Falling wheat supply will not affect flour industry

P.C. Naommy, The Jakarta Post, Jakarta

The country's largest wheat flour producer, Bogasari Flour Mills, expressed confidence in the future of domestic wheat flour production despite increased competition for world wheat supplies and rising transportation costs.

"The current price hike in the world's wheat market will not affect flour production in Indonesia. In fact, production is forecast to be higher than last year's since domestic demand is estimated to increase from 5 percent to 10 percent this year," said company vice president Philip Purnama.

The firm, accounting for 70 percent of the country's flour production, is a subsidiary of PT Indofood Sukses Makmur, the world's largest instant noodle producer.

The world wheat price has increased by 20 percent to US$200 per ton over the past six months, following a decrease in supplies as a result of harvest failures in China and India, and a hike in transportation costs. Importing countries, including Indonesia, are now scrambling to get sufficient supply of the commodity.

Philip told The Jakarta Post on Saturday that despite thinner supply in the world's wheat market, the company would still increase its wheat imports this year.

"We have no choice but to increase imports to 4.3 million tons this year, from last year's four million tons, to meet increasing demand," said Philip, adding that the company would import from the United States, Australia and Canada.

Philip said that there would be a price hike for wheat flour and other wheat-based products, such as instant noodles produced by Indofood, but declined to be specific.

He said only that the increase would be made in several stages to prepare consumers for it.

Last month, the Indonesian Wheat and Flour Producers Association (APTINDO) predicted that the price of wheat flour would gradually increase by 18 percent during 2004, following the rise in the price of wheat.

According to Philip, instant noodle production accounts for 20 percent of total consumption of wheat flour in Indonesia, which reached 3,179 tons in 2003.

Anticipating the unexpected situation in the world's wheat market, Bogasari is currently carrying out studies into the possibility of developing flour from potential new sources, such as cassava, corn and sweet potato.

According to Philip, the ongoing study is also aimed at providing consumers with alternatives to wheat or rice flour currently produced by the firm.

"We have also developed an instant food made from cassava, based on Javanese tradition and known as tiwul, which entered the Yogyakarta market in December 2003," said Philip, adding that the new product had drawn a good response from the market so far.