Bulog to quit wheat business in October

JAKARTA (JP): The State Logistics Agency (Bulog) will stop importing wheat and wheat flour in October after the government ends subsidies to the commodities, the agency's chairman said.

Beddu Amang said that thereafter the private sector alone would import wheat while the agency concentrated on importing rice and sugar.

He said the agency would not lobby the government to prolong the subsidy, which according to reforms agreed with the International Monetary Funds (IMF) should come to an end in October.

"In October we will leave the wheat business and private companies will have to take over our job," he said.

Beddu said that private companies were already allowed to import wheat and wheat flour directly but added they had so far been reluctant to do so.

Private wheat flour producer PT Bogasari Flour Mills said that it has no plans to import wheat directly, despite the removal of import restrictions on the commodity.

Company director Franky Welirang argued that importing wheat would be too expensive because of the sharp depreciation in the value of the rupiah.

He said Bogasari would continue to operate exclusively as a miller.

"Milling Bulog's wheat is still more profitable than becoming a trader, even though the processing fee is very low," Franky said.

Franky said that Bogasari meets 80 percent of the country's monthly flour demand of 250,000 tons.

Beddu said that Bulog planned to buy 700,000 tons of wheat next month.

"We will need to import around 4.25 million tons of wheat in this fiscal year. We have already bought approximately 1 million tons," Beddu said.

"In September we will tender a contract to buy 700,000 tons of wheat to cover between two and three months consumption," he said. He declined to reveal the current stock of wheat flour held by the agency.

Beddu said the last wheat purchase tender was held on July 30, when the agency bought 745,000 tons of wheat from the United States, Canada and Australia to cover August, September and October. Prices agreed were between $129.24 and $171.00 per ton on a cost-and-freight basis.

The agency raised the price of flour by 46 percent on Monday, from Rp 2,231 per kilogram to Rp 3,290 per kg, to adjust for the increase in international wheat flour prices and the sharp depreciation in the value of the rupiah against the U.S dollar.

Bulog lost its monopoly to import and distribute wheat, wheat flour, soybeans, garlic and sugar on Feb. 1 under the economic reform package agreed with the IMF.

But under June's supplementary memorandum, all subsidies were extended in an attempt to lessen the impact of the worsening economic conditions on the nation's poor. The agency's role in importing and distributing the commodities was also reinstated. (gis)