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Tofu Makers in Indonesia May Halt Output as Soybean Prices Surge

Tofu Makers in Indonesia May Halt Output as Soybean Prices Surge
Tofu is fried by a worker at a tofu production facility in Sumedang, Indonesia. Soy protein remains a key part of the Indonesian diet. The nation imports about 70 percent of its soybeans, largely to produce tofu and tempeh. Photographer: Dimas Ardian/Bloomberg News

July 25 (Bloomberg) -- Indonesian producers of tofu and tempeh, the soybean-based staples consumed by millions of Muslims during the Ramadan holy month, may stop production today after the U.S. drought sent bean prices to a record.

The Confederation of Indonesian Tofu and Tempeh Makers Cooperatives demanded the government lift a 5 percent duty on soybean imports, imposed in January, to help ease local prices that have risen 33 percent in the past three weeks to about 8,000 rupiah per kilogram ($841 a metric ton), according to Sutaryo, the group’s head of business.

Surging soybean prices may boost inflation in Southeast Asia’s biggest economy that imports about 70 percent of its needs. Consumption of staples climbs during Ramadan as communal meals lift overall demand, even as followers fast during the day. The U.S. drought may spark a rebound in global food costs through October, halting a slide that sent prices in June to the lowest in 21 months, the United Nations said July 5.

“We will call all our members in Bandung and the greater Jakarta areas to stop production from Wednesday to Friday to show the customers that the surge in soybean prices was out of our control,” Sutaryo, who uses a single name, said in a phone interview from Jakarta. “Other cities will follow the stoppage if the government fails to come up with a solution.”

Soybeans climbed 29 percent in Chicago this year on concern that the worst drought since 1956 in the U.S., the world’s biggest grower, will cut supplies. Futures, which reached a record $16.915 a bushel on July 23, may surge to $20 in three months, Goldman Sachs Group Inc. said.

Middle Ground

The country scrapped a 10 percent import tax on soybeans in January 2008 after thousands of tempeh and tofu producers rallied in Jakarta demanding the government intervene.

Muslims began observing Ramadan last week. At least 85 percent of Indonesia’s 240 million people are Muslims.

The government has urged the confederation to seek a middle ground and call off the stoppage plan, Deputy Agriculture Minister Rusman Heriawan said.

The price increase “is temporary, hopefully after the conditions in the U.S. return to normal, production will resume,” Heriawan told reporters in Jakarta yesterday. “Tofu makers can either reduce the size or increase prices to a reasonable level to adjust to the cost,” he said.

The government is studying a policy to regulate the imports, to better manage supplies and prices, according to Deddy Saleh, director general of foreign trade at the Trade Ministry on July 3.

Cheapest Protein

Tofu and tempeh, derived from soybeans and eaten mainly with rice, the main staple, are the key and cheapest sources of protein for Indonesians. The foods represent about 88 percent of total soybean use in the country, according to the U.S. Department of Agriculture.

Indonesian inflation unexpectedly accelerated in June as food costs climbed, the Central Statistics Office said July 2. Consumer prices rose 4.53 percent last month from a year earlier after climbing 4.45 percent in May.

Some Indonesian tofu and tempeh makers have already ceased production or reduced the size of the food, Sutaryo said.

“We want to raise the selling prices, but I think the customers won’t understand the situation if they’re increased suddenly,” Sutaryo said. “So, now it’s up to the government.”

The country is expected to import 1.97 million tons of soybeans in the marketing year from October 2012, up from 1.9 million tons a year earlier as consumption will exceed output, the USDA’s Foreign Agricultural Service said in a report in May.

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

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

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