Indonesia May Top Japan in Wheat Purchases

Indonesia, the world’s fourth-most populous nation, may boost wheat and flour imports 10 percent this year as surging sales of instant noodles and cookies stoke demand, according to an industry group.

Overseas purchases of wheat may gain to 5.06 million metric tons from 4.6 million tons last year, while flour imports may climb to 838,766 tons from 762,515 tons, Ratna Sari Loppies, executive director at the Indonesian Flour Mills Association, said in an interview yesterday.

Increased shipments may help Indonesia to dislodge Japan as Asia’s biggest wheat buyer, while benefiting exporters from Australia. The increase may also help to stem a 9.7 percent drop in Chicago prices this year, bolstering global food costs.

“We see an increase in consumption of basically everything in Indonesia, not only noodles,” said Wellian Wiranto, a Singapore-based economist at HSBC Holdings Plc. “Rice will always be the staple food for Indonesians but as the income is increasing, people are looking for a variety of food by consuming noodles, bakery and other products.”

Southeast Asia’s biggest economy expanded 6.49 percent in the last quarter, according to data released today, and the nation may be one step away from its first investment-grade credit rating in more than a decade as President Susilo Bambang Yudhoyono targets average growth of as much as 6.6 percent.

‘Beneficial News’

“Any news that the Indonesians are boosting their consumption and, importantly, their imports of wheat, is a beneficial news story to Australia,” said Luke Mathews, a commodity strategist at the Commonwealth Bank of Australia. The Asian country is Australia’s biggest destination for wheat exports, accounting for about 20 percent of shipments, he said.

Indonesia’s per capita income more than doubled to 27 million rupiah ($3,175) last year from 10.64 million rupiah in 2004, according to data from the Central Bureau of Statistics.

“Instant noodle is very cheap in Indonesia, where we can still buy a pack of noodle for less than 1,000 rupiah,” Loppies said by phone from Jakarta. The biscuit industry is expanding to meet rising local demand and for exports, she said.

The average price of a pack of instant noodles in Indonesia was 1,496 rupiah as of Aug. 3, 6 percent higher than at the start of the year, according to data from the trade ministry. That compares with 7,418 rupiah per kilogram of medium-grade rice, the most consumed staple, the ministry said.

Rising Rupiah

Indonesia’s central bank has refrained from raising borrowing costs for five meetings to support consumer spending, relying on a rising rupiah to curb price gains. With inflation easing for a sixth straight month in July, Bank Indonesia will keep its benchmark rate unchanged at 6.75 percent on Aug. 9, according to a Bloomberg survey of 16 economists.

Wheat for December delivery dropped as much as 2 percent to $7.1075 per bushel in Chicago today as commodities slid on concern that the global economic recovery may be stalling. Corn, soybeans, palm oil, base metals and crude also declined.

Wheat consumption in Indonesia was estimated at about 2.28 million tons in the six months through June, Franciscus Welirang, a director at PT Indofood Sukses Makmur, who’s also chairman of the flour mills association, said July 26. The country is the biggest wheat buyer in Asia after Japan.

Japan may buy 5.11 million tons of wheat for food in the year from April 1 compared with 5.39 million tons a year earlier, the Ministry of Agriculture, Forestry and Fisheries said in March. Indonesia’s wheat imports may gain to 6.3 million tons in the year from July 1, compared with an estimated 5.9 million last season, a unit of the U.S. Department of Agriculture said in a report in April.

“Some of this predicted growth is because several new wheat millers and multinational food manufacturers have begun production and are driving demand,” according to USDA’s Foreign Agricultural Service.

To contact the reporters on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net; Eko Listiyorini in Jakarta at elistiyorini@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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