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Indonesia's Wheat Imports Set to Jump at Least 19% on Flour Tax
December 10, 2012

Wheat purchases by Indonesia, Asia’s largest buyer, may soar at least 19 percent in 2013 as a flour-import tax increases demand for the grain, an executive said.

Shipments will probably rise to 7 million metric tons from 5.9 million tons in 2012, said Franciscus Welirang, chairman of the Indonesian Flour Mills Association. Purchases could be higher as the forecast doesn’t include the increase in domestic demand and the level of the inventories, he said. That would beat the record 6.61 million tons of wheat, flour and products imported in the year that ended in June last year, US Department of Agriculture data show.

Futures rallied 32 percent this year as demand for the world’s most consumed food-grain outstripped harvests cut by drought from the United States to Australia. That may boost food costs that fell for a second month in November. The market may be “underestimating the problems” in wheat supply, Abdolreza Abbassian, an economist at the United Nations Food & Agriculture Organization, said on Dec. 6. World wheat stockpiles will shrink this year to the smallest since 2009, according to the USDA.

“The situation is fragile,” Welirang said in a phone interview on Dec. 7, referring to global supply. While he declined to give a forecast, a price increase “is what everybody is expecting because of lower international stocks,” he said.

The government plans to impose a 20 percent duty on imported flour for 200 days to protect local mills, Bachrul Chairi, head of the Indonesian Trade Safeguard Committee, said on Dec. 7. The World Trade Organization has been notified and the date for the tariff to become effective will be announced after the regulation is finalized by the Finance Ministry, he said.

Four-Year High

Wheat for March delivery fell 0.4 percent to $8.58 a bushel on the Chicago Board of Trade at 10:07 a.m. Singapore time. Futures reached at four-year high of $9.4725 in July.

About 900,000 tons of flour, milled from about 1.1 million tons of wheat, are estimated to be shipped to Indonesia this year, Welirang said. The duty will make imported flour more expensive than the domestically milled product, boosting imports of the grain, he said.

Consumption of wheat and flour in the fourth-most populous nation, will probably rise as much as 7 percent from 6.8 million tons this year, said Welirang, director of Jakarta-based Indofood Sukses Makmur, owner of the world’s largest wheat mill.

Indonesia, which doesn’t grow wheat, relies on imports to meet its demand for the grain used in making bread, noodles and pasta and feed for pigs and chickens. The country will import 6.6 million tons in the year that began July 1, up from 6.46 million tons a year earlier, the USDA estimates.