New Market Research Report: Indonesia Agribusiness Report Q3 2012

Fast Market Research recommends "Indonesia Agribusiness Report Q3 2012" from Business Monitor International, now available
By: Fast Market Research, Inc.
 
July 5, 2012 - PRLog -- BMI View: Overall, we hold an optimistic outlook towards the country's agriculture sector and see significant growth opportunities in sub-sectors such as livestock, palm oil and cocoa. However, while we believe that the government's goal of self-sufficiency in rice by 2015 is attainable, we are less confident about other commodities such as sugar and corn. We also highlight that the country's aim to become the second largest coffee producer in the world by 2015 is unrealistic. Much of our scepticism is owing to the lack 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 and cocoa) will warrant more public and private investment in order for the raw inputs industry to keep pace with downstream industries.

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Key Forecasts

Cocoa production growth to 2015/16: 53.5% to 650,000 tonnes. We believe that private investment in the grinding sector will be the major growth driver of the industry, even in the midst of choppy production. However, in order to fully capitalise on the country's expanding grinding capacity, the government will also have to simultaneously grow and develop production facilities so as to avoid an undesirable situation of grinding sector undercapacity.

* Rice consumption growth to 2016: 12.0% to 43.7mn tonnes. Demand levels are expected to increase on the back of population growth, as per capita consumption is expected to fall. We note that the campaign launched in 2009 aimed at lowering domestic rice consumption has largely been unsuccessful so far; the country imported a record 1.33mn tonnes of rice in 2010.
* Palm oil production growth to 2015/16: 25.6% to 29.6mn tonnes. The key drivers of this growth are physical expansion of plantation area and increased investment into downstream activities such as biodiesel and oleochemical production.
* 2012 real GDP growth: 5.8% (down from 5.9% in 2011; forecast to average 6.2% to 2016).
* 2012 consumer price index: 4.8% year-on-year average in 2012 (down from 5.4% in 2011)
* 2012 central bank policy rate: 5.75% in 2012 (down from 6.0% in 2011)

Key Industry Developments

In March, the agricultural technology faculty of Bogor Agriculture University announced that it had developed a new staple food similar to rice. This new food is a mix of many sources of carbohydrates, such as corn, tubers and buckwheat. This is in line with the government's drive to reduce domestic rice consumption and substitute it with other carbohydrates. However, given the deeply entrenched custom of rice consumption in the country, we do not think this development will be significant any time soon. Following the new palm oil tax regime in Indonesia, which resulted in tax on refined exports falling from 15% to 7%, Golden Agri Resources, Sime Darby, KL Kepong and IOI Corporation have all announced plans to increase refining capacities in the country. According to reports, Singapore-based palm oil company Golden Agri Resources now plans to nearly double its Indonesian refining capacity to 2.6mn tonnes over the next two years. The third largest palm oil firm in Malaysia, KL Kepong, plans to build three refineries in Indonesia to offset the growing negative margins of its Malaysian refining plants. IOI Corporation, although a relatively smaller player in Indonesia, has also announced plans to build its first refinery in Indonesia once it is able to generate 'enough feedstock from its plantations in Borneo island in the next three years'.

BMI remains sceptical about Indonesia attaining its goal of becoming the second largest coffee producer in the world by 2015. Exports in March fell for the third consecutive month, to 5,070 metric tonnes from 5,358 tonnes in February, reinforcing our pessimistic view on Indonesian coffee exports. Indonesia Coffee Exporters and Industries Association President Suyanto Hussein has said that predicting export volumes for 2012 is 'difficult' owing to unpredictable weather conditions. That said, we are forecasting coffee exports in 2012 to increase to 400,000 tonnes, from 350,000 in 2011 (though this is still lower than 2010's export volumes of 450,000 tonnes).

About Business Monitor International

Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets.  BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports.  Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports.
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Source:Fast Market Research, Inc.
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Tags:Rice, Indonesian, Oil
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