Indonesia's free meal program sparks concern over rice reserves, future imports

Indonesia's free meal program may challenge rice reserves, raising the possibility of a resumption of imports later in the year, sources told S&P Global Commodity Insights.

Imports are on hold, but demand may make Indonesia a buyer, affecting Asian rice markets. Any decision to import rice will largely depend on local procurement and harvest success, according to market participants.

Commodity Insights and the US Department of Agriculture forecast a 3% increase in rice production in marketing year 2024-25 to 34 million mt.

Indonesia's self-sufficiency policy aims to boost domestic food production and reduce reliance on imports. The free meal program, which started Jan. 6, targets school children and pregnant women. The initiative, part of President Prabowo Subianto's 2024 election manifesto, aims to feed 82.9 million people -- nearly 30% of the population -- by 2029.

Commodity Insights analysts project milled rice imports to fall 68% year over year to 1.5 million mt in MY 2024-25 (January-December), while the USDA forecasts a drop of 85% to 700,000 mt.

The free meal program could create additional rice demand, potentially straining rice reserves.

Wanniwat Kitireanglarp, deputy secretary general of the Thai Rice Exporters Association, said Indonesia's free meal program "sounds great on paper, but feeding millions of people regularly is no small feat. That kind of demand could stretch the country's rice reserves more than expected, especially if the program ramps up quickly."

Kitireanglarp warned that if the second half of the year brings weather issues or if local procurement fails to hit targets, "there's a chance they'll have to look at importing rice again, even if just to top things off." A resumption of imports "might depend on how smoothly the meal program rolls out and whether local harvests keep up with demand," he said.

Officials from Indonesia's state food procurement agency, Bulog, have not commented on the possibility of a resumption of rice imports.

Local procurement is ongoing, but potential weather and seed adoption issues may affect supply.

A trader dealing in Vietnamese rice said Indonesia "clearly needs more rice. Whether they decide to import this year or push it to next year will come down to political will. During the elections, the president's manifesto focused on self-reliance, so that's definitely a factor."

A Dubai-based trader said much will depend on "how the government allocates its budget between farmer support schemes and consumer-focused programs. Historically, the government steps into the market through Bulog at intervals of three to four years. Overall, I don't expect any imports over the next six months, as current stock levels appear sufficient to meet domestic demand."

According to Platts data, carry-in rice stocks MY 2024-25 (as of Jan. 1) will be 6.17 million mt, while carryout stocks (as of Dec. 31) will be 4.5 million mt.

The coming months will determine whether Indonesia can maintain its self-sufficiency in rice production or reconsider its stance on imports, amid potential weather challenges and the adoption of new agricultural practices by farmers.