow farmers to grow secondary crops and sugarcane on 1 million hectares of targeted forestry area. A pilot project on 30,000 hectares of forestry land will be carried out in Central Java. Therefore, Post raises the MY 2014/15 corn harvested area estimate to 3.14 million hectares, compared to the previous estimate of 3.12 million hectares.

Post field visits to East Java revealed that farmers in both lowland and upland rain-fed areas are growing corn during the first crop cycle.

Average corn yields are expected to rise slightly due to the increased use of hybrid corn seed. More seed producers are producing downy mildew-resistant hybrid corn seed. Corn seed suppliers report that in MY 2014/15 total area grown with hybrid corn seed is expected to reach 55 percent, an increase from 50 percent in MY 2013/14. All major hybrid corn seed suppliers expect increased sales in MY2014/15.

Given the abovementioned factors, Post revised the estimate of MY 2014/15 Indonesian corn production from 9.2 to 9.4 MMT. Assuming normal weather and increased hybrid corn planting, Post expects MY 2015/16 corn harvested area to remain on par at 3.12 million hectares. Post also expects that MY 2015/16 corn production will increase to 9.6 MMT due to the growth of hybrid corn seed use. Post notes that production growth is challenged by the conversion of Indonesian farm land to non-agricultural uses.

Current farm-gate corn prices range from Rp. 2,400/kg ($185/MT) in Lampung to Rp. 3,400/kg ($261/MT) in East Java. The price of hybrid corn seed has risen, with prices ranging from Rp. 60,000/kg ($4.6/kg) to Rp. 80,000/kg ($6.2/kg). (This compares with Rp. 50,000/kg ($3.8/kg) to Rp. 80,000/kg ($6.2/kg) in 2014).

Consumption

The Indonesian Feed Producers Association (Asosiasi Produsen Pakan Indonesia, APPI) reports that in calendar year (CY) 2015, feed production is expected to increase by 10 percent to 16.5 MMT, compared to 15 MMT in CY 2014 (This excludes 1.4 MMT used for aquaculture feed). Assuming that the economic and political situation remains stable, there are no significant poultry disease outbreaks, and the Indonesian rupiah trades favorably against the U.S. dollar, APPI forecasts that Indonesian feed consumption will further increase to 18 MMT in CY 2016.

The poultry industry consumes approximately 83 percent of Indonesia's animal feed. Aquaculture consumes 11 percent and the remaining six percent is consumed by cattle and swine. The Indonesian poultry industry reports that the poultry population in CY 2014 will include 2.354 billion broilers, 134.7 million layers, 21.755 million breeders, and 94.3 million male layers (raised for meat). Demand for aquaculture feed in CY 2015 is estimated to increase by 13 percent due to an increase in demand for shrimp in the international market. Expansion by feed mills continues to take place. Five new feed mills started operation in CY 2014, and existing major feed mills continue to expand operations. As a result, installed capacity of Indonesian feed mills is expected to reach 20 MMT. Millers report that Indonesian mills are running at 70 – 80 percent capacity.

Indonesia: Sources of Primary Feed Ingredients

No.

Feed Ingredient

Sources

Local

Import

1.

Corn

90-95

5-10

2.

Fish Meal

5-10

90-95

3.

MBM

0

100

4.

Soybean Meal

0

100

5.

Rapeseed Meal

0

100

6.

Corn Gluten Meal

0

100

7.

Feed Additive

0

100

8.

Rice Bran

100

0

9.

Copra Meal

100

0

10.

Palm Kernel Meal

100

0

11.

CPO

100

0

Source: Indonesian Feed Producers Association (APPI)

APPI reports that on average, livestock feed is composed of corn (50 percent), soybean meal (15-20 percent), corn gluten meal (3 percent), CPO (2 percent), fish meal (5 percent), rice bran (15 percent), wheat pollard (8 percent), and premix (0.6 percent). Indonesian feed millers are heavily reliant on imported feed ingredients. Factors inhibiting feed millers from sourcing ingredients locally include low protein content, high raw fiber content, rancidity, limited and inconsistent corn supplies for commercial scale feed millers, and storage challenges. Given these challenges and Indonesia's expanding livestock sector, feed millers report inelastic demand for imported corn.

Considering the above factors, Post increased the MY2014/15 corn feed consumption estimate to 8 MMT compared to the previous estimate of 7.6 MMT. This is forecast to increase further to 8.6 MMT in MY 2015/16. To the contrary, BPS reports in the Indonesian National Economic Survey that Indonesian human corn consumption is decreasing by 6.33 percent per annum. Therefore, Post estimates that MY 2014/15 Indonesia corn consumption for human food will decline to 4.2 MMT compared to the previous estimate of 4.4 MMT. Corn consumption is forecast to continue declining to 4.1 MMT in MY 2015/16 as consumers substitute rice and wheat-based food products.

Trade

Corn constitutes about 80 percent of Indonesian feed energy sources. Despite growing domestic production, challenges persist due to inconsistent seasonal supplies and poor post-harvest management that result in high moisture content and high aflatoxin levels. These factors, combined with growing feed mill capacity, are driving import demand. Post revises MY 2014/15 Indonesian corn import estimates to 3.5 MMT, an increase of 900,000 MT over the previous estimate. Prospects for better corn production in MY 2015/16 and larger carryover stocks from MY 2014/15 will push MY 2015/16 Indonesian corn imports down to 3 MMT. According to the Global Trade Atlas, MY 2013/14 Indonesian corn imports originated in Brazil (48 percent), India (33 percent), Argentina (15 percent), and the United States (3 percent).

Indonesia imported 326,000 MT of distiller's dried grain solubles (DDGS) in MY 2013/14, a 47 percent increase over 223,000 MT in MY 2012/13. The United States is Indonesia's largest DDGS supplier, with a 98 percent market share. In 2013/14, Indonesia imported 200,000 MT of corn gluten meal (CGM), a decline of 29 percent compared to 282,000 MT in MY 2012/13. Frequent promotional activities and technical assistance provided by the U.S. Grains Council, in conjunction with other U.S. promotional activities, contributed to increased knowledge about the value of using DDGS by Indonesian feed mills.

With increasing feed production capacity and higher demand from the meat and poultry sectors, APPI reports that the feed industry will need to import more corn in MY 2014/15 than in MY2013/14. However, MOA maintains an unofficial import quota for corn. In order to import corn, a feed miller must obtain an import recommendation from MOA. MOA only issues import recommendations for corn imports based on the difference between estimated domestic corn production and estimated feed demand. MOA's production estimate for CY 2014 is 19.13 MMT.

Prices

In March 2015, corn farm gate prices ranged from Rp. 2,400/kg ($185/MT) to Rp. 3,400/kg ($261/MT) compared to Rp. 2,600/kg ($200/MT) to Rp. 3,600/kg ($277/MT) in February 2015. (Note corn prices FOB Gulf basis ranged approximately $170 to_$180/MT in March 2015.) Prices are decreasing as supplies arrive from the current harvest period. With tighter competition from growing feed mills industry, APPI reported that prices of broiler feed in January 2015 declined to Rp. 5,500/kg ($423/MT) compared to Rp. 6,000/kg ($461/MT) in 2014.

S&D Corn Indonesia

Corn

2013/2014

2014/2015

2015/2016

Market Begin Year

Oct 2013

Oct 2014

Oct 2015

Indonesia

USDA Official

New post

USDA Official

New post

USDA Official

New post

Area Harvested

3,120

3,120

3,120

3,140

0

3,140

Beginning Stocks

1,040

1,040

1,715

1,715

0

2,395

Production

9,100

9,100

9,200

9,400

0

9,600

MY Imports

3,500

3,500

2,600

3,500

0

3,000

TY Imports

3,500

3,500

2,600

3,500

0

3,000

TY Imp. from U.S.

126

126

0

10

0

0

Total Supply

13,640

13,640

13,515

14,615

0

14,995

MY Exports

25

25

25

20

0

20

TY Exports

25

25

25

20

0

20

Feed and Residual

7,400

7,400

7,600

8,000

0

8,600

FSI Consumption

4,500

4,500

4,400

4,200

0

4,100

Total Consumption

11,900

11,900

12,000

12,200

0

12,700

Ending Stocks

1,715

1,715

1,490

2,395

0

2,275

Total Distribution

13,640

13,640

13,515

14,615

0

14,995

1000 HA, 1000 MT, MT/HA