Sating Indonesian Sweet Tooth Means Record Raw Sugar Imports
The refiners association represents 11 firms that process only imported raw sugar for industrial use in food and drinks.
(Bloomberg) -- Refineries in Indonesia, the world’s biggest sugar importer, are set to boost overseas purchases of the raw variety next year to a record.
Processors will probably buy 3.3 million tons of raw sugar from abroad, up from 2.6 million tons this year, according to Bernardi Dharmawan, chairman of the Indonesia Sugar Refiners Association. Still, that doesn’t signal much of a change in refined production, which will stay at around 3 million tons, he said. That’s because output this year was supported by raw sugar stockpiles carried over from last year.
The refiners association represents 11 firms that process only imported raw sugar for industrial use in food and drinks. Sweetener for household use is supplied by other mills that crush domestic cane and make additional imports. Altogether, the country will import 4.5 million tons in 2019-20, data from the U.S. Department of Agriculture show.
Southeast Asia’s largest economy has boosted food consumption in the past decade as rising affluence changes diets and lifestyles. Indonesia is now the world’s second-largest importer of wheat and biggest consumer of palm oil, part of which is used in an ambitious biodiesel program.
Sugar demand from food and drink manufacturers is stable, Dharmawan said in Jakarta on Wednesday. “We’re trying to be more realistic. We cannot be naive and see growth, when we don’t exactly know the consumption number,” he said. “There’s also a trend to replace refined sugar with artificial sweeteners. We see consumption staying around 3 million tons in 2020.”
The government is gathering information on food industry demand and may decide raw sugar import quotas for 2020 next week, according to Industry Minister Agus Gumiwang Kartasasmita. Allocations for the first half will account for 60% of the total quota to meet rising demand for Eid al-Fitr in May.
Rule Revision
The food and beverage industry is growing by 7%-8% annually, “but what we need to know is how big demand for refined sugar is. We have only an assumption and we need to conduct a thorough survey,” Dharmawan said.
The refiners import most of their raw sugar from Thailand and Australia. They are open to buying supplies from India once the Indonesian government has adjusted the so-called Icumsa level, a standard set by the International Commission for Uniform Methods of Sugar Analysis, Dharmawan said.
The Indonesian Trade Ministry is in the process of revising the rule, which will include lowering the Icumsa level for raw sugar imports to 600 from 1,200, Director General of Foreign Trade Indrasari Wisnu Wardhana, said on Wednesday. The regulation will be issued as soon as possible, he said.
More raw sugar imports by Indonesia could give a fresh fillip to prices. Benchmark futures in New York closed at 13.55 cents a lb on Thursday, the highest level in more than a year.
To contact the reporters on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net;Eko Listiyorini in Jakarta at elistiyorini@bloomberg.net
To contact the editors responsible for this story: Anna Kitanaka at akitanaka@bloomberg.net, James Poole, Atul Prakash
©2019 Bloomberg L.P.