During last week’s AGIC conference in Melbourne, a director of PT Indofood Indonesia talked about future trends on our most important trading partner. Last marketing year, Australia exported 3.2mmt of wheat into Indonesia. This represents 22% of our total wheat exports; our next largest customer was Vietnam at 8% and Japan at 7.6%. So the importance of Indonesia is paramount.
Total capacity of Indonesian wheat mills is 6.9mmt, with Bogasari mills taking the lion’s share of this trade spread between their two mills at Jakarta (2.8mmt) and Surabaya (1.5mmt). The bulk of the mills are still located on the more populous island of Java. Further growth is also expected with eleven new mills in the pipeline, with a capacity of an extra 1.5mmt, only capacity of six are known so future capacity would be much higher. And whilst flour consumption has been growing at 10% since the record high prices of 2008, consumption is only at 21kg per person. This ranks Indonesia at number 32 in the world, well behind leading consumption of the central Asian state of Azerbaijan of 220kg. So there is still a large potential for future wheat exports.
Australia dominates wheat exports to Indonesia with 66% (3.2mmt) of total market share in 2010, up from 40% in 2008; ahead of Canada at 15.8% and US at 13.2%. Before lasts years export ban, Russian imports had accounted for 6% of market share. With many new mills being built and stiff domestic competition, cheaper Russian lower protein imports would be expected to increase and possibly be blended with Australian higher protein grades.
What could generate more demand for Australian grain into this market place, is the soon to be enforced “anti-dumping” tariffs on imported flour. Particularly Turkish imported flour, which dominates the market with 59% share (454kt). This refined flour lands into Indonesia at similar prices as bulk grain eroding local mills margins.