SINGAPORE/JAKARTA- Indonesian grain buyers are boosting imports of lower quality wheat, as a decline in corn output last year following a severe drought linked to an El Nino weather pattern tightened the country’s animal feed supplies.
Wheat imports into Indonesia, the world’s No.3 buyer of the grain, are likely to climb at least 10 percent in 2024 from around 10.87 million metric tons last year, according to Singapore-based grain traders.
“Indonesia millers have been buying larger volumes of wheat mainly from the Black Sea region,” a Singapore-based trader at an international house said. “Some of the wheat is of lower quality and it is expected to be used in animal feed.”
Indonesian importers have signed contracts to buy around 300,000 metric tons of lower quality wheat in recent weeks, largely from Ukraine and Russia, at $260-$270 per ton, including cost and freight, for February-March shipment, traders said.
“These deals are for prompt shipments,” a second trader said in Singapore, underscoring the urgency to ship cargoes amid tight feed grain supplies.
“For flour, Indonesian buyers usually sign deals two to three months in advance. These shipments are for feed industry as local corn prices are more than double the price of imported wheat,” the trader said.
Locally produced corn is currently quoted at around $550-$600 per metric ton, compared with imported feed wheat priced around $260-$270 a ton, traders said.
The National Food Agency’s price monitoring website showed average corn prices for chicken farmers on Monday at 8,700 rupiah ($0.5566) per kilogram, about 47 percent higher than a year ago.
“This is due to El Nino and prolonged drought that occurred in the second half of 2023, which delayed corn planting,” said Desianto Budi Utomo, chairman of the Indonesian Feedmills Association.
“It is estimated that corn production in the first quarter of 2024 would not be optimal to meet feed mill demand.”
Corn prices are more than 70 percent above government reference levels, which are likely to push up egg and chicken prices.
Some small farmers have started culling birds, officials said, which could tighten poultry supplies ahead of the Muslim holy festival of Ramadan in March.
On Monday, Indonesia assigned procurement company Bulog to import 500,000 tons of corn to supply feed millers in an effort to cool prices, although traders said that was unlikely to reduce wheat purchases given the high level of feed prices.
Higher Indonesian demand for imported wheat comes amid ample global supplies, with the Chicago benchmark down more than 10 percent in 2024 and in negative territory for a second year in a row.
Indonesia’s corn production is forecast to rise 8.3 percent to 14.58 million tons in 2024, according to officials, after drought last year reduced output by 12.5 percent from 16.53 million tons in 2022.
Indonesia tightly controls corn imports to protect farmers, while wheat shipments are allowed more freely as the country meets flour demand through imports.-Reuters
