Indonesia's grains move sends positive signal

Indonesia's grains move sends positive signal

SINGAPORE (Reuters): Strife-torn Indonesia's move to lift a
three-and-half-month ban on South American grains could not have
come at a better time.

The rupiah is strengthening, the feed market is facing a
supply squeeze, South American grains are currently the cheapest
option available and importers have started dipping their toes in
the market after a long lull.

Asia's grains trade sees it as one of the first market-
friendly moves by Indonesia under new President Megawati
Sukarnoputri as businesses hope for a return of political and
economic stability following last week's political transition.

"The move certainly signals that things are moving for the
better. It is a sign for business to hope for more market-
friendly policy decisions in the future," said Bob Rusli Tjetjep,
general manager of PT Panganmas Inti Persada, a Jakarta-based
commodity firm.

The Asian grains trade was stunned when Indonesia banned South
American grain in mid-April due to foot-and-mouth fears -- at a
time when the South American harvest was at its peak -- robbing
Indonesian buyers of the chance to buy the cheapest option
available.

Indonesian buyers were obliged to fill most of their needs
with purchases from the United States at prices up to $20 a ton
higher than Argentine or Brazilian supplies.

"When all other Asian countries were buying -- and only buying
South American corn and soymeal -- there was no reason for
Indonesia to ban them in the first place," said one Singapore-
based trader.

"South American supplies are still the cheapest and some
Indonesian buyers, who lost the opportunity earlier, can cover a
part of their needs quickly," the trader added.

Indonesia's Agriculture Ministry said on Tuesday it had
decided to lift the ban because of the reduced threat of the
foot-and-mouth disease. But the government will make regular
reviews of the situation and reimpose the ban if fresh cases of
the outbreak are reported.

Indonesia was declared free of foot-and-mouth in 1990.

Since last week's ouster of the country's first democratically
elected president, Abdurrahman Wahid, the rupiah has gained more
than 18 percent against the U.S. dollar.

"With the rupiah gaining ground sharply, the decision to lift
the ban is definitely icing on the cake," said one Jakarta-based
grains trader. "We are hoping that we will be able to partially
offset the damage to our trade in the past months."

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 million
last year, but the slowdown in recent months prompted trade
officials to revise down the figure to zero growth.

"A supply squeeze situation for feed ingredients partly
contributed to the slowdown in Indonesia's commercial feed
production in the past months," said another Singapore-based
grains and oilseeds trader.

"But now with supplies expected to rise -- and at a cheaper
price from South America -- there is hope for some growth," the
trader added.

Although some Asian grain traders remain hesitant over South
American grain contracts, many of them expected business to flow
in as the market was still not covered for all of September.

"After looking at the government's statement that it could
reimpose the ban, some traders are shying away from fresh deals,"
said one trader. "They don't want to again face the trauma of
diverting and re-diverting cargoes."

Many South American cargoes, which were stranded at sea after
Jakarta suddenly banned South American grains, were diverted to
other destinations such as Malaysia, Thailand and Taiwan at
discounted prices.