It's a good year for agricultural sector

It's a good year for agricultural sector

Adianto P. Simamora, The Jakarta Post, Jakarta

It was a good year for the country's agricultural sector.

As the manufacturing sector struggled to cope with a variety
of problems, farmers and farm product traders ended the year with
smiles on their faces.

Prices for the country's main agricultural commodities --
cocoa, crude palm oil (CPO), coffee and rubber -- increased and
there was an optimism shared by many parties that the upwards
trend would prevail next year.

The government even predicted the above commodities would
become the prime mover of the country's non-oil and gas exports
next year.

Minister of Trade and Industry Rini M. Soewandi said the non-
oil and gas exports would increase by up to 7 percent in 2003,
mostly due to the agricultural commodity exports.

The government's non-oil and gas exports are expected to reach
about US$42.7 billion this year.

The CPO price, which remained sluggish over the past several
years and dropped to as low as US$235 per ton in the first half
of last year, started to recover this year. It hit a three-year
high of around $415 per ton in June and is now quoted at $450 per
ton.

Many have projected it to break through the $500 per ton mark,
which is still lower than the pre-crisis level of $600 per ton,
but is high enough to generate a lot of income for farmers and
traders.

"I predict the CPO price will remain strong next year due to
the decrease in the supply of sunflower oil," Association of
Indonesian Palm Oil Producers (Gapki) chairman Deron Bangun told
The Jakarta Post.

Indonesia, the world's second largest CPO producer after
Malaysia, has targeted an output of nine million tons this year,
up from 8.3 million tons in 2001, while exports are projected to
rise to 5.5 million tons from 4.9 million tons.

Derom said the output could increase next year as the palm
trees planted in 1999 were expected to begin production, but he
did not provide any figures.

In August this year, Indonesia and Malaysia formed a
consultative group to boost CPO exports, mainly to China and
India.

Rubber also saw a price increase this year after years of
depression.

The price jumped to about $0.80 per kilogram in June, after
plunging to a 30-year low of less than $0.45 per kilogram late
last year.

Most analysts agree that the price will continue to be strong
next year and could hit the price target of above $1 per kilogram
set by the world's largest rubber producing countries Thailand,
Indonesia and Malaysia.

The ministers from the three countries held several meetings
this year to devise strategies to prop up the price of the
commodity.

The three countries, which account for 85 percent of the
world's rubber output, agreed to set up the International
Tripartite Rubber Organization (ITRO) to coordinate action to
support rubber prices.

They also pledged to cut output by 10 percent and exports by 4
percent during the next three years, starting from 2002 with
Indonesia promising to cap its exports at 1.23 million tons
during the period, Thailand at 1.93 million tons and Malaysia at
227,000 tons.

Thailand produced 2.3 million tons last year, Indonesia 1.5
million tons and Malaysia 615,000 tons.

In addition, the three countries formed the International
Rubber Consortium Corp. (IRCo) aiming to procure rubber from
farmers and withhold it to help stabilize prices.

IRCo was expected to have started operations in mid November.
But it has not yet functioned as Indonesia and Malaysia have yet
to appoint their representatives to IRCo's management team and
the countries have not yet made full payment of their respective
dues. In order to fully function, the consortium has to have
US$225 million in cash reserves.

Despite the agreement to cut output and exports, the
Indonesian Rubber Producers Association (Gapkindo) predicted the
country's output would increase by up to five percent next year,
from this year's target of 1.6 million tons.

Gapkindo secretary general Suharto Honggokusumo said the
expected increase was due to trees being planted in the last ten
years, mainly in Sumatra.

"If the weather patterns in general is normal, we predict the
rubber output will increase by about four to five percent next
year," Suharto told The Post.

The price of cocoa has been also on the rise during the past
couple of months.

The price of cocoa hit a thirteen-year high of Rp 17,000 per
kilogram (about $2) in September amid fears of lower output from
the war-torn Ivory Coast, the world's largest producer.

The price will remain strong next year, Zulhefy Sikumbang,
secretary general of the Association of Indonesian Cocoa
Exporters (Askindo), predicted.

He said the price might hover at about $1,500 per ton next
year, from the average $1,700 per ton over the past several
months.

The country's cocoa output was expected to reach about 430,000
million tons this year.

Indonesia, the world's second largest producer of cocoa after
the Ivory Coast, mainly exports its cocoa to the United States,
Singapore, Malaysia and Brazil.

South, Southeast and Central Sulawesi account for 75 percent
of the country's cocoa output.

The country's total area of cocoa plantations is estimated at
700,000 hectares, with some 350,000 growers being involved.

The year was also a good year for coffee producers as the
price of the commodity started to climb during the past couple of
months.

Coffee prices had fallen to only about Rp 2,600 per kilogram
over the past three years due to oversupply, mainly due to bumper
harvests in the two largest producing countries, Brazil and
Vietnam.

In January, coffee was priced at around $400 per ton, but it
has now climbed to $842 per ton following moves by Brazil and
Vietnam to cut their output.

The Indonesian Coffee Association (AEKI) predicted the price
of coffee would continue to improve next year, if all producing
countries implemented the agreement to cut output.

"We predict the price (of coffee) will climb to Rp $900 per
ton in January next year," AEKI general secretary Nuril Hakim
said.

However, many coffee growers in Lampung, the country's largest
coffee producing area, could not enjoy the rising price as they
had pulled their trees out.

Frustrated by the depressed coffee price, many of them
converted their plantations into vegetable farms.

In a bid to boost domestic consumption per capita to one
kilogram per year from the current 0.6 kg, the association will
also launch a five-year coffee drinking promotion, starting next
year.

The country's coffee output is expected to reach about 400,000
tons this year.