Indonesia plans to import up to 2 million tonnes (mt) of rice this year to ensure food security, an unexpected move that could soak up regional stockpiles and support prices. The country had aimed to avoid rice imports this year after surprising markets by buying 1.9 million tonnes in 2011, but output from the world’s third largest grower is again falling short of forecasts, threatening its ambition to become self-sufficient in rice.
“The harvest is going well, but we’ll still have to import...a maximum of two million tonnes,” Indonesian Trade Minister Gita Wirjawan told Reuters at a news briefing on Wednesday , without elaborating on the potential suppliers.
Imports are expected to come from government-to-government deals. State procurement agency Bulog last month bought 200,000 tonnes of rice from Myanmar after signing an annual agreement.
Countries in the region, including top exporter Thailand, are sitting on high levels of stocks, traders say.
“This is very good news for us,” a Vietnamese exporter said of the Indonesian import plans.
Indonesia, which has a population of 240 million, expects unmilled rice output of 68 million tonnes this year, below a previous forecast of 72 million, because of wet weather and damage to crops by disease. Production will still be up from 65.39 million tonnes last year, when hefty imports were aimed at calming food price inflation. This year the central bank is hoping for lower inflation to give it room to further cut interest rates to prop up economic growth in the face of a global slowdown.
Last year, Bulog imported rice from Thailand, Vietnam and India, in a combination of commercial and government-to-government deals.
Indonesia has had a ban since early 2004 on rice imports by private traders, in an effort to combat smuggling that squeezed local prices, particularly during the harvest period.
Rice prices in Vietnam this week dropped below an industry-imposed floor level due to thin demand and could fall further as fresh grain from a major harvest was arriving before the harvest peaks next month, traders said.
Traders said they would see more price impact when Indonesia starts seeking grain for specific import orders.
Indicative offers for 5 per cent broken rice dropped to $400-$430 a tonne this week, free-on-board basis, from $430-$435 last on Wednesday. The 25 per cent broken grain also fell to $375-$380 a tonne, from $405-$420 a week ago. Bulog said last month that Southeast Asia’s biggest economy would not import rice in 2012 and instead maintain high stock levels by buying four million tonnes of the staple grain from domestic sellers.
“It seems Bulog can’t do their main task of collecting rice from (local) farmers,” said one Indonesia-based trader. “When the price goes up, Bulog thinks import action is the only option to control prices.”
The agency’s stockpiles of the staple grain are maintained at between 1.5 million and 2 million tonnes, and the country’s agriculture minister has said rice imports should only be used for emergency needs. Bulog can distribute its stocks if prices rise or supplies fall short.
Wirjawan said the country needed to cut consumption, which he said was double that of Thailand on a per capita basis, as well as to boost production.
Monthly rice consumption is 2.7 million tonnes and rising, though the country has a goal to be self-sufficient in rice by 2014.