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Indonesia's 2019-20 wheat imports revised lower as pandemic hits appetite: USDA

Highlights

Indonesia's 2020-21 wheat imports to rebound on year

Mills running capacity plunges to 60%-70% from 80% last year

Indonesia's wheat imports in the 2019-20 marketing season (July-June) are expected to decline, due to lower food consumption as locked down shoppers cut spending on ready-made meals, coupled with less feed demand and an increasing domestic corn production competing for the feed markets, according to the US Department of Agriculture.

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The USDA revised Indonesia's 2019-20 wheat imports 1.9% lower from the previous estimate to 10.6 million mt, it said in a statement July 23.

The federal body, however, kept the Southeast Asian country's 2020-21 wheat imports unchanged from a previous estimate of 10.8 million mt, according to the Global Agricultural Information Network report prepared by the USDA's Foreign Agriculture Service.

Indonesia is the world's second-largest wheat importer after Egypt.

The revision comes as Indonesia's hotel, restaurant and food services took a major hit following the government measures to contain the coronavirus pandemic in late March and April. Besides this, the economic disruption caused by COVID-19 further exacerbated consumption worries.

While retail sales increased as consumers prepared meals at home, the change is not significant enough to offset declining consumption in other sectors.

At the time, Indonesia's running capacity of wheat mills slumped to 60%-70% from 80% in 2018-19, according to the agency.

"Many mills, which also import wheat for sale to the feed milling industry, have also faced challenges as higher domestic corn production combined with a weaker rupiah has lowered domestic corm prices relative to imported wheat used for feed," the FAS said.

FAS also attributed the import cuts to weaker feed demand from the poultry industry, which has further cut into demand for wheat as a feed ration component.

Most of wheat imported for feed use originates from the Black Sea region.

Both wheat consumption for food and feed use were revised down by 100,000 mt each, contributing to the import cuts.

However, Indonesian wheat imports in the 2020-21 marketing year is expected to rebound as sectors impacted by social distancing measures begin to reopen, according to the FAS.

Australian wheat

Australia -- traditionally the largest supplier of wheat to Indonesia -- is set to return to higher production in the 2020-21 marketing season, resulting in higher available exportable supplies into Southeast Asia.

Australia used to dominate the Indonesian wheat market, but Ukraine and Argentina have managed to grab a larger market share in recent years as Australia struggled with multi-year drought that weighed on wheat crop prospects.

With higher production, many analysts believe Australia may be able to regain some lost market share in Indonesia in the new marketing season.

However, buying preferences of Indonesia's flour industry are unlikely to change "unless prices for Australian wheat reach lower than $25/mt above Black Sea wheat," FAS said.

Between July 2019 and April 2020, Ukraine and Argentina have dominated the Indonesian market with 30% and 28%, respectively.

In latest on Australian wheat, wheat export prices continued to strengthen following solid gains seen in the Australian dollar, which is at multi-month high.