Esther Samboh and Linda Yulisman, The Jakarta Post, Jakarta | Headlines | Wed, July 25 2012,
Record soybean prices in the world’s largest soybean exporter, the drought-stricken United States, is pushing up volatile food prices in Indonesia, a major consumer of soybean cakes (tempeh), tofu, cooking oil and soybean milk.
While it is likely volatile food prices will rise, Indonesia’s overall inflation will probably remain stable because soybeans and derivative products only account for about 8 percent of the consumer prices index (CPI), according to Bank Indonesia’s (BI) assessment.
The overall inflation basket is comprised of core inflation, volatile foods and government-controlled prices like subsidized rice and fuel. Volatile food prices, such as rice, chili, onions and others, account for only about 16 percent of the overall inflation basket.
“The general implication, I am not too concerned about. Core inflation is well on track. Volatile food prices are the ones that we need to pay close attention to, because of Ramadhan and price fluctuations from the drought in the US,” BI spokesman Difi A. Johansyah told a press briefing on Tuesday, in which he described the soybean price surge as “temporary”.
The worst drought in more than half a decade in the US has hurt corn and soybean crops, and water shortages in other leading soybean growers such as Brazil and Argentina have exacerbated global shipment and production problems. But agriculture experts and economists estimate that the conditions will return to normal soon after the dry season ends in September.
Indonesia imports 60 percent of its soybean needs mostly from the US, and the drought has spiked imported soybean prices in the domestic market to Rp 8,000 (84 US cents) per kilogram, from about Rp 5,000 early this year, up almost 50 percent so far in 2012.
Across Indonesia, tofu and tempeh producers are reported to have been cutting back on staff due to higher costs. Producers in Bogor and many other cities in Indonesia plan to stop production from July 25 to 27, demanding that the government controls fluctuating soybean prices.
Deputy Trade Minister Bayu Krisnamurthi said his ministry had proposed scrapping the current 5 percent import duty on soybeans, hoping to lower retail prices. The Finance Ministry is responsible for setting duties charged on exports and imports.
“That would be a temporary solution,” Bayu said. The permanent solution was to increase the country’s production capacity, government officials said.
Agriculture Minister Suswono said that Indonesia needed an additional 2 million hectares of productive land to make the country self-sufficient in key commodities, of which 500,000 hectares should be allocated for soybean cultivation.
“With enough land for our farmers, our dependency on soy and other imports could be drastically reduced,” he added. “Our soybean once had its heyday, but with the introduction of imports, our farmers have lost out.”
Imported soybeans cost less than those locally produced which sell for about Rp 9,000 per kilogram.
“If tempeh and tofu consumption is not substituted, it will be difficult for us,” Trade Minister Gita Wirjawan said.
“If this weather persists, the impact will be not only be on supply, but also on prices.”
Record soybean prices in the world’s largest soybean exporter, the drought-stricken United States, is pushing up volatile food prices in Indonesia, a major consumer of soybean cakes (tempeh), tofu, cooking oil and soybean milk.
While it is likely volatile food prices will rise, Indonesia’s overall inflation will probably remain stable because soybeans and derivative products only account for about 8 percent of the consumer prices index (CPI), according to Bank Indonesia’s (BI) assessment.
The overall inflation basket is comprised of core inflation, volatile foods and government-controlled prices like subsidized rice and fuel. Volatile food prices, such as rice, chili, onions and others, account for only about 16 percent of the overall inflation basket.
“The general implication, I am not too concerned about. Core inflation is well on track. Volatile food prices are the ones that we need to pay close attention to, because of Ramadhan and price fluctuations from the drought in the US,” BI spokesman Difi A. Johansyah told a press briefing on Tuesday, in which he described the soybean price surge as “temporary”.
The worst drought in more than half a decade in the US has hurt corn and soybean crops, and water shortages in other leading soybean growers such as Brazil and Argentina have exacerbated global shipment and production problems. But agriculture experts and economists estimate that the conditions will return to normal soon after the dry season ends in September.
Indonesia imports 60 percent of its soybean needs mostly from the US, and the drought has spiked imported soybean prices in the domestic market to Rp 8,000 (84 US cents) per kilogram, from about Rp 5,000 early this year, up almost 50 percent so far in 2012.
Across Indonesia, tofu and tempeh producers are reported to have been cutting back on staff due to higher costs. Producers in Bogor and many other cities in Indonesia plan to stop production from July 25 to 27, demanding that the government controls fluctuating soybean prices.
Deputy Trade Minister Bayu Krisnamurthi said his ministry had proposed scrapping the current 5 percent import duty on soybeans, hoping to lower retail prices. The Finance Ministry is responsible for setting duties charged on exports and imports.
“That would be a temporary solution,” Bayu said. The permanent solution was to increase the country’s production capacity, government officials said.
Agriculture Minister Suswono said that Indonesia needed an additional 2 million hectares of productive land to make the country self-sufficient in key commodities, of which 500,000 hectares should be allocated for soybean cultivation.
“With enough land for our farmers, our dependency on soy and other imports could be drastically reduced,” he added. “Our soybean once had its heyday, but with the introduction of imports, our farmers have lost out.”
Imported soybeans cost less than those locally produced which sell for about Rp 9,000 per kilogram.
“If tempeh and tofu consumption is not substituted, it will be difficult for us,” Trade Minister Gita Wirjawan said.
“If this weather persists, the impact will be not only be on supply, but also on prices.”
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