Indonesia Agribusiness Report Q1 2013Published by: Business Monitor International Published: Nov. 14, 2012 - 87 Pages Table of Contents
AbstractBMI View: Overall, we hold an optimistic outlook towards the country’s agriculture sector and seesignificant growth opportunities in sub-sectors such as livestock, palm oil and cocoa. However, while webelieve that the government’s goal of self-sufficiency in rice by 2015 is attainable, we are less confidentabout other commodities such as sugar and corn. We also highlight that the country’s aim to become thesecond largest coffee producer in the world by 2015 is unrealistic. Much of our scepticism is owing to thelack of proper infrastructure and the existence of a large number of low-technology, small-scale farmers.We believe that the shift from raw commodity exports to refined exports (especially for palm oil andcocoa) will warrant more public and private investment in order for the raw inputs industry to keep pacewith downstream industries.Key Forecasts Sugar production growth to 2016/17: 61.2% to 3.0mn tonnes. This expansion will be mainlydue to improved yields and higher sucrose content in cane. Despite the production improvement,we believe the country will likely remain, along with India and the EU, one of the world’slargest sugar importers. Coffee consumption growth to 2017: 33.7% to 3.1mn tonnes. Expansion will come fromrising incomes and greater urbanisation. Consumption of cheaper instant coffee is also likely toincrease at the expense of tea, as trends set by the upper and middle classes filter down to alllevels of society. Palm oil production growth to 2016/17: 24.2% to 31.6mn tonnes. The key drivers of thisgrowth are physical expansion of plantation area and increased investment into downstreamactivities such as biodiesel and oleochemical production. BMI universe agribusiness market value: US$62.7bn in 2013; growth to average 5.3%annually between 2011/12 and 2016/17. 2013 real GDP growth: 5.6% (down from 6.0% in 2012; forecast to grow annually by 6.3% onaverage to 2017). 2013 consumer price index: 5.3% year-on-year (y-o-y) average (down from 4.8% in 2012;forecast to grow annually by 5.0% on average to 2017) 2013 central bank policy rate: 5.80% (same as in 2012) Growing Rivalry Over Refined Palm Oil Select Countries – Palm Oil Production & Consumption (‘000 tonnes) f = BMI forecast. Source: BMI, USDA Key Industry Developments Indonesia could see its palm oil refining capacity nearly double in the coming years, as various companiesreported their intention to invest more than US$2.5bn in the downstream sector. This is a response to thenew palm oil tax regime in the country, which from October 2011 reduced export taxes on palm oilprocessed products from 25% to 13%, while only decreasing taxes on crude palm oil from 25% to 20%. Golden Agri Resources, Sime Darby, KL Kepong IOI Corporation, Wilmar, PT Smart and MusimMas have all announced plans to increase refining capacities in the country. As a result of Indonesia’snew palm oil exports tax system, refined exports have gathered steam in the past months and representedmore than 65% of total palm oil exports in April 2012, 20 percentage points higher y-o-y. We remain sceptical towards the government’s ambitious goal to turn Indonesia into the world’s secondlargest coffee producer by 2015. This is mainly due to a steady decline in area dedicated to coffee and toerratic weather that affects yields and causes production output to fluctuate. Farmers in key growingregions have been actively converting their robusta coffee plantations to more profitable crops such ascocoa, rubber and oil palm. Low yields are also holding back the sector’s growth. Despite boasting thesecond largest planted coffee area in the world after Brazil, overall coffee production typically placesIndonesia around the world’s third or fourth largest producer of coffee. Indonesia is the third largest cocoa grower in the world behind Côte d’Ivoire and Ghana. Due to thegrowing global demand for cocoa powder – the processed form of cocoa beans – Indonesia is increasinglypoised to promote its processing industry and to channel its beans production into local grinding facilities.In the medium term, this could make Indonesia gradually lose its position as third largest raw cocoaexporter. However, the higher earnings through selling processed cocoa products are expected to make upfor the losses in cocoa bean export earnings. Get full details about this report >> |
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