Grain trade with RI in virtual halt

Grain trade with RI in virtual halt

SINGAPORE (Reuters): The uncertainty in Indonesia has brought grain flows there to a near halt, and traders said yesterday they expected little or no movement until the political situation stabilizes.

"Things are out of control in Indonesia. The market will not be quiet, it will be dead," said one Singapore-based trader with a U.S. commodity house.

"If there are very good profits, some people may still take a risk and do business with Indonesia. But if the profit is small and the risks are high, I wonder who will do it," said another Singapore trader.

On Wednesday, Indonesia bought 50,000 tons of U.S. dark northern spring wheat, 13.0 percent protein, for July shipment, but some traders voiced worries over the arrival.

"The arrival should not be a problem if the shipment is for food purposes, but if the riots get worse and port operations stop, it'll be another story," the trader said.

"Whether Indonesian buyers can open letters of credit is another problem," said the trader.

In Thailand, industry sources said on Monday exporters had suspended rice and sugar exports to Indonesia unless the sale was backed up by letters of credit from third countries.

Letters of credit from Indonesia, hit by its worst unrest in decades, would not be accepted until the situation in the country returned to normal.

The departure of ethnic Chinese from Indonesia during the riots cast more shadows on the market.

"Most people in the trade in Indonesia are Chinese and if they are not around, who should we do business with and who should we contact?" said one trader.

Shipowners are nervous about bringing their ships to Indonesia, traders said.

"Even if the ship can arrive in Indonesia, there are still worries over land transportation or whether the warehouses will be attacked by rioters," said one trader.

"The sentiment is very pessimistic now," the trader said.

Asia's grains market has been slow in the past few months over a regional financial crisis and some traders have hoped activities would pick up slightly after Jakarta settled its reform disputes with the International Monetary Fund (IMF) earlier this month.

In the rice market, Vietnam's month-long ban on fresh rice export contracts coupled with political instability in Indonesia made Vietnamese exporters reluctant to strike contracts with Indonesia even once the ban was lifted, traders said.

"We won't see anything happening at least for this week," said the trader with the U.S. house.