* Tempe, tofu makers strike, demand lower soybean prices
* Soybean prices have risen in top supplier the United States
* Indonesian govt soybean policy creates uncertainty for importers
By Michael Taylor and Yayat Supriatna
JAKARTA, Sept 10 A falling rupiah, rising international soybean prices and a backfiring policy on food self-sufficiency have combined to drive up the cost of one of Indonesia's favourite staple foods and sparked artisan food makers to down tools in protest.
Indonesia's soybean imports, which account for 70 to 80 percent of its total demand, have slowed due to changes in government policy that have left importers unsure about where they stand and drained stock levels.
Inventories of the oilseed in the Southeast Asian country are now at multi-year lows of 315,000 tonnes, traders and government officials say, with domestic prices at 10,665 rupiah ($0.96) per kg, compared with 9,285 rupiah in January.
"Ironically, ample opportunities exist to achieve the objective of increased domestic production by improving underlying conditions - such as infrastructure, land titling procedures and accessible financial services," said Kevin O'Rourke, an independent risk analyst.
"Instead, policymakers emphasize protection and price controls, which tend to backfire and exacerbate price spikes."
Global prices are trading near 11-month highs due to concerns over dry weather in top supplier the United States, making imports more expensive for Indonesians who use the oilseed to make soybean-based staple foods tofu and tempe.
Members of the Indonesian Joint Cooperatives of Tempe Tofu Makers went on strike this week to protest against rising soybean prices, but the government's efforts to tackle this have created greater uncertainty and curbed imports into Indonesia.
Policy changes over the past six months have included forcing traders to buy domestic supplies and imposing a floor and ceiling price for buyers and sellers.
The country's top soybean importer however says procuring domestic supplies is difficult due to logistics and because producers are small-scale farmers.
While the government has removed import quotas, it maintains a controversial system of issuing import permits, a process traders say is too slow to react to demand spikes.
"I thought we were out of the woods but still we are not," said one senior soybean industry official, who did not want to be named due to the sensitive nature of the subject.
"The policy making is confusing."
As a result, Indonesia's soybean imports have lagged last year's pace. Through August, it had imported 850,000 tonnes, less than half the 1.9 million tonnes shipped during the full year in 2012, according to trade ministry officials.
Overseas purchases are likely to continue lagging last year's levels as the government has rejected a plan to ditch its import tariff for soybeans, even though the proposal was backed by the trade ministry. A recent fierce selloff in the rupiah will also make imports dearer.
If the slower shipments continue, imports will fall short of previous industry and government forecasts for a volume of around 1.9 million tonnes for the full year, similar to 2012.
As a nation of 240 million people where about half the population lives on less than $2 per day, Indonesia has scrapped many of its ambitious 2014 self-sufficiency targets for staple foods this year.
Although Indonesian soybean imports are small compared to the world's top buyer China, demand is likely to climb as wealth and population levels increase and eating habits change.
Major soybean importers in Indonesia include Sungai Budi Group, Cargill Inc and FKS Multi Agro Tbk.
Last week, Trade Minister Gita Wirjawan said the country was seeking soybean suppliers in Paraguay, Argentina and Brazil.
Other trade ministry officials said that rules for importers to buy local soybeans had been eased and that only a commitment letter to buy domestic soybeans, and not a purchasing contract, was now needed to obtain an import permit.