Indonesian Wheat Imports On the Rise

Wheat Flour

Canada

United States

Published Feb 7, 2020

Indonesian wheat imports are rising with the increase of wheat-based product consumption as well as feed wheat. Ukraine and Russia are expected to benefit while Australia and Canada might have to revise their strategy to stay in the market.

As the second-largest importer of wheat and growing steadily year by year, Indonesia is the most promising market for wheat exporters. Thus despite a recent increase in price for wheat worldwide, Indonesian companies are still bent on increasing demand this year to accommodate the rapidly-growing flour-based foods industry.

A Surge in Indonesian Wheat Demand and Imports

The country’s wheat imports are estimated to rise to approximately 11.3 million tons during 2019/2020 from 10.78 million tons during the previous year. Among Indonesia’s suppliers, Ukraine had the largest market share in 2018/2019 at 24%, with Canada at 22%, Argentina at 18%, the US at 13%, Australia at 11% and Russia at 9%. Indonesia is estimated to require about 11K tons of wheat flour from these countries in 2020 to meet the demand for wheat flour products.

Rice consumption, on the other hand, is decreasing at approximately 0.62% yearly as more consumers are incorporating more western-style foods such as bread and noodles into their meals. With the fourth-biggest population in the world, Indonesia’s transition to flour-based diets has led to a significant increase in overall wheat demand.

Despite growing demand, however, the country is utterly dependent on wheat imports from other nations due to low local production outputs. Commercial imports of wheat flour in Indonesia is a relatively recent phenomenon, started in the mid-20th century, as the crop was traditionally less consumed than rice. Thus Indonesia is almost entirely dependent on foreign wheat imports for flour-based foods and feed wheat for livestock and poultry.

Import Increase Positively Impacts Newcomers Ukraine and Russia

Newer wheat exporters to the Indonesian market such as Ukraine and Russia are benefiting the most from the steady demand increase. This was further enhanced by the Indonesian government’s ban in 2015 on importing corn to use as livestock feed, which has led farmers to seek alternative sources.

As Indonesian buyers turned to cheap wheat supplies from the Black Sea, Ukraine became their number one go-to source for wheat imports. Russian wheat, while still relatively small in terms of market share, has also become one of the fastest-growing suppliers due to its price competitiveness, and imports increased by 579% in 2017.

Traditional Sources Might Have to Fight to Stay in the Market

While still prominent in terms of market share, more traditional high-quality suppliers such as Australia, Canada, and the US are expected to have difficulties staying in the market as they have not benefited from the demand increase for feed wheat.

Furthermore, these countries are being steadily pushed out of the market for wheat used in flour-based products as well. While these countries have traditionally benefited from the premium cost of its high-quality crops, they have recently begun to lose their competitive edge as these up-and-coming countries have also started to produce high-quality products.

This is especially devastating as Indonesia is the largest importer for many of these countries. In Australia, for example, approximately 4.6 tons of wheat is exported to Indonesia annually.

For the 2019/2020 season, while the US has been doing better than Australia and Canada, the situation is tougher for Australia in particular, as the country dealt with drought during 2018/2019 that resulted in a shortage and forced them to import wheat from Canada, the first time in 21 years. Production of wheat for the 2019/2020 period was 15.7 metric tons, which is the lowest yield in almost 12 years.

Global exports from Canada are also expected to drop by 9% as wheat productions met with unfavorable weather conditions including snow and moisture during harvest, and went through of the biggest rail strikes in a decade, all of which caused production to decrease.