The U.S. Department of Agriculture’s (USDA) Foreign Agricultural Service (FAS) Post in Jakarta issued its latest Oilseeds and Products Update for Indonesia in late July. The Post noted in the report that lower soybean prices in recent months have helped to bolster better demand for imports. The U.S. has been able to capture the archipelago’s better demand for full fat soybeans in the feed industry as changing trade flows have made the U.S. more competitive when compared with competition from South America. The following chart shows that Indonesia’s growing feed industry has resulted in generally increasing demand for soybeans. USDA expects that this trend will continue into the next marketing year with the agency’s official July projection of 2.95 million tonnes versus the Post’s slightly less optimistic import forecast of 2.75 million tonnes.

According to the Post’s Grain and Feed update issued in mid July, Indonesia’s government has continued to halt private companies’ importation of corn for feed needs, although soaring domestic corn prices did briefly spur imports by the government-owned agency BULOG in late-2018, to help support domestic growers. Farmers are expected to have expanded corn plantings at the expense of rice following improved economic relationships; however, the production outlook is less optimistic. Indonesia’s corn farmers are facing advancing Fall Armyworm populations that are expected to limit corn output. In the Grain and Feed update, the Post cited industry sources which suggested that 90 percent of the corn area in the Lampung province had already been impacted by the pest while corn planted in North Sumatera was expected to be able to rebound from the Armyworm damage assessed in June, and plants were expected to be harvested with a significant yield reduction of between 10 and 25 percent. The Post forecast in mid July that Indonesian corn output in 2018/19 would decline to 12.0 million tonnes, compared with USDA’s official estimate of 12.6 million. The Post also sees 2019/20 output at 12.7 million tonnes compared with USDA’s official World Agriculture Supply and Demand Estimate (WASDE) forecast in July of 13.3 million tonnes. It will be particularly interesting to see whether official corn production forecasts continue to deteriorate, as this would likely leave a void in Indonesia’s domestic feed industry.

Indonesia’s feed industry has been increasing the levels of full fat soybeans combined with feed wheat in livestock rations since domestic corn prices have surged higher in recent years. According to the Mid-July Grain and Feed Update, corn’s share of feed rations have been slashed by 20 percent since 2016 to 30 to 40 percent as high prices have made alternative feedstuffs more attractive. The Post projected that Indonesian feed millers will have imported 2.1 million tonnes of feed wheat in 2018/19, and that number is expected to decrease in 2019/20 conversely with the expected rebound in corn output. Should the projected rebound in corn output fail to be realized, then Indonesian feed millers would likely have to return to the import markets in order to match corn characteristics with feed wheat and full fat soybeans. Ample U.S. soybean supplies are expected to keep the U.S. competitive with world soybean prices in the marketing year ahead.