Wheat Imports by Indonesia Seen Climbing as Incomes Rise

Wheat and flour imports by Indonesia, Asia’s biggest buyer, may gain at least 6 percent this year as rising incomes boost food demand in the world’s fourth most populous country, an industry executive said.

Purchases may reach 6.6 million metric tons in 2012 from 6.2 million tons a year earlier, said Franciscus Welirang, chairman of the Association of Flour Producers in Indonesia.

“Every year, the milling capacity increases by 400,000 tons,” said Welirang, also a director at PT Indofood Sukses Makmur, owner of the world’s largest flour mill. “That’s how fast demand is rising.” Companies producing wheat-flour increased to 18 last year from just four in 1998, he said.

Rising purchases may curb an 11 percent slump in Chicago futures in the past year. Prices have declined as global production surges to a record, taking inventories to a 12-year high before the next Northern Hemisphere harvest, according to the March 9 estimate by the U.S. Department of Agriculture.

Wheat declined 0.7 percent to $6.4425 a bushel at 6:09 p.m. Singapore time today, extending a drop to 1.3 percent this year on the Chicago Board of Trade.

Demand in Indonesia, which relies completely on imports, jumped more than 50 percent in the past decade, surpassing Japan as Asia’s biggest importer, USDA data showed. That surge is attracting exporters including the U.S., Australia and Russia, the top three shippers.

Import Demand

Growth in imports will be driven by developing countries, including Indonesia and Vietnam, where incomes and population are rising and consumers are shifting marginally from rice to wheat, the USDA said in its 10-year outlook on Feb. 13.

About 85 percent of Indonesia’s imports by volume are wheat and the rest flour, Welirang said in an interview today in Singapore where he’s attending a conference. The total is expressed in wheat equivalent, he said.

Imports from Australia, the world’s second-largest shipper, rose to 3.8 million tons in the 12 months to September 2011, from 3.2 million tons a year earlier, according to data from the Australian Bureau of Agricultural and Resource Economics and Sciences. That makes Indonesia the biggest buyer of Australian wheat, accounting for 21 percent of total shipments, it showed.

From the U.S., the largest exporter, purchases surged to 695,194 tons from June 1 to March 1, from 555,070 tons in the same period a year earlier, USDA data showed.

Indofood’s (INDF) PT Bogasari Flour Mills is the largest miller in a single location in the world, according to the company’s website and the Russian Grain Union. Bogasari has a milling capacity of 4.338 million tons at its plants in Jakarta and Surabaya, representing more than half of the nation’s total, according to Welirang.

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net

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

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