Indonesian quotas could hit wheat imports

08 Jul, 2014 02:00 AM
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THE Australian Export Grains Innovation Centre (AEGIC) has warned changes to Indonesian government regulation could decrease the amount of wheat Australian growers export to the fourth most populated country in the world.

WA growers and grain exporters have enjoyed the perks of Indonesia's geographical proximity and reliable buying custom for a number of years now but AEGIC fears tariff rate reductions and the introduction of quotas on wheat flour imports could reduce the potential for Indonesian imports of global wheat by up to 500,000-600,000 tonnes every year.

Reiterating that it was a global figure, AEGIC program leader Roslyn Jettner said the amount was equivalent to 16 per cent of the total 3.7 million tonnes of Australian wheat imported by Indonesia last year.

AEGIC prefaced the news by saying during 2012 Indonesia imposed a temporary 20pc duty on wheat flour imports to safeguard its milling industry from the alleged dumping of Turkish flour.

That duty was afterwards reduced to 5pc.

AEGIC also said recently the Indonesian Government imposed a quota on wheat flour imports of 441,141t until December this year, as well as a restriction of shipments to seven specific Indonesian ports.

Ms Jettner said the move had the potential to impact on the latest forecast of a 6pc increase in wheat imports for 2014 to an estimated 7.1mt, as expected by the Indonesian Flour Millers Associations (APTINDO) in April.

Ms Jettner also said the reduced tariff rate could have flow-on effects with other South East Asian markets like the Philippines, which had also investigated the alleged dumping of Turkish flour.

But the head of CBH's marketing and trading arm Jason Craig said there wasn't any need for immediate grower or exporter concern.

He said any increase in the direct imports of wheat flour into Indonesia from countries that weren't currently buying Australian wheat had the potential to have some impact on the total wheat exports from Australia to Indonesia.

But there were a range of other factors that also influenced the purchase decision including economic factors, the price of Australian wheat when compared to wheat from other origins and the price of comparable foods like rice.

"Indonesia is a very large consumer of Australian wheat, the demand for Australian wheat in the Indonesian market is likely to continue to increase with Indonesia's growing population," Mr Craig said.

Grain Industry Association of WA (GIWA) vice president and Wheat Council chairman Sean Powell, Quairading, also thought along the same lines.

He said 400,000-odd tonnes of flour converted to about 600,000t of grain and if Indonesia filled its entire quota it could result in up to 600,000t of wheat being knocked back.

"It won't all be taken out of WA's current export tonnes," Mr Powell said.

"WA is the major wheat exporter into Indonesia so the news could impact our growers to a degree but the quoted tonne figure is across all wheat tonnes – minimising the potential impact.

"The other consideration is that Indonesia would have to take up the full quota which isn't entirely likely."

Mr Powell said the overall impact to the WA wheat industry was really unknown but unlikely to be too significant.

APTINDO statistics showed Indonesian flour imports reached an all-time high of 775,534t during 2010 and were predominantly from Turkey.

Last year total flour import volume was reduced to 205,447t with India becoming a major supplier along with Turkey and Sri Lanka.

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READER COMMENTS

Deregul8
8/07/2014 7:06:18 AM, on Farm Weekly

Storm in a teacup. Government, no matter how smart it thinks it is, can't put a tariff on your daily calorific needs. AEGIC is another waste of growers' money. Trying to do a role which the free market does for free.
Ross B. Taylor
9/07/2014 9:38:06 AM, on Farm Weekly

WA wheat exporters, through groups such as CBH, have been very 'smart' in developing deep 'partnerships' with our friends in Indonesia that has seen the vertical integration of the wheat business to include growing, shipping, milling and then, and importantly, adding value in Indonesia of not only wheat, but other grains such as lupins. This industry should be a role model as to how to develop long term export based links in the Asian Century. My institute remains very comfortable that the relationship in this area between Indonesia and Wa in particular, will continue to be very strong.
Jock Munro
9/07/2014 11:31:17 AM, on The Land

The free market is not working too well, deregular. Our customers are telling us that our wheat is cheaper, inconsistent in quality and no one is providing expertise. Why is wheat cheaper yet our costs in the East are higher under 'çompetition' dereg8?
Deregul8
9/07/2014 11:43:52 AM, on Farm Weekly

CBH has been very smart to 'lock' growers into 'export' through what is by world standards a very 'expensive' storage and handling cost structure. For example, it ignored a malthouse 'over the fence' at MGC and instead elected to build a new one in Vietnam. The first option allowed elimination of port costs for malt barley growers. If growers are ever to see relief in the form of lower S+H costs it will come from competition. Lower costs mean you don't need as much for your grain to be profitable. Once again, AEGIC is a non necessary cost to growers, co-funded by compulsory GRDC levies.
Philip Downie
9/07/2014 12:56:03 PM, on The Land

Actually we had very good relations with Indonesia from when they first started milling our wheat. Then it fell in a hole which we are still trying to get out of and currently not succeeding very well, we are fragmented and full of ideas that were dismissed years ago but we go back to the old chestnuts to try and make them new again. Doesn't work, waste of time and effort.
Deregul8
10/07/2014 3:36:05 AM, on Farm Weekly

Meanwhile China's COFCO pushes ahead with plans to build a flour mill in CBH heartland of Geraldton proving that there are plenty of opportunities here in WA. the day CBH began investing abroad it started rolling the dice on the competition never arriving and whiteanting its balance sheet which has seen its best days. Unfortunately this means growers equity is being diluted with debt and devalued by loss of volume to the competition. Sadly most growers still fall for the old CBH PR machine. Ask yourself when was the last time CBH looked at value adding IN WA?
Jock Munro
10/07/2014 6:11:33 AM, on The Land

Come over to the East, Deregular! You must work for the merchants and are hoping that if you repeat something often enough people will start believing you.
Deregul8
10/07/2014 9:02:15 AM, on Farm Weekly

A lifetime in agripolitics and all you have to show for it is the ability to throw a few name derivations around. You know you have an ag soc beat when they go the man like a 2 year would. Stick to the facts
Jock Munro
10/07/2014 10:10:03 AM, on The Land

Tell us your real name then deregular and please explain how competition has lowered our wheat value but increased our logistics costs.
LT
10/07/2014 10:38:53 AM, on The Land

Deregul8, based on your stance on GM canola, you clearly only support the production of bulk raw materials, and then just assume that anything which farmers feel works good for them, must be consumed by our customers. Best with such attitudes, that you stay out of lecturing us on market development for wheat or any other crop thanks. CBH seems to be in a class above you and have long been good at their job. You fail to be at all objective about them, despite their obvious long term success. And no proof of your outlandish claim about them being very expensive by world standards.

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It was a disappointing saga that Terry Redman could have solved but he did not want to.
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Why do they forget the small producers they are the backbone of the industry. What. Did this
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Good these guys will be able to help the farmers they are treating like second class peasants.