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Today's Headlines Sugar
Indonesia posted inflation of 0.10 percent month-on-month (m/m) in March 2020, almost unchanged from a pace of 0.11 percent (m/m) in the same month one year earlier. Hence, Indonesia’s consumer price index (abbreviated: CPI) increased 2.96 percent year-on-year (y/y) in March 2020 (from 2.97 percent in the preceding month).
The Indonesian government prepared a number of new incentives to encourage investment in integrated sugar mills (which include sugar plantations). Through these incentives the Industry Ministry targets to attract four new investors in Indonesia's sugar industry each year. The two main schemes within its incentive package involve imports of raw sugar and tax breaks for imports of machines.
Indonesia's Regional Representatives Council speaker Irman Gusman will be removed from his position on Tuesday (20/09) after being named a suspect by the nation's anti-corruption watchdog (Corruption Eradication Commission, or KPK) in Indonesia's latest corruption case. Allegedly, Gusman accepted a IDR 100 million (approx. USD $7,500) bribe for lobbying to manipulate West Sumatra's sugar import quota. Earlier this year State Procurement Agency Bulog imposed the quota to a company called CVSB. It is yet another graft case related to Indonesia's import quota system for food commodities.
Several companies in Indonesia's food and beverage industry may need to cease production altogether as there is a shortage of sugar ahead of the Idul Fitri celebrations (which mark the end of the Ramadan month). Adhi Lukman, Chairman of the Indonesian Food and Beverage Association (Gapmmi), said there are at least ten companies that are in direct need of new sugar supplies for their production process. Without new sugar supplies, the factories will simply need to be shut down temporarily.
The Indonesian government announced it plans to allow 100 percent foreign ownership of cold storage businesses, sugar factories, rubber manufacturing companies, and the e-commerce business by revising Presidential Regulation No. 39/2014 on the Negative Investment List. The Negative Investment List (in Indonesian: Daftar Negatif Investasi) lists the sectors that are either fully or partially closed to foreign investment. Meanwhile, the government is studying whether other sectors can also be opened (or opened up wider) to foreign investors.
Indonesia is forced to import sugar as domestic production of white crystal sugar in 2015 failed to achieve the target of 2.7 million tons. Indonesia's sugar processing plants only managed to produce 2.5 million tons of white crystal sugar in 2015. The Indonesian Sugar Association (AGI) predicts a widening sugar deficit in 2016 as it sees domestic production slowing further to 2.3 million tons in 2016, implying that about 400,000 tons of sugar need to be imported in order to meet domestic demand.
Prices of certain food commodities increased significantly due to a combination of political tensions in Ukraine, weak harvests and a possible new El Niño cycle (periodical warm ocean water temperatures off the western coast of South America that can cause climatic changes across the Pacific Ocean). El Niño is a well known weather phenomenon that occurs once every five years on average. However, its impact on the weather, harvests and the world varies; it can pass almost unnoticeable (such as in 2010) but it can also be felt worldwide.
The holy fasting month of Ramadan, the ninth month of the Islamic calender, and subsequent Idul Fitri (or Lebaran) festivities, when many Indonesians go back to their home towns for several days, will arrive soon (on or around 9 July 2013). This annual recurring tradition has some big economic implications as Indonesia's Muslim community increases spending prior and during this period to buy new clothes, shoes, food and drinks as well as transportation fares to travel back to their places of birth.
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The completion of its factory and being granted an additional sugar import quota is expected to boost corporate earnings of Tunas Baru Lampung, one of Indonesia’s leading producers of vegetable cooking oil (covering palm and coconut cooking oil). Furthermore, the company will feel the positive impact of rising crude palm oil (CPO) prices. Tunas Baru Lampung is part of the Sungai Budi Group, an Indonesia-based manufacturer and distributor of agricultural consumer products.
Brazil has been in the spotlight as recent developments in this country influence global prices of coffee and sugar. There are currently two factors at play in Brazil, the world’s leading coffee and sugar supplier. First, ongoing drought has sharply pushed up the price of coffee. Secondly, the market is hopeful that reform-minded candidate Aécio Neves wins the Brazilian presidential election in the second voting round. This has given Brazil’s currency (real) a boost against the US dollar, and thus impacted on prices of coffee and sugar.
Australia's Bureau of Meteorology is increasingly convinced that the world needs to prepare for a new El Niño cycle. According to the institution, the impact of this new cycle will be felt starting from July 2014 and may continue through the winter. Also the European Center for Medium range Weather Forecasting (ECMWF) and the US Climate Prediction Center stated that chances of a new El Niño cycle in 2014 are becoming higher, although it is too early to provide an indication of this year's strength of the weather phenomenon.
Indonesia's central bank, Bank Indonesia, expects deflation of about 0.9 percent in September 2013. Statistics Indonesia, on the other hand, believes there will be limited inflation this month. Both institutions agree, however, on a forecast of at least 9 percent of inflation over full-year 2013. The bank's September forecast is based on a survey that was conducted in the second week of September. This survey showed that food commodities and government administered prices eased.
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