Indonesian grain buyers are increasing imports of wheat of inferior quality, as the decline in the production of corn Last year, after a severe drought linked to the El Niño weather pattern reduced the country's animal feed supply.
Wheat imports to Indonesia, the world's third-largest buyer of the grain, are expected to increase by at least 10% in 2024 from around 10.87 million tonnes last year, according to Singapore-based grain traders.
“Indonesian millers have been purchasing larger volumes of wheat mainly from the Black Sea region,” said a trader from an international house based in Singapore. “Some of the wheat is of inferior quality and is expected to be used in animal feed.”
Indonesia increases wheat imports to make up for corn shortages in the feed market
Indonesian importers have signed contracts to buy around 300,000 tonnes of lower-quality wheat in recent weeks, mainly from Ukraine and Russia, for shipment from February to March, traders said.
“These agreements are for immediate shipments,” said a trader in Singapore, highlighting the urgency of shipping cargo amid supply shortages.
“For flour, Indonesian buyers usually sign agreements two to three months in advance. These shipments are intended for the feed industry, since local corn prices are more than double the price of imported wheat,” said the trader.
Locally produced corn is priced between US$ 550 and US$ 600 per ton, compared to imported feed wheat priced between US$ 260 and US$ 270 per ton.
The National Food Agency showed that average corn prices for chicken farmers were 8,700 rupees/kg ($0.5566), about 47% higher than a year ago.
“This is due to El Nino and the prolonged drought that occurred in Q2/23,” said Desianto Budi, president of the Indonesian Feed Mills Association.
“It is estimated that corn production in the first quarter of 2024 would not be ideal to meet the demand of feed mills.”
Purchase of corn
Corn prices are more than 70% higher, which will likely drive up egg and chicken prices.
Some small farmers have begun slaughtering poultry, which could restrict poultry supplies ahead of the Muslim holy festival of Ramadan in March.
On Monday, Indonesia designated the company Bulog to import 500,000 tons of corn to supply feed factories, trying to lower prices. Although traders have said this is unlikely to reduce wheat purchases, given the high level of feed prices.
High demand for Indonesian wheat contrasts with ample global supply; Chicago wheat index falls by more than 10% in 2024. Corn production in Indonesia is expected to rise by 8.3% in 2024 to 14.58 million tons, after drought reduces by 12.5% in 2022.
However, Indonesia strictly controls corn imports to protect farmers. At the same time, it allows wheat shipments more freely, satisfying the country's demand for flour through imports.
($ 1 = 15,630,0000 rupees)
Source: Naveen Thukral and Bernadette Christina | Notícias Agrícolas
