Economic growth and greater convenience are behind the rise of this more economical and nutritious alternative to rice, Indonesia’s staple, which is in turn set to drive imports and investment.
Given the current consumption rate, Indonesia could import more than 10m tonnes per year over the coming five years, placing it among the top three wheat importers in the world.
"Indonesia is traditionally a rice-consuming country," explained Rabobank analyst Pawan Kumar. "However, in the last two decades, the importance of wheat as an important staple has grown, driven by a rising middle-class, the westernisation of diets, economic growth and the desire for convenience.
“At the same time, the country has struggled to maintain rice self-sufficiency due to constraints on acreage expansion, lack of quality land and lower yield, especially among subsistence farmers".
According to Rabobank, Indonesian wheat consumption increased by 5% per year between 2002/03 and 2012/13, making it one of the highest-growth countries for consumption. Overall consumption grew by 70%, rising from 3.8m tonnes to 6.6m tonnes over the same period.
Supplies from Australia
Indonesia is unable to produce wheat domestically, as the hot and humid climate is unfavourable for cultivation. It therefore relies heavily on imports from Australia, Canada and the US. Imports have shot up more than threefold in the last 20 years, reaching 7.1m tonnes in 2012/13 and making it the third-largest importer for the year.
Wheat provides an economical and nutritious alternative to rice, and the growth in consumption of noodles and bakery products and the expansion of food service chains will underpin import growth.
With a growth rate of 6% per annum over the last 10 years, a favourable projected economic growth, and a young population, Rabobank predicts that Indonesia will import more than 10m tonnes in the next five years. This would place the country on par with the current leading global importer, Egypt.
The proximity of Australia provides Indonesia with a large and sustainable supply of wheat. The Indonesian government has been supportive of wheat industry growth and the wheat milling industry. With such positive factors, Indonesia is likely to become a major wheat consumer and importer over the next decade, providing ample opportunities for foreign investments in the wheat supply chain, Rabobank believes.