JAKARTA, April 29 (Reuters) - Indonesian poultry prices are set to climb as the government curbs corn imports in a drive for greater self-sufficiency in food production, a policy that has already stoked concern about inflation in the price of rice, beef and other staples.
The cost of home-grown chicken has already risen around 6 percent from a year ago to nearly 60,000 rupiah ($5) per kg, according to Trade Ministry data. Overall food prices were also 6 percent higher in March than a year before, according to official data.
Indonesian President Joko Widodo, in power since October, is aggressively pursuing self-sufficiency targets in various foodstuffs and curbs on imports have been blamed for sugar refinery closures as well as higher prices for food.
Southeast Asia’s biggest economy will import 3 million tonnes of corn this year compared with 3.1 million last year, Desianto Budi Utomo, secretary general of the Indonesian Feedmills Association (GPMT), told Reuters.
“We should be importing 3.5 million but, considering the policy of the government, we are not supposed to import more than last year,” Utomo said. “There is a big push from the government not to import like last year. Local corn (prices) will increase. The price for feed mills will increase.”
Indonesian corn demand has grown in recent years due to rising wealth and higher demand for poultry.
In addition to domestic corn, Indonesia imports mostly from Brazil and Argentina. It imposes a 5 percent import tariff and requires importers to apply to the government for a permit.
The poultry sector has enjoyed rapid investment and is now worth more than $4 billion a year, a figure likely to grow as the economy expands and the world’s biggest Muslim population eats more meat.
Most of Indonesia’s 82 feed mills are running at about 75-80 percent of capacity, Utomo said. They can handle 21.5 million tonnes a year, which will rise by 2.5 million tonnes this year.
The government hopes higher domestic corn output can fill the gap left by lower imports. The Agriculture Ministry estimates production will rise 6 percent this year to 20.33 million tonnes.
But government commodity production figures have little credibility with industry.
The U.S. Department of Agriculture sees record Indonesian corn production in 2014/15 but its forecast is just 9.4 million tonnes, up from 9.1 million a year before according to its data. The GPMT broadly agrees with those figures.
To encourage production, the new government has committed to building more dams, modernising irrigation systems, increasing planting areas for staple foods and providing easier access to credit for smallholder farmers.
Poultry feed firms with an Indonesian footprint include PT Japfa Comfeed Indonesia, PT Malindo Feedmill and PT Charoen Pokphand Indonesia.
Top commodities trader Cargill is considering building a corn milling facility in Indonesia, Jean-Louis Guillou, CEO for Cargill Indonesia, said in an email. But for that investment to be viable, it would want the option to import corn if domestic supplies were lacking in quality or quantity.
Food demand is likely to rise ahead of Ramadan in June and any rise in prices could deal another blow to Widodo’s popularity.
But government policy will not change, said Djatmiko Bris Witjaksono, head of the centre for trade policy harmonisation at the Trade Ministry.
“This government has put food security top, as a national issue,” Witjaksono said. “We want to increase self-sufficiency. The public has the same line of thinking, and industry also.” ($1 = 12,970.0000 rupiah) (Additional reporting by Gayatri Suroyo; Editing by Alan Raybould)