Post estimates that total Indonesian wheat imports will grow by 4.2 percent from 7.329 MMT in MY 2013/14 to 7.7 MMT in MY 2014/15. Imports are expected to continue growing to 8.1 MMT in MY 2015/16, in line with higher demand from the domestic wheat flour-based food industry. Post expects that U.S. origin wheat exports to Indonesia will decrease to 600,000 MT in MY 2014/15 due to stronger competition with traditional suppliers such as Australia and Canada.

Trade

During the 1998 Indonesian monetary crisis, only four Indonesian flour mills were operating. Today Indonesia is home to 29 flour mills with a total installed capacity of 10.3 MMT/year, currently operating at 60 – 70 percent capacity. This is lower than 2012, when estimates indicated that mills were operating at 75 percent capacity. The decline is attributable to a highly competitive market and strong supply.

Flour production costs have increased as Indonesian electricity and labor rates have risen, while the Dollar/Rupiah exchange rate has fallen from Rp. 11,591/$1 in July 2014 to Rp. 13,191/$1 in March 2015. This has been somewhat offset by abundant wheat supplies in Australia, the United States, and Europe. Therefore, the Indonesian Ministry of Trade's Market Information Center reports that the price of Segi Tiga Biru flour has been relatively stable. (Retail Rp. 8,200 ($631/MT) – Rp. 8,300/kg ($638/MT) and factory gate Rp. 5,832/kg ($449/MT) from July 2014 to March 2015).

Based on the aforementioned factors, Post estimates that Indonesia's MY 2014/15 wheat imports will increase to 7.7 MMT, compared to 7.392 MMT in MY 2013/14. Higher demand for wheat flour-based food and growing mills will drive a further increase of wheat imports which is forecast to reach 8.1 MMT in MY 2015/16. Australia held the largest market share for wheat (53 percent) in MY 2013/14. This was followed by United States (16 percent), and the Canada (16 percent). Australia's majority market share is due to the noodle industry's preference for Australian standard white wheat, price, and Australia's close proximity. With strong Australia supplies expected to continue to MY 2014/15, U.S. market share in MY 2014/15 will likely to decline to approximately 7.8 percent. U.S. wheat import market share is expected to increase to 8.6 percent in MY 2015/16, in line with increasing imports from Indonesian flour mills.

Indonesia's wheat flour import quota, which limits imports of wheat flour, expired on December 4, 2014. Nevertheless, industry reports that the depreciating Rupiah has resulted in higher freight rates, discouraging wheat flour imports from Sri Lanka, India, or Turkey. Domestic flour continues to dominate the market with a 96.4 percent market share. Based on Global Trade Atlas data for MY 2013/14 Indonesian wheat flour imports, Turkey maintained the largest market share (43 percent), followed closely by India (23 percent), Sri Lanka (16 percent), Malaysia (7 percent) and Ukraine (6 percent). In MY 2013/14, Indonesia imported a total of 225,392 MT of flour, (308,336 MT of wheat equivalent). This represents a decline from MY 2013/14 wheat flour imports of 256,420 MT (350,783 MT of wheat equivalent).

With the expiration of the wheat flour import quota, the Indonesian Flour Mills Association (APTINDO) urgently requested the GOI to implement an anti-dumping duty. APTINDO has submitted anti-dumping petitions to the Indonesian Anti-Dumping Commission in March 2014. If their petition is approved, Indonesia is expected to impose an anti-subsidy or anti-dumping duty on imports of wheat flour. The current import duty for imports of wheat flour is 5 percent. One consequence of this action is Indonesia's feed sector, which consumes approximately 165,000 MT of imported feed grade wheat flour annually. Industry sources report that the feed sector continues to prefer to use domestically produced feed-grade wheat flour.

Consumption

Approximately 66 percent of Indonesian flour mill customers are small and medium sized wheat-food producers. These include small scale wet noodle makers, street food vendors, low end bread and bakery businesses, and traditional Indonesian cake makers. Instant noodle manufacturers, middle and upper end bakeries, and cookie and biscuit manufacturers take the other 34 percent of the market. APTINDO reported that approximately 200,000 small and medium scale enterprises, employing two million workers, are operational in Indonesia.

In MY 2013/14, Indonesia's annual per capita wheat flour consumption reached 19 kg per capita per year. Relatively stable macro-economic conditions have allowed middle and upper-middle income consumers to diversify their diets to include more western-style foods like bread and pasta. Rather than eating rice three daily meals, many Indonesians have switched to eating bread or noodles for breakfast. Restaurants are also driving demand for wheat-based food products. Contrary to the depressed growth of small and medium scale bakeries, the number of high-end bakeries is growing, mainly in major cities including Jakarta, Surabaya, Medan, and Bandung. Instant noodle prices are currently cheaper than rice, and many more lower and middle income consumers substitute instant noodles for breakfast or dinner. As a result, the noodle industry continues to grow rapidly, consuming 70 percent of Indonesia's wheat flour. Bakery industry consumption follows with 20 percent of flour, while household and the commercial biscuit producers each consume 10 percent, respectively. The Indonesian Statistics Agency (BPS) in its 2013 National Economic Survey recorded that Indonesian wheat flour-based food consumption has increasing by one percent per annum since 2009. Given these factors, Post increased the MY 2014/15 Indonesian wheat consumption estimate by approximately 4.2 percent from 7.1 MMT to 7.4 MMT. It is forecast to continue increase to 7.6 MMT in MY 2015/16.

S&D Wheat Indonesia

Wheat

2013/2014

2014/2015

2015/2016

Market Begin Year

Jul 2013

Jul 2014

Jul 2015

Indonesia

USDA Official

New post

USDA Official

New post

USDA Official

New post

Area Harvested

0

0

0

0

0

0

Beginning Stocks

1,560

1,560

1,387

1,387

0

1,192

Production

0

0

0

0

0

0

MY Imports

7,392

7,392

7,700

7,700

0

8,100

TY Imports

7,392

7,392

7,700

7,700

0

8,100

TY Imp. from U.S.

1,126

1,126

0

600

0

700

Total Supply

8,952

8,952

9,087

9,087

0

9,292

MY Exports

300

300

300

330

0

370

TY Exports

300

300

300

330

0

370

Feed and Residual

165

165

165

165

0

200

FSI Consumption

7,100

7,100

7,300

7,400

0

7,600

Total Consumption

7,265

7,265

7,465

7,565

0

7,800

Ending Stocks

1,387

1,387

1,322

1,192

0

1,122

Total Distribution

8,952

8,952

9,087

9,087

0

9,292

1000 HA, 1000 MT, MT/HA