Feb 17 2023
Indonesia's state-owned livestock farming company, Berdikari, has requested the Indonesian Feedmills Association GPMT to submit the required imported feed wheat demand from its members amid rising raw material costs in the form of domestic corn and imported soybean meal prices.
Berdikari has sought Indonesian feed millers' imported feed wheat demand to be submitted by Feb. 17, where the latter will be obliged to purchase the required feed wheat at a price of Rupiah 5,775/kg (38 cents/kg), in a letter dated Feb. 16 seen by S&P Global Commodity Insights. Berdikari intends to buy Australian feed wheat with Standard Feed Wheat specifications for May-June shipments to Cigading and Surabaya if they can gather enough interest.
Feed wheat could be imported through Berdikari, according to Indonesian buyers.
But feed millers believe that feed wheat at that price, before adding the associated cost, continues to remain expensive while noting that the cargo will only arrive from June 2023 onward, whereas the outlook on domestic corn prices remains unclear.
A similar request was submitted to GPMT Feb. 10, where Berdikari requested members to consolidate demand to import milling grade wheat from Ukraine, Bulgaria or Australia with an obligation to purchase between Rupiah 6,200-6,575/kg. The request was unable to garner sufficient interest, according to sources.
Platts assessed Australian Standard White Wheat FOB Australia at $315/mt Feb. 16, according to S&P Global Commodity Insights data.
Domestic corn prices have been soaring in the past weeks. Domestic corn was heard to be offered at Rupiah 5,700/kg Feb. 17, gaining more than 10% since Jan. 30 when it was offered at Rupiah 5,150/kg, S&P Global's records show.
These prices pale in comparison against prices between September-December 2022, when local corn prices reached a low of Rupiah 4,200-4,300/kg and an export program was started to support the rapidly falling corn prices. As a result, more than 200,000 mt of Indonesian corn was exported to neighboring destination markets of Vietnam, the Philippines and Malaysia, S&P Global previously reported.
"Corn prices started picking up as farmers felt no incentives to plant corn at the low prices and switched a large amount of planting area to cassava crops which is easier and cheaper to plant as they need less fertilizers. Higher corn price is also a result from higher input costs for seeds and fertilizers, and some unfavorable weather in the past weeks during harvest," a trader said.
Some of the feed millers had anticipated a spike in domestic corn prices. But in February 2022, carried-over feed wheat stock from 2021 made the high corn prices manageable.
High corn prices add to the already-high cost of feed production on the back of rising soybean meal prices imported from South America. However, weaker futures and a weaker undertone on soybean meal premiums over the week ended Feb. 17 provided some relief for the buyers. CFR Indonesia (2 ports) soybean meal indications were heard in the low- to mid-$60s/st over May (K) and July (N) futures for April-July shipments on Feb. 17.
"Corn and soybean meal are both very expensive now, it is going to squeeze poultry farmers. Some of them have already started reducing their feed rations to save cost," an Indonesian trader said.
Platts assessed Corn CFR North East Asia at $338/mt Feb. 16, according to S&P Global data.