Indonesia eyes domestic rice due to costly imports

Indonesia is not solely dependent on Thailand or Vietnam for rice and is seeking cheaper imports, while state procurement agency Bulog should look to buy from domestic suppliers, the Indonesian agriculture minister said on Thursday. Indonesian officials are in Bangkok to discuss the reported cancellation of a proposed sale of 300,000 tonnes of rice to Southeast Asia's biggest economy, agreed under the previous Thai administration.
This came as the main export rice grade from Thailand, the world's top exporter, was offered in the market as high as $660 a tonne this week, up from $595 last week, as exporters said operators were holding on to supply ahead of a government intervention scheme to support prices.
Rice export prices in No 2 exporter Vietnam also rose, up nearly 1 percent on Thursday, with the 5 percent broken grade hitting $575 a tonne and is heading towards the highest level in over three years. This was due to demand from Indonesia and Mekong Delta flooding impact, while eyes are also on Philippine demand as crops are damaged by Typhoon Nesta, traders said.
"Rice import should be only for emergency need," Agriculture Minister Suswono told Reuters in an interview, adding that the country is still in surplus. "In an emergency situation, Indonesia can import rice from anywhere in the world. We do not need to be dependent on Vietnam or Thailand only. "It is a good chance for Bulog to procure more rice domestically," Suswono said. "Because, there are several regions in Indonesia that are still harvesting rice."
He said that while higher domestic rice prices are beneficial for farmers, "it is indeed a problem because it would drive the inflation rate. But, it is of course unavoidable." Suwono's comments came as a Thai Commerce Ministry official said on Thursday that Bangkok would be willing to renegotiate a deal with Indonesia for 300,000 tonnes that was tentatively agreed in a memorandum of understanding under the old government but never ratified.
"There was a misunderstanding on the rice deal. The MoU was signed as the government was changing," said Manat Soithong, director general of the Department of Foreign Trade. "We're willing to sell rice to Indonesia but the new government would like to talk on the amount and price." Thailand's new government which came into power last month, has promised farmers 15,000 baht ($481) a tonne for paddy from October. That compares with a market price of 8,000 baht in August, shortly after the government was formed, and the 11,000 baht guaranteed by the previous government.
Indonesian trade minister Mari Pangestu also said on Wednesday the country will explore alternative shipments of the grain from other major producers, including Pakistan and India. Pakistan expects Indonesia to place orders for its rice in coming days, said Irfan Ahmed Sheikh, the outgoing chairman of the Rice Exporters Association of Pakistan (REAP), adding that the country's IRRI-6 prices on average are less than $500 a tonne, FOB, making it one of the cheapest sources of rice.
Vijay Setia, president of the All India Rice Exporters Association said Indonesia can buy Indian rice at least $100 a tonne cheaper than Thai rice. India's entry's into the export market after a three-year gap threatens to undercut supplies from Thailand and Vietnam, which have seen demand for their costlier supplies fall after India's food ministry allowed 2 million tonnes of common rice exports on September 8. India, the world's second biggest rice producer, is sitting on huge inventory and heading for a bumper harvest for a second year in a row due to normal monsoon rains.