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Good Times for Feed Producers

by 5m Editor
16 October 2008, at 7:31a.m.

INDONESIA - Poultry feed producers in Indonesia, the world's fourth most populous country, are benefiting from the global financial crisis as prices of their ingredients plunge, the industry association chairman said.

Bloomberg reports that the corn price has slumped 52 percent from its record $7.9925 a bushel June 27 and soybean meal tumbled 45 percent from its peak July 3 as global credit markets froze, depriving companies of financing, slowing economic growth and cutting commodity demand.

"We're wondering what will happen in the longer term," said Budiarto Soebijanto of the Indonesian Feedmill Association. "What worries us is if the crisis hurts the banks as there will be a liquidity problem and it will be hard for us to get loans for expansion and letters of credit to finance trade."

Indonesia has joined countries in efforts to prevent the global financial crisis that has toppled US and European banks from spreading. The government of the $433 billion economy will allow commercial banks to use loans as collateral, cut reserve ratios and ease accounting rules in a bid to ease credit access.

The global loan crisis will not affect domestic feed demand as long as the economy stays strong and stable, Mr Soebijanto said.

Poultry consumption will be sustained as political parties boost spending on food as part of their campaigns before the presidential and parliamentary elections next year, he said.

Impacts on Poultry

"Chicken and eggs are considered the cheapest source of protein, so demand is out there," he said. The price slump for corn and soybean meal will help us cut costs, keep prices down, and increase demand, he said.

The biggest producers are PT Charoen Pokphand Indonesia, PT Japfa Comfeed Indonesia and PT Cheil Samsung Indonesia.

Soybean meal for delivery in December and January to the port of Jakarta has dropped to $360 a metric ton including freight costs in the past few days from $460 a ton, he said. Corn for the same delivery fell to around $230 a ton from $330.

The country's feed output will climb to 8.5 million tons next year from 8.1 million tons this year and 7.6 million tons in 2007, he said. That compares with an installed capacity of 13 million tons. Corn imports will fall this year to 300,000 tons from 650,000 tons in 2007 and feed makers may buy mostly from the domestic market next year, he said.

Soybean Meal

Indonesia aims to be self-sufficient in corn in 2008, after output gained 14 percent in 2007 and 12 percent this year on greater area and productivity, Agriculture Minister Anton Apriyantono said on 13 October.

Soybean meal imports will climb to 2.4 million tons this year from 2.3 million tons in 2007 and may increase as much as 7 percent in 2009 if economic growth is sustained.

"For next year, under our less optimistic scenario, we assume imports will be flat," he said. If the economy is good, sustaining incomes, and food prices drop, "I could see an increase of 5 to 7 percent in imports," he told Bloomberg.

5m Editor