Soybean Domestic Production of Major Food Commodities in Indonesia

Figure 2.4 Sugar Production in Indonesia Source: BPS-Statistics Indonesia

2.3.5 Wheat

In terms of wheat, Indonesia has become one of the largest wheat importers in the world. The domestic demand for this commodity is high, but farmers are reluctant to plant wheat on their land due to the inappropriate characteristics of the land and climate in Indonesia for growing wheat. As a consequence, Indonesia imports wheat in large quantities, at approximately 5.4 million tonnes in 2014, from several countries such as Australia, Canada, USA, Russia, Ukraine, Kazakhstan, India, Pakistan, Brazil and Argentina Jaramaya 2015.

2.3.6 Crude Palm Oil

In contrast, Indonesia is known as one of the largest crude palm oil exporters in the world dominating the world palm oil production. Palm oil can be used to produce biodiesel, RBD palm oil refined, bleached and deodorized crude palm oil including cooking oil and margarine, as well as oleochemicals. In 2014, domestic demand for crude palm oil is about 8.8 million tonnes, consisting of 2.5 million tonnes for biodiesel industries, 4.2 million tonnes for RBD palm oil industries and 0.7 million tonnes for oleochemical industries Fahriyadi and Laoli 2015. As shown in Figure 6 below, domestic production of crude palm oil largely surpasses domestic consumption. This low domestic demand enables Indonesia to export cooking oil products to several countries including China and India. 0.5 1 1.5 2 2.5 3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 tho us an d to nnes Sugar Production Figure 2.5 Crude Palm Oil Production in Indonesia Source: BPS-Statistics Indonesia Overall, shocks in oil price can be transmitted onto food crop commodities through production costs and biofuel demands. This means that fluctuations in oil prices are expected to influence food prices, posing risks to national food security. Moreover, rising oil prices encourage the use of biofuels as an alternative energy source. In Indonesia, biofuels are mainly produced from palm oil, corn and sugar cane. These three commodities are not only used for feedstocks, but also for food. This then leads to lower food supply thereby contributing to higher food prices. These factors combined induce a significant rise in food commodity prices posing threats to food security in Indonesia. 5 10 15 20 25 30 35 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 m il li o n to nnes Crude Palm Oil