Grains: Light seen at end of RI tunnel

Grains: Light seen at end of RI tunnel

SINGAPORE (Reuters): Indonesia's commodity markets, disrupted for months by political and economic chaos, are cautiously optimistic a day after the strife-torn country named a new president, traders said on Tuesday.

As the world's fourth biggest population hopes for a return to stability under President Megawati Soekarnoputri, and the rupiah currency gains against the U.S. dollar, traders said Indonesian buyers were dipping their toes in the grain market.

"Encouraging signs for the markets are already visible. I am sure business will get a boost," Ali Basry, director for Indonesia of the American Soybean Association, told Reuters by telephone from Jakarta.

The largest market for wheat in Southeast Asia and one of the leading markets for commercial feed, Indonesia's commodity markets have been hit by many negative factors in recent months.

But traders said grain buyers were now making tentative inquiries for relatively bigger volumes of wheat and soy, after almost three months of sluggish business.

In addition to currency woes and high Chicago prices, Indonesia earlier this year banned grain imports from South America due to foot-and-mouth fears. This left buyers with no option but to buy high-priced U.S. grain.

The poultry industry has also been hit by political violence.

Megawati took over as Indonesia's president on Monday after the country's top assembly sacked her predecessor, Abdurrahman Wahid, for incompetence.

The rupiah gained more than 10 percent, and was last traded at 9,800 per dollar, on hopes of a stable political scenario.

"We are pretty confident that business will return to its normal pace by September," said one Jakarta-based wheat trader. "Things will take time to pick up."

At the start of the year, Indonesia was hoping its feed output would rise to about 5.10 million tons in 2001 from 4.60 last year but the slowdown in the past few months prompted trade officials to revise down the figure to zero growth.

Regional grain traders said Indonesian soymeal buyers were expected to return to the market for soymeal for late August and early September shipments. Buyers were eying wheat cargoes for October shipments.

"There was a bit of rally in Chicago overnight. But the relatively stronger rupiah will partially offset that," one trader said. "We are expecting some buying interest."

On Monday, Chicago Board of Trade soy product futures ended higher on short covering and support from higher CBOT soybean prices. CBOT soymeal futures front months closed 90 cents to US$2.30 per ton higher, with August up $1.10 at $171.40.

Some traders said they were hoping that the ban on South American grains would be lifted following a change in Indonesia's leadership.

Trade officials have urged the government to lift the ban, saying that they were losing out the opportunity of buying the cheapest available grain.