2012-09-04 08:46:10 - New Food research report from Business Monitor International is now available from Fast Market Research
BMI View: We believe that the Indonesian government's plan to be self sufficient in rice is achievable in coming years. Negotiations between the Indonesian government and Papuan officials have led to an agreement to allow 200,000 hectares of land in the Merauke region to be developed into the Merauke Integrated Food and Energy Estate. Most the land will be used to grow rice two times a year.
* Coffee production growth to 2015/16: -9.4% to 8.5mn bags owing to base effects. Coupled with our long-term bullish outlook for prices, another long-term production driver of the coffee sector will be domestic consumption. This is likely to increase over our forecast period as a coffee culture grows in Indonesia's cities on
the back of increased urbanisation.
* Poultry consumption growth to 2016: 13.3% to 1.7mn tonnes. The increasing ability of Indonesians to afford meat as part of their daily diet will be a main driver of poultry demand.
* Palm oil consumption growth to 2016: 39.4% to 9.2mn tonnes. This will mainly be driven by domestic food-use demand, which accounted for more than 70% of total local palm oil consumed in 2011. We believe that industrial demand will lag growth in the food-use sector largely due to a lack of government subsidy support for biofuels and state-owned oil company Pertamina's uncompetitive purchasing prices. Industrial use (for biodiesel and oleochemicals) of palm oil currently accounts for about 20% of total domestic consumption.
* 2012 real GDP growth: 5.4% (down from 6.5% in 2011; forecast to average 6.3% to 2016).
* 2012 consumer price index: 4.8% year-on-year (y-o-y) average in 2012 (down from 5.4% in 2011; forecast to average 5.2% to 2016)
* 2012 central bank policy rate: 6.0% in 2012 (same as in 2011; forecast to average 6.7% in 2016)
Full Report Details at
- www.fastmr.com/prod/451285_indonesia_agribusiness_report_q4_2012 ..
Key Industry Developments
Animal feed companies PT Japfa Comfeed Indonesia Tbk and PT Multibreeder Adirama Indonesia Tbk have agreed to a merger, speeding up the consolidation occurring in the industry. These firms are two of the top players in the growing Indonesian animal feed industry, and we believe the merger will enable more resources to be shared and lead to stronger supplier power and higher market share. Despite higher production, cocoa bean exports from Indonesia have been slow in the first quarter of 2012.
Cocoa export volumes fell by 42.0% y-o-y to 40,000 tonnes, according to the Indonesian Cocoa Association. Exports from the island of Sulaweso, which supplies around 75% of the country's production and exports, also dropped in the first quarter, by 45% y-o-y to 18,826 tonnes. This decline is linked to lower bean quality as well as an increased push towards domestic grindings in order to export refined cocoa products instead of raw beans. The tax on cocoa-bean exports, which was implemented in 2010 and was set to remain unchanged for eight months from June 2012 at 5%, hinders incentives to export. Therefore, exports of processed cocoa have soared. Indonesian semi-processed cocoa products exports increased by 60% y-o-y to 137,460 tonnes in 2010/11.
Golden Agri Resources, Sime Darby, KL Kepong and IOI Corporation have all announced plans to increase refining capacity in Indonesia in response to the new palm oil tax regime in the country. We believe that these developments will significantly boost Indonesia's overall refining capacity and will also further improve economies of scale for the nascent industry. Indonesians have reported a price advantage of at least US$100 per tonne for refined palm oil in terms of cost of production compared with their Malaysian counterparts, even with Malaysia's absence of export taxes on refined palm oil. We believe that companies such as First Resources, Wilmar and Golden Agri Resources could benefit the most from these developments as they already have an established landbank in Indonesia and a favourable maturity profile for their trees. Over the long term, we highlight that having sufficient land space to expand new plantations is also important, and we favour these companies for this reason.
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