Indonesia: Indonesia Agriculture Profile

Agriculture in Indonesia supports the livelihood of the people. Each three out of five people live in rural areas and farming is considered a major occupation for a lot of families. Around 45% of Indonesian workers are farmers. Rice is Indonesians primary staple crop. Indonesia today is the third major rice producer totaling 64,398,900 tons of rice in all.

Most of the rice produced in Indonesia is located in the island of Java. Before the fall of the New Order, they were most known for their contribution to Indonesians agriculture industry. The New Order introduced the Green Revolution rice technology to Indonesia. The Green Revolution was the foundation for economic increase in Indonesia. This Revolution controlled the water supply and improved fertilizers and pesticides. The Green Revolution moved Indonesia from being a major rice importer in the 1970s to being self-sufficient by the mid 1980s.

Based on the people quickly increasing, Indonesia is finding ways to make food production additional efficient and cheaper to support the people. Indonesia had the majority rapid decrease in poverty due to the fast agricultural increase created by the Green Revolution. The production of crops became quicker and cheaper, allowing the sales price to decrease. Poverty stricken people presently do not have to devote their whole paycheck towards paying for food, since the sales price has lowered. The availability of crops increased which as well contributed to the decrease in price. Indonesia relies greatly on agriculture to feed the people and help decrease the poverty rate.

The 2014 accumulation rice production estimate slightly below last year’s record level

Harvesting of the 2014 major (wet) season paddy crop, which accounts for about 95 % of annual production, was completed by June, while that of the 2014 secondary season crop is expected to start in mid-October and continue into December. New official forecasts put this year’s accumulation rice production (inclunding the 2014 major and secondary seasons) at 69.9 million tonnes, slightly below last year’s record level. The expected decrease is the result of a slight contraction in planted area, reflecting a shift from paddy land to other crops, inclunding planting disruptions due to floods from mid-January to late February, particularly in parts of West Java.

Harvesting of the 2014 major (rainy) season maize crop was completed in April and that of the 2014 secondary (dry) season crop will start in mid-October and will be completed in December. The 2014 accumulation maize output is officially estimate at 18.6 million tonnes, similar to last year’s above-average harvest and slightly below the 2012 record output.

The probability of an El Niño event in the last quarter of the year has been recently lowered to 60 %. The phenomenon is often associated with below-average precipitation and the completed moderate El Niño events resulted in production declines in the country. Depending on the timing and intensity of an eventual El Niño, the 2015 major rainfed paddy crops, which are planted from late October, may be negatively affected by the event.

Cereal imports expected to increase in the 2014/15 marketing time(April/March)

Indonesia is one of the biggest importers of cereals with quantities of some 11 million tonnes annually. For the 2014/15 marketing time(April/March) wheat imports are estimate close to last year’s record level at 7.4 million tonnes, reflecting sustained request for the commodity. Similarly, imports of maize are expected to remain high at 2.7 million tonnes. Rice imports in 2014 are anticipated to return to additional normal quantities and reach 1.2 million tonnes, some 70 % above the low level of 2013 following the Government’s self-sufficient policy. In general, cereal imports for the 2014/15 marketing time(April/March) are thus estimate at 11.4 million tonnes, some 3 % above the large volume of the previous year and about 14 % higher than the five-year average.

Rice prices at record levels in August

The average price of medium quality rice increased slightly in August but reached record highs. Prices were above their year before levels both in nominal and real terms, supported by the contraction of this year’s paddy output and low imports in previous months.
In general food security situation satisfactory but localized food insecurity persists

In general, the food security situation in the country continues to be stable and satisfactory. Recently, Indonesia graduated from the inventory of Low-Gain Food-Deficit Nations (LIFDC) on the basis of net food-exporter and on gain criteria. However, high food prices are affecting the food security situation of vulnerable low-gain groups of the people.

Owing to its location in fish-rich waters and a long fishing tradition, Indonesia is one of the biggest seafood producers in the world. The archipelago as well ranks part the majority productive nations in aquaculture, and as wild stocks in the earth’s seas are dwindling, Indonesia’s importance in world markets is set to increase further. The world’s fourth most-populous country is as well a major seafood consumer. The combination of domestic request and export potential points to business opportunities for fish, shellfish and seaweed producers operating out of Indonesia, inclunding for processing companies and suppliers of equipment and logistics.

Indonesia’s Aquaculture & Fisheries Sector

The combination of domestic request and export potential points to business opportunities for fish, shellfish and seaweed producers operating out of Indonesia, inclunding for processing companies and suppliers of equipment and logistics.

The industry in numbers

Indonesia's fishery production totalled 15.26 million tonnes in 2012, with wild capture accounting for 5.81 million tonnes and aquaculture for 9.45 million tonnes, according to the Ministry of Marine Affairs and Fisheries. The UN’s Food and Agriculture Organization (FAO) in 2011 ranked Indonesia third in the world in terms of inland and marine catch inclunding fourth in aquaculture output. Fishery exports increased strongly in recent years and reached $3.9 billion USD in 2012, with most shipments going to the US and Japan, followed by the EU. East Java as the country’s foremost production area accounts for roughly a third of shipments. Shrimp dominates the country’s exports, followed by frozen fish and fresh fish.

The government is looking to the seafood sector to bolster national food security and ensure sufficient protein intake by increasing fish in Indonesians’ diet. Annual per-capita consumption of fishery produce amounted to 33.8 kg in 2012 next rising rapidly over the preceding decade. Jakarta has proclaimed a “Blue Revolution”, an initiative launched in 2010 with the aim of boosting sales to world markets. Meanwhile, major exporting nations like Norway and Canada are striving to increase sales to Indonesia, though at a total of $412 million in 2012, Indonesian imports are only a fraction of its exports.

Room for improvement

A number of factors suggest that Indonesia is far from realizing its full potential in fishery production, particularly with regards to exports. The vast majority (95% in 2011) of the country’s seafood comes from artisanal fishermen using traditional means. Up-scaling production, adapting sophisticated methods and modernising vessels and equipment could vastly improve margins in the industry.

The potential for efficiency gains is particularly stark in aquaculture. FOA figures from 2010 show that fish farmers in Norway had an average annual production of 187 tonnes per person, in Chile the corresponding figure was 35 tonnes, and in Indonesia this was approximately one tonne. Investors can bring capital and knowhow to bear to increase harvests and ensure better stability in both quantity and quality, which is vital to enhancing exportability. Joint ventures and cooperation with local fish farmers and cooperatives are convenient entry points.

Aquaculture open for investment

While foreign companies have rather limited options to engage in capture fishing due to foreign investment restrictions (See Considerate the Negative Investment Inventory), aquaculture is open to world players in partnerships with local entities. Aquaculture as well arguably holds better potential than capture fishing. Following double-digit increase for a number of years running, national aquaculture output has superseded wild catch. This is as well due to over-exploitation of some marine resources particularly in western Indonesia. As sustainability is becoming the order of the day and world importers require stringent environmental and health certification, request for properly farmed seafood is set to grow further from presently on.

Indonesia’s immense coastline territory provides ideal conditions for fish farming in brackish waters, while lakes and ponds provide an abundant resource for freshwater cultivation. Saltwater fish farming in offshore floating cages is an area that warrants closer attention. The government has allocated budget funds to support small-scale fish farmers and has enlisted the help of foreign companies and organizations to modernize the sector. Indonesia’s aquaculture commodities include various types of fish, shrimp and seaweed.

Fish

Indonesia is a leading tuna producer, but the sustainable production of this saltwater fish in an aquaculture setting poses critical challenges. Marine aquaculture (mariculture) in Indonesia is predominantly used for seaweed production, while offshore fish cultivation remains relatively undeveloped. Research continues on alternative species, but so far grouper remains Indonesia’s principal mariculture fish and its cultivation appears to be the majority promising business. As for freshwater aquaculture, Indonesia has become the world’s major supplier of tilapia and made headlines in 2012 at the same time as its tilapia became the initial farmed fish to receive certification from the Aquaculture Stewardship Council (ASC).

Shrimp

Shrimp is Indonesia’s major fishery export commodity, and it is well suited to cultivated production. The World Aquaculture Alliance, a certification NGO, in 2013 projected average annual increase rate of 10.7% in Indonesia’s shrimp cultivation from 2012 to 2015. The Indonesian government has issued even additional optimistic targets. The country reportedly has 1.2 million hectares of potential areas for shrimp breeding, giving it the potential to become the world’s major shrimp exporter. As with other seafood goods, the shrimp industry harbours potential for productivity gains through the employment of modern knowhow and technology.

Seaweed

Long consumed in Asia, seaweed is only beginning to catch on as an ingredient in Western cuisine, mainly through its inclusion in sushi. The algae plant is known for certain health benefits, and an increasing internationalization of food the world over is likely to see the emergence of new markets for edible seaweed. As a leading seaweed producer, Indonesia is well placed to take chance of growing request. The country can as well build on ample experience in seaweed cultivation, but it lacks the capacity to process all of its seaweed. Much of it is exported abroad in raw form and often re-imported for domestic consumption, which signifies downstream business prospects.

Equipment and logistics

To improve the quantity and quality of its exports and to remain competitive in regional trade, Indonesia’s fisheries sector is under high pressure to modernize equipment and adapt production techniques. This includes the rearing and harvesting of fish and other seafood inclunding various forms of processing, and it makes the sale of equipment one of the majority obvious business opportunities for foreign companies. Undoubtedly aware of the need for modernization in the industry, the government should prove generous on applying legal facilities to reduce or waive duties and/or taxes on imported capital goods.

Fast distribution is crucial with regards to fresh seafood, which is in particularly high request in urban centres, where most of Indonesia’s prosperous middle class consumers live. Getting it there on time is a logistical challenge in a country that remains behind the curve in infrastructure development. This is a business opportunity for firms providing live shipment or temperature-controlled transportation of fresh and frozen goods. Given that seafood export volumes from Indonesia have significant increase potential, so do specialized shipping services to bring Indonesian produce to overseas markets.