Indonesia May Scrap Soybean Import Duty as Stocks Dive
Rabu, 28 Agustus 2013 | 10:45
Indonesia may scrap its import tariff for soybeans in an effort to tackle domestic food price hikes, the trade minister said on Tuesday, as traders said that stock levels were dangerously low and likely to fall further.
The threat of dry weather in top supplier the United States has pushed Chicago soybean prices to 11-month highs, while the Indonesian rupiah is trading at four-year lows.
Compounding this, Indonesian soybean inventories are now at multi-year lows below 300,000 tons, enough to meet around two or three months of demand, government officials and traders added, with no large shipments expected until October.
“We are discussing with other ministries whether to scrap the soybean imports duty, which is currently 5 percent,” Indonesian Trade Minister Gita Wirjawan told Reuters, without specifying whether the measure could be temporary or permanent.
“Soybean prices in the domestic market are increasing because of the declining rupiah versus the US dollar, and a weather anomaly in the US.”
Soybeans are mainly used by makers of soybean-based staple foods tofu and tempe in Indonesia, with imports forecast to hit 1.8 million tons this year, or around 70 percent of its annual needs. Most shipments come from suppliers in the United States.
Indonesia still had enough soybean stock to supply several months of demand, Wirjawan said, adding that soybean consumption until July was 1.9 million tons but that an additional 600,000 tons was needed for 2013.
Only registered soybean importers can ship the oilseed in Indonesia, and traders said the government was slow in issuing permits, which was stoking prices further.
Around 20 companies had applied for soybean import permits, Wirjawan said, without giving details on how many or who had been granted licenses and volumes.
Major soybean importers in Indonesia include Sungai Budi Group, Cargill and FKS Multi Agro.
“We believe that soybean stocks are significantly below historical averages,” said a soybean trader. “Domestic prices appear to be reflecting global soybean futures and a depreciating rupiah.”
Indonesia’s soybean imports are relatively small compared to top buyer China, but as wealth increases and eating habits change, shipments are likely to steadily climb.
The nation struggles to meet rising demand from an increasingly affluent population of 240 million, and is the world’s top importer of sugar and Asia’s largest wheat buyer.
The Indonesian government often suspends import duties for food imports such as rice, soybeans and wheat in a bid to fight inflation and dampen civil unrest.
After global food prices spiked last year, Indonesia temporarily scrapped its soybean import tariff and extended the role of state procurement body Bulog beyond rice in order to build bigger food stockpiles.
Domestic producers of staple foods tofu and tempe, a protein-rich substitute for costlier meat, had threatened to go on strike last year.
To protect domestic farmers, the government imposes curbs on imports and trading of food staples, which has been criticized by consumers and international trading partners.
Shortages of beef caused a corruption scandal this year, while garlic and onion prices have also spiked and come under the scrutiny of the local competition and monopolies commission.
Food import quotas in Indonesia encourage bribes and price spikes and must be replaced with import tariffs, a panel of government advisers urged earlier this year.
Last week, Indonesia’s government unveiled a fiscal package to promote foreign investment, reduce imports and quotas and prop up its tumbling rupiah currency.