Global Markets: Wheat – Imports Surge in Indonesia, Middle East

Wheat Heads. Photo: Oklahoma State University

Indonesia: Strong Wheat Imports Displace Other Grains

Indonesia’s drive for self-sufficiency is resulting in record wheat imports displacing imported rice and corn. The country’s rise to the second-largest wheat importer has been spurred by growth not only for food but now also for feed, primarily supplied from Australia and Ukraine.

Traditionally, growth in imports was for milling quality wheat, supporting surging flour use for instant noodles and bread. While rice self-sufficiency has nearly been achieved, it has been due to declining rice consumption in the face of affordable wheat-based alternatives more so than higher rice production.

However, Indonesia’s record forecast is driven even higher this year due to growing feed use. Import restrictions on corn have shrunk imports since 2014/15 turning feed mills to seek lower-priced feedstuffs.

Wheat feed use has surged as a result of lower prices relative to domestic corn, in addition to feed use for the burgeoning poultry and aquaculture industries. As a result of ballooning imports, the government has placed restrictions on feed wheat to strengthen and expand domestic corn production.

To surpass the feed wheat import restrictions, Indonesia has been importing lower-quality milling wheat to blend in feed rations. As Indonesia continues its quest for self-sufficiency in grains, feeders are likely to remain reactive and agile in this dynamic environment.

Middle East Wheat Imports Surge on Growing Consumption

Wheat consumption in the Middle East has grown by about 20 percent over the last decade. Production, on the other hand, has remained stagnant with Iran and Turkey representing more than 80 percent of the total.

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Expanding populations in Iran, Iraq, Saudi Arabia, and Yemen account for much of the consumption growth. Jordan and Lebanon have also shown a sharp increase in wheat consumption as millions of refugees from Syria have resettled in these nearby countries. Turkey’s consumption has risen partly due to the presence of refugees, but this growth is mitigated by slightly declining per capita use.

Based on this growing gap between supply and demand, imports are twice as large as a decade ago, with Saudi Arabia and Turkey accounting for half of the growth. Saudi Arabia is importing more as domestic production was phased out to conserve water. Turkey continues to import wheat even as domestic production grows. Under Turkey’s Inward Processing Regime, wheat is imported duty-free to be milled and exported as flour.

Turkey Wheat Exports Forecast at a Record

Turkey’s wheat exports are forecast at a record, spurred by a record crop. With exports more than tripling in the last decade, Turkey has become the world’s leading flour exporter. Shipments to Asian countries, particularly Indonesia and the Philippines, have declined as governments placed tariffs on wheat flour to protect domestic millers.

However, strong demand from nearby markets, particularly Iraq, Sudan, and Syria, has more than compensated for lower exports to Asian countries.

Iraq Imports Rebounding to Highest Level in 5 Years

Iraq’s production has trended higher in recent years, leading to lower imports. Wheat imports had increasingly come in the form of Turkish flour as grain imports dropped off. This shift was mainly due to conflict in northern regions, budgetary constraints on importing wheat for the Public Distribution System (PDS), and competitive pricing of Turkish flour.

However, Iraq’s 2017/18 imports are forecast to rebound more than 40 percent from last year, partly because of the low quality of its crop. The United States has already sold at least 500,000 metric tons of Hard Red Winter wheat to Iraq, according to U.S. Export Sales data. This already represents the largest sales to Iraq in 6 years. In addition to grain purchases picking up in recent months, flour imports have also continued at a fast pace.

Historically, the Grain Board of Iraq relied on public tendering to purchase wheat. Typically, the tenders listed Australia, Canada, and the United States as acceptable origins. In May 2017, Iraq’s cabinet authorized the Ministry of Trade to make direct purchases. During the 2017/18 marketing year, the United States has already sold 150,000 tons of wheat to Iraq under the public tendering system in addition to robust direct sales.

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