Indonesia. Grain and Feed Update. Jul 2014 Aug. 18, 2014
In marketing year (MY) 2013/14, Post expects Indonesian rice production to decline by 1.5 percent to 36 MMT of milled rice equivalent, compared to the previous MY 2012/13 of 36.55 MMT. The decline is due to 2014 floods in major rice production areas of northern Java and higher pest and disease incidents in southern Java. There are no changes in MY 2013/14 corn production estimates. Corn imports are expected to increase due to higher demand from feed mills. There are no changes on to the wheat PSD.
SITUATION AND OUTLOOK
International climatology agencies including the National Center for Environmental Predictions/National Oceanic and Atmospheric Administration (NCEP/NOAA) and the Japanese Agency for Marine-Earth Science and Technology (JAMSTEC) forecast a moderate El Nino to hit Indonesian between August and November 2014. The Indonesian Meteorology, Climatology, and Geophysics Agency (Badan Meteorologi, Klimatologi, dan Geofisika, BMKG) informed Post in June 2014 that despite international agency forecasts, BMKG observed that as of middle of June, the 30-day average and 90-day average of the Southern Oscillation Index (SOI) are still positive. One of the indicators to predict possible occurrence of El Nino is the SOI. The SOI should be below -10 for an El Nino to occur. BMKG expects the Indonesian climate will be normal in July 2014, while a weak El Nino during August to November 2014 remains possible.
El Nino phenomena are more prevalent on the eastern islands of Jakarta, leaving Sumatra, Kalimantan and western Java untouched. However, in the eastern portions of Indonesia, including the provinces of Sulawesi, Java, Nusa Tenggara, Bali and Papua, El Nino normally prolongs the dry season, increasing food crop production risks. Noting that ocean surface temperatures are still warm in Indonesia, BMKG is expecting a delayed onset to the 2015 rainy season, coupled with some rainfall during the 2014 dry season. Although there may be a prolonged dry season due to the expected weak El Nino, the impact will not be as severe as 1997’s strong El Nino.
Data shows that weak and moderate El Ninos occurring during grain filling periods and harvest periods may improve yields. Additional sunshine and dry periods leads to better photosynthesis and lower moisture content.
2014 water elevations at three major reservoirs covering approximately 226,961 hectares of food crops in West Java during.
No update on wheat.
Based on reports from the Indonesian Feed Mills Association (GPMT), Post revised Indonesian MY 2013/14 corn imports to 3.1 MMT compared to the previous estimate of 2.8 MMT. Higher feed mill demand is driving higher imports.
Based on the Indonesian Statistics Agency (BPS) MY 2013/14 production estimate and Post field observations, Post revises MY 2013/14 Indonesian rice production from 36.55 MMT to 36 MMT of milled rice equivalent. The decline is due to flooding in northern coastal Java and pest and disease incidents in southern coastal Java during the first crop cycle of 2014. The Indonesian National Logistics Agency (BULOG) will likely import more medium quality rice because of the lower supply from the domestic market and an uncompetitive government purchasing price (HPP).
Post field observations in Central and East Java indicated no significant problems with the standing corn crop. Farmers are growing their second crop cycle, which accounts for approximately 37 percent of total Indonesian corn production. Favorable weather with sufficient rainfall is favorable for upland corn. Given these positive factors, Post made no changes to Indonesian corn production estimate.
Currently, farm-gate corn prices range from Rp. 3,250/kg ($278/MT) to Rp. 3,500/kg ($299/MT). The price of hybrid corn seed has risen, with current prices ranging from Rp. 50,000/kg ($4.3/kg) to Rp. 80,000/kg ($6.8/kg). (This compares with Rp. 45,000/kg ($3.8/kg) to Rp. 70,000/kg ($6/kg) in 2013.
Indonesian feed mills are expanding operation as poultry industry demand rises. A mill located in Tangerang, Banten, is expanding operations to a total capacity of 30,000 MT per annum from the current running capacity of 20,000 MT per annum. In line with robust feed mill demand, the Indonesian Feed Millers Association (Gabungan Pengusaha Makan Ternak, GPMT) reports that Indonesian feed mills will import a total of 1.85 MMT of corn during the second semester of 2014. During the January - June 2014 period, the industry imported a total of 1.3 MMT of corn.
The Indonesian 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 2014 is estimated to increase by 20 percent due to an increase in demand for shrimp in the international market. Expansion by feed mills continues to take place. Millers report that the Indonesian mills are running at 70 – 80 percent of capacity.
Considering the above factors, Post increased the MY2013/14 corn feed consumption estimate to 7.3 MMT from 7 MMT, while a total of 4.5 MMT of corn will go for human consumption. MY 2014/15 corn feed consumption is expected to increase to 7.5 MMT, while corn for human consumption will decline to 4.4 MMT as consumers substitute rice and wheat-based food products.
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 revised MY 2013/14 Indonesian corn import estimates to 3.1 MMT, an increase of 300,000 MT over the previous estimate. Prospects for better corn production in MY 2014/15 and larger carryover stocks from MY 2013/14 will push MY 2014/15 Indonesian corn imports down to 2.6 MMT. According to BPS, during the period of January to May 2014 Indonesian corn imports originated in India (57 percent), Brazil (38 percent), and the United States (2 percent).
June 2014 Post field observations in West, Central and East Java took place during the second paddy plantings of the year. Most of the fields that Post visited were in the early to middle stage of growth. Only small sporadic harvests took place in Central and East Java. Second paddy crop harvested are anticipated at the end of July and through August 2014, confirming the observation that the first MY 2013/14 crop cycle started late. 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 followed by paddy or secondary crops like corn, mungbean, soybean, peanut, or sweet potato during the third crop cycle (July – October). However, in MY 2013/14, most farmers on Java started the first crop cycle in late November/ mid-December 2013 due to water shortages (late rainfall). By late January/mid-February 2014, high rainfall resulted in flooding in the northern coastal area of Java. Officials in the three observed provinces reported a decline in harvested area of the first crop cycle. Because of the delay in the first and second crop cycles, it is expected that some of the harvest of the third crop cycle will be carried over to MY 2014/15.
Although the southern coastal parts of Java eluded the this year’s floods, paddy production in the area declined due to pest and disease incidents. Farmers reported more brown hoppers, white hoppers, and rats compared to the same period of first crop cycle in MY2012/13.
In the first forecast figures for Indonesian food crop production, BPS reported paddy production declines due to lower yields and a 265,000 hectare reduction on harvested area. However, Post estimates that overall MY 2013/14 yields are on par with MY 2012/13 due to the growing use of high yielding varieties such as Ciherang, Sinta Nur, Inpari, Memberamo, and Mekonga.
Considering the above mentioned factors, Post revised MY 2013/14 Indonesian rice production to 36 MMT of milled rice equivalent, compared to the previous estimate of 37.3 MMT of milled rice equivalent.
The Indonesian National Logistics Agency (BULOG) set its procurement target at 3.85 MMT of milled rice equivalent for MY 2013/14. This is higher than the 3.2 MMT procurement target set in MY 2012/13. As of the middle of July 2014, BULOG has procured a total of 1.9 MMT of milled rice equivalent domestically. This is well below the 2.6 MMT of milled rice equivalent procured during the same period one year previously (July 2013). Current domestic procurement is approximately 49 percent of the initial MY 2013/14 procurement target. BULOG missed its 60 percent domestic procurement target in July due to lower supply and an uncompetitive government purchasing price. Considering BULOG’s domestic procurement realization and BPS reports of a possible decline in MY 2013/14 Indonesian rice production, Indonesia’s Minister of Trade instructed BULOG to import in order to maintain BULOG stocks at 2 MMT. However, when and how much rice BULOG will import is unclear, as the GOI prohibits imports of medium quality rice one month prior to, during, and two months after the main harvest period. The GOI limits BULOG to importing medium quality rice only.
The GOI permits private traders to import premium quality rice such as basmati, Thai Hom Mali, and japonica rice, as well as 100 percent broken rice, glutinous rice, and rice for diabetic purposes. Following a case of falsely declared medium quality rice several months ago, the Ministries of Trade and Agriculture have issued new regulations on rice imports and exports. Indonesia has now implemented new varietal purity attestation and packaging requirements. However, despite exporter compliance with these requirements MOA has not yet issued rice import recommendations intended for restaurants (including japonica and basmati varieties) as of July 2014. Indonesia imports approximately 200,000 – 250,000 MT of these rice varieties.
Considering the factors mentioned above, Post revised MY 2013/14 imports to 1.4 MMT from its previous estimate of 1.5 MMT. MY 2014/15 Indonesian rice imports are expected to reach 1 MMT.
In MY 2013/14 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 July 2014, BULOG has distributed a total of 1.9 MMT of rice under the Raskin program.
Some rice stocks held by BULOG are used as part of their normal, on-going market operations to increase supply and lower the price of medium quality rice in the domestic market. During the period of January - July 2014, 43,000 MT of rice was distributed commercially. Post continues to estimate MY 2012/13 Indonesian rice consumption at 38.127 MMT. In line with population growth, Post expects Indonesian rice consumption to increase to 38.65 MMT in MY 2013/14 and to 39.197 MMT in MY 2014/15.
Post revised MY 2013/14 ending stocks to 5.376 MMT. This is a decline from the previous estimate of 6.476 MMT and is in line with the revisions on production and imports. Post expects MY 2014/15 ending stocks will decline to 4.876 MMT.
Due to the delayed harvest, the current price of wet paddy and rice are above the HPP. Currently, the farm gate price of wet paddy in West and Central Java ranges from Rp. 3,500/kg ($299/MT) to 4,000/kg ($342/MT) compared with Rp. 4,000/kg ($342/MT) to Rp. 4,500/kg ($385/MT) in the same period of MY2012/13.
Average daily rice deliveries from Javanese production areas to the Cipinang rice wholesale market in Jakarta increased to 3,141 MT in July 2014 due to sporadic harvests in Central and East Java, from 2,644 MT in June 2014 when there was no harvest. The price of medium quality rice at Cipinang wholesale market also increased from Rp. 8,800/kg ($752/MT) at the end of June 2014, to Rp. 8,750/kg ($748/MT) in the middle of July 2014