Boston, MA -- (ReleaseWire) -- 09/05/2012 -- BMI View: We believe that the Indonesian government's plan to be self sufficient in rice is achievable in coming years. Negotiations between the Indonesian government and Papuan officials have led to an agreement to allow 200,000 hectares of land in the Merauke region to be developed into the Merauke Integrated Food and Energy Estate. Most the land will be used to grow rice two times a year.
- Coffee production growth to 2015/16: -9.4% to 8.5mn bags owing to base effects. Coupled with our long-term bullish outlook for prices, another long-term production driver of the coffee sector will be domestic consumption. This is likely to increase over our forecast period as a coffee culture grows in Indonesia's cities on the back of increased urbanisation.
- Poultry consumption growth to 2016: 13.3% to 1.7mn tonnes. The increasing ability of Indonesians to afford meat as part of their daily diet will be a main driver of poultry demand.
- Palm oil consumption growth to 2016: 39.4% to 9.2mn tonnes. This will mainly be driven by domestic food-use demand, which accounted for more than 70% of total local palm oil consumed in 2011. We believe that industrial demand will lag growth in the food-use sector largely due to a lack of government subsidy support for biofuels and state-owned oil company Pertamina's uncompetitive purchasing prices. Industrial use (for biodiesel and oleochemicals) of palm oil currently accounts for about 20% of total domestic consumption.
- 2012 real GDP growth: 5.4% (down from 6.5% in 2011; forecast to average 6.3% to 2016).
- 2012 consumer price index: 4.8% year-on-year (y-o-y) average in 2012 (down from 5.4% in 2011; forecast to average 5.2% to 2016)
- 2012 central bank policy rate: 6.0% in 2012 (same as in 2011; forecast to average 6.7% in 2016)
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Key Industry Developments
Animal feed companies PT Japfa Comfeed Indonesia Tbk and PT Multibreeder Adirama Indonesia Tbk have agreed to a merger, speeding up the consolidation occurring in the industry. These firms are two of the top players in the growing Indonesian animal feed industry, and we believe the merger will enable more resources to be shared and lead to stronger supplier power and higher market share. Despite higher production, cocoa bean exports from Indonesia have been slow in the first quarter of 2012.
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