JAKARTA (Commodity Online): Indonesia has been feeding the increasing demand for agricultural commodities especially in the rapidly expanding emerging markets but its forward march in this sector is beset with some key challenges, according to a report titled Indonesia Food and Agribusiness Outlook by Rabobank.
Indonesia's has witnessed rapid economic growth after the financial crisis thanks to structural reforms of financial sector, resilient domestic spending and srong growth in export commodities. The nation is number one in palmoil palmoil production, number two in rubber, third largest producer of cocoa and fourth largest producer of coffee. Indonesia is Asia's third largest net agricultural producer behind China and India.
The future growth in food and agribusiness will be driven by resilient domestic demand, export of agricultural products to emerging nations, according to Rabobank. However, the nation faces some key challenges as outlined below:
-low yielding small-holder crop systems
-sustainability pressures
-low quality
-under investment
-inadequate infrastructure
-underdeveloped agriculture practices
-restrictive government policies
The Rabobank report points out that investment in management practices, land and technology devlelopment are required to proudce better yields and replenish older plantations in Indonesia. Despite higher commodity prices, the large number of small farm holders are faced with the difficult task of finding capital to raise their holdings. "Higher commodity prices are still not enough to encourage small holders to invest in farms especially estate crops," Rabobank report said.
Corn and soybean consumption is set to rise in Indonesia to feed the growth in meat and poultry industry. The nation aims to become self-sufficient in sugar and beef which requires investmnet in plantations, mills, breeding, farms and feedlots, Rabobank report said.
Export taxes are levied with the intention of value addition and employment generation but results in lower farm gate rpices for small farmers. "The Indonesian Government is facing the challenge of balancing regulation and policies to ensure growth and development are acheived". The report points out that Indonesia will continue to be a major player in the food and agri-business in the next decade thanks to surging demand for commodities from India and China.
