INDONESIA’S growing demand for food imports holds much opportunity for Australian exporters beyond the cattle industry.
The real value of agrifood consumption in Indonesia is projected to quadruple between 2009 and 2050, on the back of expected sustained economic growth, population increase and continued urbanisation.
That’s according to a new report, What Indonesia wants: Analysis of Indonesia's food demand to 2050 from the Australian Bureau of Agricultural and Resource Economics and Science (ABARES). The report is set to be discussed at the 19th Indonesia–Australia Working Group on Agriculture, Food and Forestry Cooperation this week.
Between 2009 and 2050, the real value of beef consumption is projected to rise more than 14 times, dairy tenfold, and fruit and vegetables to more than triple.
In 2014, Australia was the second-largest exporter of agricultural products to Indonesia, behind the United States, supplying around US$2.6 billion of agricultural commodities.
In a statement, ABARES executive director Karen Schneider said over the longer term, ABARES expected per person incomes would increase significantly, leading to increased food consumption and more diverse diets in Indonesia.
“The projected rise in food consumption is characterised by expected higher intake of meat, dairy products, fruit and vegetables,” Ms Schneider said.
Assuming no major policy changes to 2050, food imports are projected to be an increasingly important component of Indonesia's food supply in the coming decades.
“Indonesia has a strong agriculture industry, characterised by the production of both food and non-food cash crops, such as natural rubber, copra, palm kernels, coffee, cocoa and spices,” Ms Schneider said.
“Production of non-food cash crops in Indonesia has comparative advantage and this is expected to result in strong competition with local food production for resources.
“While the real value of Indonesia's agrifood production is projected to more than double to US$173 billion in 2050 (in 2009 US dollars), food imports are expected to become an important part of Indonesia’s food supply.
“The real value of agrifood imports is projected to rise more than 20-fold from 2009, to US$152 billion in 2050 (in 2009 US dollars).
“In 2050, imports of beef are projected to reach US$26 billion, compared with US$500 million in 2009.
“Imports of dairy products are projected to be US$7 billion in 2050, compared with US$400 million in 2009.
“For fruit and vegetables, the value of imports is expected to increase by more than US$24 billion and US$10 billion, respectively, between 2009 and 2050.”
The report states the upward trend in food demand is most pronounced among urban households, whose income growth is assumed to be more than double that of rural households.
“A declining rural population and relatively lower incomes will result in slower growth in food consumption compared with the urban population,” the report says.
It says the projected significant increases in consumption and import demand for food in Indonesia are based on the assumption of relatively strong income growth to 2050.
Because of their geographic proximity, Australia and Indonesia are well placed to benefit from advancing bilateral agricultural trade, the report states.
“Indonesia is an important market for Australian wheat, sugar, live cattle, beef, skim milk powder, and horticultural products, such as grapes and citrus. Stronger demand for these commodities and others in Indonesia will create further opportunities for Australian exporters,” the report says.
The agriculture sector is a key component of the Indonesian economy, contributing about 14 per cent of Indonesia's GDP in 2014 (Statistics Indonesia 2015), according to the report.
Thirty per cent of Indonesia's land area is used for agricultural purposes and the sector employs 41 million people or 35 per cent of the nation's work force.
The report states the sector is a strong contributor to Indonesia's trade, with agricultural exports accounting for 24 per cent of the value of total merchandise exports in 2012 (World Bank 2014).
The report identifies challenges to agricultural production and productivity growth as including the availability and quality of natural resources, insecure land tenure, underemployment of labour and lack of infrastructure.
What Indonesia wants is part of the What Asia wants series, which analyses future food consumption and trade trends in Asian countries over the long term.
The other reports in this series are What Asia wants, What China wants and What India wants.
