USDA Attache: Indonesia Rice Prices Increase

In the first week of March, wholesale prices for low
quality rice in Indonesia were about $310 per ton, representing an increase of
about 10% since the beginning of 2005, and about a 30% increase from the lows
during the last marketing year, according to a USDA attache report posted
Tuesday on the Foreign Agricultural Service Web site.

Medium grade rice has experienced similar increases, while higher quality
types have been more stable. These price movements are a normal phenomenon
during this period of marketing year, as supplies gradually dwindle following
the last harvest from the previous marketing year (Nov. '04) and the onset of
the next main crop harvest (late Feb '05). This seasonal price increase has
been somewhat more pronounced this year as abundant supplies in 2004 resulted
in relatively low prices. The new main crop harvest has begun on Java, and as
deliveries increase, reaching peak harvest in late March/early April, prices
should decline.

On March 1, 2005, the GOI increased fuel prices by an average of 30%, but so
far this has had no measurable impact on rice prices. Constructed duty-paid
(duty is about $50/ton) prices from traditional Asian suppliers are still not
competitive with local prices. Furthermore, with border officials recently
subjecting imports of to increased scrutiny, attempts to skirt the import ban
and evade paying the duty are unlikely.


Policy

The GOI continues to monitor prices and the supply/demand situation as input
for considering whether the import ban (currently scheduled to remain in effect
until 30 June, 2005) should be maintained. If the impending harvest proves to
be less than expected, and prices rise, the ban would be removed. However,
despite some initial reports that the 2005 crop will be off from last year,
arrival of the main crop harvest into the market in mid-March through April is
expected to dampen prices, and most market observers believe the ban will be
maintained as currently planned. Even after 30 June, if prices and supplies
warrant, the ban could be extended.

When trade does resume, imports will face a new higher tariff. On January 1,
2005, the rice import duty was increased from Rp. 430/kg to Rp. 450/kg (the new
tariff equates to about $50 per ton). The new tariff structure covers rough
milled and semi-milled rice, fragrant rice, pre-cooked or parboiled rice,
broken rice, and rice flour. With the new more comprehensive tariff structure,
the GOI is hopeful that import documentation fraud can be reduced. Given the
current import ban, the new tariff has had no impact on prices.

On 2 March 2005, a Presidential Decree was issued that set prices that Bulog
will pay farmers for rice. The purchase price of wet paddy was increased from
1,230 to 1,330 rp/kg ($145/ton), while prices for dry paddy and milled rice
remained unchanged at 1,765 ($190/ton) and 2,790 rp/kg (300/ton). The new
policy also stipulates that these are prices delivered to mills, rather than at
the farm level, as was the previous policy. In theory, should the market drop
below these prices, GOI will enter the market and buy rice. In practice, Bulog
buys primarily paddy, and will use the 1,330 Rp/kg only as a "reference" price.
These are not support prices that Bulog would be required to defend should the
market drop below these levels, so the increase in the wet paddy reference
price is unlikely to have a significant impact on prices.

Bulog purchases only about 10 percent of domestic production. The move was
largely symbolic to signal the GOI's support for rice farmers and as a way to
demonstrate that the GOI is trying to minimize the impact of higher fuel costs
on rice producers. In the first week of March, farmers were receiving about
1,400 rp/kg for wet paddy in central Java.

USDA Attache: Indonesia Rice Output Seen At 54.3 Mln Tons

Continued excellent growing conditions have boosted prospects for rice output, which is now estimated at 54.3 million tons for 2004. With large carry-over stocks, expectations for another large crop, and continuation of the official policy to limit imports, the forecast for 2005 imports has been reduced to 1 million tons.

espite the recent increase in international prices, domestic prices remain remarkably stable, and import
activity in contravention of the current ban remains minimal, according to the U.S. Department of Agriculture's Foreign Agriculture Service released
Wednesday, but dated Nov. 4. Production

Based on the most recent estimates, rice production for 2004 is expected to reach 54.3 million tons (35.0 million tons milled rice equivalent).

While an increase in area is forecast, growing conditions in 2005 will unlikely be as optimal as those that prevailed in 2004. Thus, production in 2005 is forecast to be marginally lower than in 2004. The government has established a strategy to enhance production in the main producing areas (Java, South Sulawesi and North Sumatra), but the centerpiece of this strategy is to boost production through area expansion.

Trade

The margin between local prices and world prices continues to limit attempts to contravene the import ban. Due to this reduced economic incentive, combined
with stricter controls on illegal trading, smuggling remains unattractive to would be importers.

Despite it being Ramadan when demand traditionally rises, plus the phase of the marketing year when supplies are generally beginning to decline, domestic prices have remained stable through the end of October.

While the government can review monthly and then decide to remove the import ban, given the plentiful stock situation and stable prices, the ban is expected to
continue until December 31, 2004. The new Ministers of Trade and Agriculture have yet to stake positions on rice import policy.

Nonetheless, it is expected that in 2005 the ban will initially be implemented as in 2004: in place from
Feb. 2005 through June 2005.

With large carry-in stocks, expectations for another relatively abundant crop, and continuation of the import ban, import prospects for 2005 have been reduced to 1 million tons.

In an effort to cut the budget costs associated with storing their burgeoning stocks, Bulog is examining the possibility of exporting up to 50,000 tons to West Africa (Senegal and Nigeria).

These shipments may take place in December 2004 until February 2005, but discussions are ongoing and no details have been finalized. As stated above, at a time when prices are normally strengthening, rice prices in several cities are reportedly stable as markets in general have adequate supplies.

In the late October, the average retail price of medium
quality rice in Jakarta was about Rp. 3,340/kilogram (US$ 371.1/ton at an average exchange rate of Rp.9,000/US$ 1); in Bandung, West Java Rp.
2,700/kilogram (US$ 300/ton); in Surabaya, East Java Rp. 2,600/kilogram (US$ 288.9/MT); Semarang, Central Java Rp. 3,000/kilogram (US$333.3/MT); in Medan, North Sumatra Rp. 2,900/kilogram (US$ 322.2/MT). Stocks

Bulog purchases from local farmers have reached 2.2 million tons equivalent milled rice, surpassing their annual target of approximately 2 million tons. Bulog stock is reportedly over 1.8 million tons milled rice equivalent, sufficient to support Bulog's distribution for 9 months. Additional supplies from the recent harvest have resulted in plentiful pipeline stocks held by the market as well, as is indicated by the prevailing price stability.

Policy

The most recently updated official statement on the rice import ban (Letter of Minister of Industry and Trade, Ref. No. 524/MPP/VIII/2004 dated August 19,
2004) stated that it would be extended until December 31, 2004.

Indonesia's '04 Rice Output To Reach 54.34M Tons - Agency

Indonesia's total unhusked rice output is expected to reach 54.34 million metric tons this year, up 4.23% from last year and exceeding the government's target of 53 million tons due to an increase in harvested areas, the Central Bureau of Statistics said Monday.

The agency said harvested areas are expected to increase to 11.97 million hectares this year, up 4.20% from 11.49 million hectares in 2003, due to good weather, the opening of new farmlands and a mild attack of pests in some rice-producing areas.

Minister of Agriculture Anton Apriyantono said Indonesia won't need to import rice until January due to robust rice production this year.

Anton said rice stocks have been sufficient to meet increasing demand ahead of holidays until the end of this year.

"The main food crops are sufficient until January. We won't need to import rice. We have a surplus of more than 2 million tons."

The unhusked rice output of 54.34 million tons is the equivalent of 33.37 million tons of husked rice, which is more than enough to meet expected demand of 31 million tons this year.

USDA Attache: Indonesian 2004 Rice Crop Seen At 53.6 Mln MT

Indonesia's 2004 rice production estimate has been increased to 53.6 million metric tons (34.6 MMT milled rice equivalent), nearly 3% higher compared to the previous year, according to information from the U.S. Department of Agriculture's Foreign Agricultural
Service web site, dated Aug. 18 and released Monday.

Production

Major rice producing areas in Indonesia nearing the end of the second harvest season (which is expected to produce around 17.8 MMT unhusked/rough rice or GKG-gabah kering giling).

The (first) main season crop harvested in Feb/April resulted in output of 25.6 MMT, 48% of total annual production.

Despite some crop damage reported in some (nonirrigated) rice areas due to dryness, the second crop is reported to be good.

As a result, 2004 rice production estimate has been increased to 53.6 MMT (34.6 MMT milled rice equivalent), nearly 3% higher compared to the previous year.

For 2005, assuming a slight increase in area, production is expected to again grow marginally to 53.9 MMT rough rice or equivalent to 34.7 MMT milled rice.

Rehabilitation and/or development of irrigation facilities, timely availability of good seeds and other agricultural inputs such as fertilizer continue to be the government's focus in its efforts to improve rice yields (current average yield from irrigated and non-irrigated rice areas approximately 4.5 MT/ha).

However, small farmers' land ownership (in average
0.3 hectare) continues to be a major obstacle to production expansion as benefits from economies of scale are limited.

In the past month, domestic rice prices have declined. Reportedly, the average of farmgate prices during the current harvest season are declining from Rp. 1,460/kilogram for dry unhusked rice for storage (GKS-gabah kering simpan) to Rp. 1,200/kilogram and Rp. 1,230/kilogram for fresh crops (GKP- gabah kering panen) to Rp. 900/kilogram.

Consumption

Rice consumption in Indonesia is relatively stable, estimated at approximately 36.55 MMT per year in 2004. Use is increasing slightly to keep pace with population growth.

While Bulog has stopped distribution to the military, subsidized rice distribution for needy families continues, and an estimated 2.0 MMT will be distributed under this program in 2004.

Trade

In line with sufficient local supplies, stable to declining domestic prices, and prospects that the import ban will be continued, the forecast for
2004 rice imports has been reduced to 800,000 MT.

The ban is currently set to expire August 2004, but it is expected that the ban will be extended. The
official policy is that extensions will be set on a month-by-month basis, following review of the domestic supply situation, but recent comments by
senior officials indicate the ban may be extended at least through December 2004.

Rice prices are declining due to the better than expected second crop rice harvest. In the first week of August, the average price of medium quality rice was about Rp. 2,500/kilogram (US$ 290.7/MT at an average exchange rate of Rp. 8,600/US$ 1), down from Rp. 2,700/kilogram (US$ 313.9/MT) during the January-
June period.

With these prices prevailing in the domestic market, and prices from other Asian sources on the rise, the returns from trying to import rice in violation of the ban are minimal, and not worth the risk.

Since the ban has come into force, reportedly the quantity of rice imported illegally has been minimal, certainly much less than the amount of rice that has entered illegally (by not paying full duty) in previous years.

Also, by all accounts, border officials have been strictly enforcing the ban, further eroding the
incentives to try to import.

Other high profile examples of taking action against those that have attempted to smuggle other agriculture commodities has also lessened similar activity in the rice trade.

Stocks

At the end of the second harvest, Bulog had almost fulfilled their annual projected purchases (targeted at approximately 2.0 MMT of milled rice equivalent) from local farmers.

With additional supplies from the recent harvest, stocks in the market and pipeline are plentiful. Bulog stock is reportedly over 2.5 MMT of milled rice equivalent. Carry-over stocks are forecast to be at 2.8 MMT at the end of 2004.

Policy

The official decree that implements the rice import ban states that it will be reviewed on a monthly basis to determine whether is should be extended.

However, recent statements by senior officials indicate that the ban likely will be extended at least through 2004.

Jakarta sees 2004 crop output better than forecast

Indonesia said on Wednesday its rice, corn and soybean output in 2004 would be higher than expected due to favourable weather.

But the ample forecast may tighten Indonesia's rice imports for this year ahead of the expiration of rice import ban next month, Agriculture Minister Bungaran Saragih said.

Jakarta placed an import ban earlier this year and placed year-round limits on private importers to protect the minimum price of rice at around harvest time.

"Output for rice, corn and soybean are likely to be higher than our forecast thanks to the good weather," Saragih told.

He did not provide details for the estimated increase.

The agriculture ministry has projected earlier that unhusked rice production would reach 53 million tonnes this year. Corn output was projected at 11.25 million tonnes and soybean at one million tonnes.

"I've discussed it with trade and industry ministry. We would continue to evaluate monthly. We will be flexible, and if stocks are good then we may not need to import rice," Saragih said.

Indonesia usually import around two million tonnes of rice a year from Thailand and Vietnam. Rice is a staple for the country's some 220 million people.

Source: Reuters