Indonesia May Cut Food Import Duties to Combat Rising Prices

Indonesia may lift import duties on additional food commodities after scrapping its levies on soybean shipments last month, the agriculture minister said, as the country looks to shore up its defences against possible food inflation.

In the United States, corn and soybean futures rose to a record high last month, after the worst drought in 56 years started pushing up prices about 1-1/2 months ago.

The government of Indonesia, the world's fourth most populous nation, scrapped its 5 percent import duty on soybeans for the whole of 2012 after domestic producers of soybean-based staple foods tofu and tempeh threatened to go on strike last month.

The action at the start of the Muslim fasting month of Ramadan aimed to pressure Indonesia to lift the import duty on the oilseed, the bulk of whose supply comes from the world's top exporter, the United States.

"It is a temporary action," Suswono told Reuters at his Jakarta residence, referring to the easing of the soybean import duty. "For other staple food commodities, if the situation or condition enables us to do the same action, we will do it."

He did not specify which commodities could now be considered for a duty cut but last year, the government suspended import duties on rice, soybeans and wheat in its effort to rein in prices.

Indonesia's consumption of soybeans is forecast to rise by as much as 5 percent to about 2.7 million tons this year, with imports accounting for 80 to 90 percent of that.

Indonesia could also expand the job of national procurement agency Bulog in order to build bigger food stockpiles.

Last week, Suswono said soybeans could be added to Bulog's current role of maintaining rice supplies and stocks, but this could now be extended to beef, sugar and corn.

"The idea to revitalize Bulog as a buffer stock agency for certain strategic staple foods is a good idea," Suswono said in the interview.

Bulog could help protect domestic farmers by setting a minimum price, while consumers would benefit from a maximum price ceiling.

"This can be done if we have a strong stockpile and we can use Bulog to play this role," he said. "This mechanism can stimulate farmers to boost their production because government guarantees their output price."

Corn imports for animal feed in the archipelago will fall by more than half this year, the Indonesian Feed Mill Association says, thanks to better weather conditions and greater plantings.

Indonesia will cut its cattle and beef import quota by 30 percent this year from last year's figure of 90,000 tons of beef and 600,000 live cattle, as it strives to become self-sufficient by 2014.

Each year it receives about 500,000 head of Australia's live cattle exports of 800,000 head.

The country has set an ambitious annual target of 10 million tons of rice stocks by 2014, and is looking to cut down on consumption and boost domestic yields and plantations. Indonesia imported 1.9 million tons of rice from Thailand, Vietnam and India last year.

After good weather boosted the domestic crop, Bulog said imports of the staple this year were unlikely, despite a forecast of only 5.5 million tons by the end of the year.

Suswono cast doubt on whether imports would match last year's figure, pointing out that Thailand's intervention scheme late last year, that sought to pay farmers an above-market rate, had made Thai rice more expensive than supplies from Vietnam.

"We still cannot mention how much our rice imports will be this year," he added. "It depends on Bulog's effort to procure local rice. As far as I know this year Bulog's domestic rice procurement is much better than last year."