Sugar Imports Rising 29% in Indonesia as Drinks Demand Booms

Sugar refiners in Indonesia, set to become the world’s largest buyer, will probably boost imports of the raw variety by 29 percent next year to meet expanding consumption by the domestic food industry. Futures climbed.

Shipments will rise to 3.6 million metric tons from 2.8 million tons in 2014, said Andre Vincent Wenas, a vice chairman of the Indonesian Sugar Refiners Association. The country will replace China as the top importer in the year to April, buying 3.65 million tons, U.S. Department of Agriculture data show.

Consumption of everything from sugar to coffee to palm oil is climbing in Indonesia, Southeast Asia’s largest economy, as population and incomes increase. Rising imports may help curb a decline in New York futures which have plunged 57 percent from a three-decade high in 2011 as global harvests outpaced demand.

“The food industry is growing very fast, by at least eight percent per year, because of the changes in lifestyle,” Wenas said in an interview in Jakarta on Aug. 22. “Households increasingly prefer to buy processed food and drinks. We see new restaurants, cafes and bakeries appearing and companies are boosting production for the domestic market and for export.”

The contract for delivery in October rose 0.6 percent to 15.45 cents a pound on ICE Futures in New York today. Prices reached 36.08 cents in February 2011.

Domestic Demand

The refiners association represents 11 companies that process imported raw sugar for industrial use, Wenas said. Purchases are regulated by government permits. Sweetener for household consumption is supplied by other mills that crush domestic cane and through government imports. Local production may be 2.5 million tons in 2014, Gamal Nasir, director general of estate crops at the Agriculture Ministry, said in July.

Total consumption will expand to 5.9 million tons in the 12 months to April from 5.7 million tons a year earlier, USDA data show. Imports of white and raw varieties will be 3.75 million tons compared with 3.79 million tons, the data show.

Demand for other food commodities is also increasing. Consumption of palm oil will reach a record 11.2 million tons in the year to September 2015, more than doubling in a decade, USDA data show. Imports of wheat may jump to more than 10 million tons in five years, placing the country on par with the leading importer, Egypt, Rabobank International said in March.

Food, Beverage

Food and beverage sales are set to grow 11 percent to 1,000 trillion rupiah ($85.3 billion) this year from 900 trillion rupiah a year earlier, Investor Daily Indonesia reported yesterday, citing Adhi S. Lukman, head of the Indonesian Food and Beverage Association.

Increasing demand may benefit food companies such as PT Indofood CBP Sukses Makmur and PT Mayora Indah. Indofood’s revenue will probably advance 19 percent to 29.95 trillion rupiah in 2014 and Mayora may report a 23 percent increase in sales to 14.8 trillion rupiah, according to the mean of analyst estimates compiled by Bloomberg.

“Everyone with a modern lifestyle tends to be more practical,” Wenas said. “They like soft drinks, many like instant coffee in sachets that already include sugar. All of these are big markets and we can see this trend not only in big cities but all the way down to small towns and regencies.”

Global usage will outstrip supply in the year from October 2015 as production declines in Brazil, the world’s biggest grower, and global consumption increases, Jose Orive, executive director of the London-based International Sugar Organization, said on Aug. 4.

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