Indonesia to expand corn, sorghum cultivation by 2024 to bolster feed grain security

Indonesia's plan to increase sorghum and corn cultivation over the next two years was expected to increase feed grain availability for domestic livestock farming, but the impact on prices would hinge on the extent on the increase and the yield, market sources said Aug. 8.

Coordinating Minister for Economics Affairs Airlangga Hartarto told a media briefing Aug. 4 that the government plans to prepare an additional 115,000 hectares of land in 2023 and another 154,000 hectares in 2024 for sorghum production.

Indonesia currently produces about 15,000 mt/year of sorghum across 4,300 hectares, he said. S&P Global Commodity Insights calculates that the additional cultivation could boost production to more than 900,000 mt/year based on the current yield. The sorghum could be used for animal feed or bioethanol production.

Airlangga days earlier had announced the government would increase corn production in Papua, West Papua and North Maluku and start a program to distribute higher quality seeds to increase corn production yields to up to 13 mt/hectare.

"The corn yield in Indonesia is about 5 to 6 [mt/hectare], it's very low compared to yield in the US," an Indonesia-based source said.

The US expects to produce 177 bushels of corn per acre this season, or about 11.9 mt/hectare, the US Department of Agriculture said in its World Agricultural Supply and Demand Estimates report for July.

Indonesia's current corn production was estimated at 13 million mt/year, almost 90% of it in Java, Sumatra and Sulawesi, by the USDA. Indonesia does not allow feed grade corn imports or allow feed mills to directly import feed wheat.

"It is still too early to determine the timeline and success [for the corn program]. I don't think many farmers or feed millers know about it yet," a poultry producer in Indonesia said.

A source who procures raw material for feed millers in Indonesia said: "Historically, Indonesian corn prices were higher than the global prices. Since the start of the Ukraine invasion, domestic prices have started increasing to match the level of higher international prices."

Domestic corn prices were currently around Rupiah 4,800-5,000/kg, or $320-$333/mt delivered to feed mills in Jakarta, according to market sources.

South American corn for October-December shipments to Vietnam were heard at $330-$336/mt CFR Aug. 8.

Ukraine war impact

Indonesia's plans come after Russia's invasion of Ukraine halted grains exports from the Black Sea region for more than five months until the corn-carrying bulk vessel Razoni left Odesa Aug. 1. The suspension left major feed-producing countries exposed to high feed grain prices amid tight global supply, prompting policy changes in several countries to increase supply and reduce the price impact in downstream sectors.

China, the world's biggest corn importer, has entered discussions with Brazil to bring forward its timeline for Brazilian corn imports as a move toward supply diversification, S&P Global Commodity Insights reported earlier. Brazil is expecting a bumper crop of more than 115 million mt of corn for its current marketing year 2021-22, up from 87 million mt in MY 2020-21.

The Philippines has reduced corn import tariffs from 35% to 5% for imports with minimum access volume quotas and to 15% from 50% for imports outside the quota, S&P Global reported earlier.