Ukraine Crisis Disrupts Indonesia's Wheat Supply

Concern rising over possible food shortages

May 2

By: Ainur Rohmah

The dwindling supply of wheat on world markets due to the Russia-Ukraine conflict has led to an increase in the price of wheat-based commodities in Indonesia, where packets of instant noodles make up a major part of the diet of the country’s 275 million people, raising fears of food shortages. The country imported 25 percent or 2.8 million tonnes of its total wheat needs from Ukraine last year, much more than Russia's 2,900 tonnes.

The Ukrainian government in late March ceased the export of wheat, oats, and other staple foods essential to the global food supply in order to ensure that the food needs of its people are met during the intensifying war. The country’s ports are also blockaded by Russian warships.

Traders in traditional markets complain that the price of wheat flour has been increasing over the past two months. Siti Muawanah, a trader at Senori Market in Tuban Regency, said the price has increased gradually from the initial Rp11,000 (US.75 cents) per kilogram, to more than Rp14,000. In addition, she said, "Besides being expensive, goods are also getting scarcer. If previously the delivery (packaged wheat flour) to traders was scheduled, now it is not certain."

The high price of wheat flour is driving up end prices. Siti Khoiria, a cake trader, said she had to increase her prices not only because of rising prices for wheat flour but other commodities such as cooking oil. "Buyers complain about the price of my cake which is getting more expensive even though the price of ingredients is also going up," she said.

Indonesia must import wheat from other countries to meet domestic needs. Based on data from the Food and Agriculture Organization (FAO), Indonesia is the largest wheat importer in the world with 10.29 million tonnes in 2020. Wheat is the raw material for a number of foods in Indonesia, such as instant noodles which are a buffer food for the middle to lower economic community. According to Statista, consumption of instant noodles in Indonesia reached 12.6 billion portions in 2020, the second largest in the world after China.

Putu Juli, director general of Agro at the Ministry of Industry, said national wheat stocks lasted only to April and that the ministry would increase purchases from countries such as Australia, Argentina, Canada, the United States, and India.

Based on records from the Ministry of Industry, the need for wheat for the industry this year reached 11.1 million tonnes for raw materials. Other wheat-supplying countries to Indonesia include Australia at 4.6 million tonnes, Canada at 1.9 million, Argentina at 606,000, America at 447,000, and India at 318,000.

Adhi S. Lukman, the general chairperson of the All-Indonesian Food and Beverage Entrepreneurs Association, said the impact of the war on the supply of wheat depended on the length of the intensity, adding: "My estimation is that if this (war) continues for a long time, it will have an impact on the price increase of processed food products and energy costs, which we must anticipate immediately."

Inflation, he said, is expected to be unavoidable because most producers have started to increase the selling price of their products in line with the recovery in purchasing power at the beginning of this year as the Covid-19 pandemic has eased. He said he is optimistic that industry players have been looking for various alternatives to anticipate the price increases. "We need to think about alternatives, how do we substitute wheat with other raw materials, make product innovations, and so on," said Adhi.

The Indonesian Wheat Flour Producers Association (Aptindo) asked the government to ensure the availability of wheat flour supply in the market considering that 71 percent of the commodity market is micro, small and medium enterprises, with prices expected to top out this month and last at least until September. Aptindo data show the need for national flour increasing every year significantly as more people turn to wheat-based products. This trend was followed by a positive notch in the export performance of the processed food industry made from wheat.

Franciscus Welirang, the general chairperson of Aptindo, said the impact of the increase in wheat flour is still not felt significantly at this time because companies that produce flour-based products usually have wheat reserves for several months. Some companies with exposure to wheat as a raw material for production include food processing companies PT Indofood Sukses Makmur Tbk (INDF) and PT Mayora Indah Tbk (MYOR) with superior products such as bread and instant noodles.

G20 Meeting Invitation for Ukraine

Indonesia reportedly invited Ukraine to attend the G20 leaders summit to be held in Bali on November 15 and 16, 2022. Since the invasion and during preparations for the summit, the country has had to face pressure from many members of the group demanding not to invite Russian President Vladimir Putin to the summit. Indonesia still stands by its position to be “neutral” and won’t exclude Russia from the grouping. Many saw Indonesia's move to invite Ukraine as an effort to "compromise" to accommodate the demands of western countries like the United States.

Ukrainian President Volodymyr Zelensky in a tweet on Wednesday thanked President Joko Widodo, known as Jokowi, for his support for sovereign integrity and the invitation to attend the meeting. Zelensky wrote:

Jokowi in a tweet on April 26 didn’t mention the invitation, but confirmed that he had held talks with Zelensky regarding Indonesia's support for peace negotiations to end the conflict and was ready to provide humanitarian assistance: