Indonesia's Bulog enters Asian rice market to build stocks

Indonesia's state procurement agency, Bulog, is in the market to import 500,000 mt of white rice over the coming months after gaining approval from the country's parliament.

The move comes as the government seeks to replenish the country's stockpiles and will mark the first time that Bulog has entered the international rice market for a significant volume since 2018. While the body has historically tendered for rice, Bulog appears to have entered into direct negotiations with sellers this time.

Sources in various Asian rice origins have already reported that Bulog has purchased significant volumes, the bulk of which has so far come from Thailand. According to sources in two major rice trading houses, Bulog has purchased around 200,000 mt of Asian rice, half of which is anticipated to come from Thailand, with the balance coming from Vietnam, Myanmar and possibly Pakistan.

Three major Thai exporters told S&P Global Commodity Insights that a deal for 100,000 mt of 5% broken white rice had been done, with one specifying that shipment would occur in December. Another exporter said that "some shippers are preparing to ship, but... no one's actually loaded yet."

Another source in the country said that the sellers would "wait and buy quietly" in the local market to avoid any sharp local price increases. Despite this, Thai white rice prices have shot up in recent days as expectations of a sale built, with Platts Thai 5% broken white rice assessed at $429/mt FOB Nov. 28, up from $404/mt FOB at the start of November.

Sources in Vietnam also believe that a sale has been concluded with Bulog, with shipment due in December-January. The total volume sold is unclear but sources agreed that it is at least 30,000 mt, with one source putting this figure at up to 70,000 mt.

Myanmar and possibly Pakistan are thought to have sold the remaining volume to Bulog. The exact cargo sizes are unclear, but one major trader put the figure at 20,000-30,000 mt each. Despite being the most price competitive white rice origin, India is not believed to have sold, with some sources linking this to an outstanding demurrage issue which Bulog has from a previous Indian order.

Bulog did not immediately respond to a request for comment.

According to reports citing Bulog's CEO, the body aims to import 500,000 mt by the end of the year. It is unlikely that any of the rice agreed in deals in recent days will be available for distribution by the end of the year, although purchases for the remaining 300,000 mt before the year-end are possible.

Aside from its importing activities, Bulog will procure an additional 500,000 mt of rice from local farmers to bolster stocks and to ensure stable domestic rice prices.

Despite Bulog's recent import activities, the Food and Agricultural Organization of the UN forecast Indonesian 2022 paddy output at 55.7 million mt in October, up by 2.3% on year "due to area expansions and favorable yield prospects." No major year on year bump to domestic rice prices was recorded by the FAO.