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Wheat flour market in Indonesia.

1. Background

Wheat flour is one of basic staple foods and its consumption has increased considerably in the last 15 years following the popularity of various foods made from wheat flours and food diversifications from rice to other type of staple foods. Per capita wheat flour consumption has increased from 9.9 kg/ capita in 1992 to around 17.1 kg per capita in 2007.

Up to the middle of 1998, BULOG, the state owned logistic body of the Government monopolized the distribution wheat flour. At that time wheat flour millers were set up as only millers to receive orders for milling from BULOG. In June 1998, Indonesian Government liberalized the flour industry by removing the monopoly and, from that time forward, all national flour companies, have operated as flour producers who regulate the supply of raw materials, the production of their own brands as well as their distribution

For many years, there were only four flour Milling Industries operating in Indonesia, but since the last two years, the market is getting competitive with the entry of new producers and also penetration of low price flours from other countries.

This report will discuss various issues covering the development of domestic industry of wheat flour, key players, the market size and share, related government regulations on imports and trade, and increasing imports of wheat grain to meet the demand for flour millers.

2. Wheat flour: characterized by protein, moisture and ash contents

Wheat flour is the main material for noodle, bread, biscuit and various cakes. It is produced from wheat grains through milling process.

It is available in the market with the protein content of 8%-9%, 10.5%-11.5% and 12%-14%. It is important to choose the right type of wheat flour when preparing the wheat flour based food. Wheat flour with protein content of 12%14% is ideal to make bread and noodle, 10.5%-11.5% to make biscuit, pastry/pie and donut, and 8%-9% to make fried food, cake and wafer. Thus, a specific kind of wheat flour cannot be used to produce all kinds of food. The quality of wheat flour is also determined by the water content (moisture), ash content and other physical parameters, such as water absorption, developing time, stability and others.

Moisture. It is the level of water in the wheat flour. If the amount of moisture exceeds the maximum standard then the shelf life of the wheat flour shall decrease due to its quick damage, fungi attack, odorous.

* Low moisture content more expensive [right arrow] more expensive

* High moisture content [right arrow] cheaper

% Protein: Acknowledging the protein content within the flour, users are able to determine the kind of flour that is most appropriate to produce particular food products. Protein determines the final quality of the products. Protein is greatly related to gluten, where gluten itself is a mineral that makes flour chewy and elastic. The higher the protein, the higher its gluten content and vice versa.

* Low protein cheaper

* High protein more expensive

Ash content. The amount of ash contained in the wheat flour affects the end product, i.e. the color (crumb color for the bread and noodle) and stability level of the dough. The higher the ash content is the low quality of the wheat flour would be and on the contrary, the lower the ash content is the better quality of the wheat flour would be. This, however, does not have any relationship with the amount and quality of the protein.

Water absorption. The ability of wheat flour to absorb the water shall decrease if the water content of the flour (moisture) is too high or the storage place is moist. Water Absorption shall depend on the product to be produced. Higher water absorption is required for bread than for noodle and biscuit.

Developing time. If the flour is insufficiently mixed then it is called under mixing that results to flour output not at its maximum volume, the bread surface becomes rough, the bread is too elastic, the bread becomes odorous, the bread easily gets harden, the bread surface cracks off and grow thick. While if over mixing, it will impact to the bread being enlarged and flat, breed insufficiency of the bread, crumb color of the bread, the upper part of the bread becomes small, and the bread becomes inelastic.

Stability. It is the ability of the wheat flour to hold the dough stability as to be always at its perfect feature though it has passed the developing time. The stability of the wheat flour is resulted from the amount of the protein, the quality of the protein, and additives.

Like the most manufacturing processes, flour milling generates by-products. When wheat is milled and sifted, bran and pollard are from flour. These become ingredients for the animal-feed industries that blend the bran and pollard with, for example, corn, Soya meal, rice bran, fishmeal and bone meal. Nowadays local modern feed mills are using bran and pollard in palletized form. Bogasari also exports palletized bran and pollard to Korea, Japan, Taiwan and Middle East.

Since 1986, Bogasari also produces another by-product i.e. industrial flour, which is used by plywood industry and feed mills for aquamarine.

In the beginning, Bogasari only produces three types of flour:

* Cakra Kembar / Golden Crest (hard) protein 12-12.5%. (Made using hard wheat)

* Segitiga Biru / Blue Triangle (medium) protein 10.5-11.5%. (Made using a mix of soft and hard wheat)

* Kunci Biru / Gold Key (soft) protein 8-9% (Made using soft wheat)

Other than the three types of flour, Bogasari now produces other types of flour with the objective to satisfy the needs of customers in terms of the amount of protein content that is really required to obtain maximum results for particular types of food products.

PT Sriboga Raturaya also offers various brands of flours for different applications and different market segments. Characteristics of the products markets by this company is presented by the following table:

Product specification of wheat flours produced by Sriboga

Quality details Unit Naga Hijau Tali emas

Moisture % 13.00-14.0 13-14
Protein (Nx5.7) % 8.0-8.5 13-14
Ash % 0.50-0.55 0,50-0.55
Falling Number sec 300-650 300-550

Water Absorption % 53-58 62-65
Development Time minutes 2-10 5-10

Stability minutes 3-10 15-25
Tolerance Index BU 10-30 10-30


Amylogram Peak BU 700-1800 1200-1800
Temp of
gelatinization [degrees] C 59-62 59-62


Wet Gluten % 21-25 33-36
Dry Gluten % 7-8 11-12
Gluten Index % 90-99 90-99

Application Economical Premium
 multipurpose bread
 cookies, dry

Quality details Naga biru Beruang Biru

Moisture 13-14 13-14
Protein (Nx5.7) 9,00-10,00 10,00-0,50
Ash 0.5-0,6 0.50-0,55
Falling Number 300-600 300-600

Water Absorption 58-60 5-908
Development Time 3-5 3-5

Stability 8-10 10-15
Tolerance Index 20-40 15-30


Amylogram Peak 1000-1800 1000-1800
Temp of
gelatinization 59-62 59-62


Wet Gluten 25-30 25-30
Dry Gluten 8-10 8-10
Gluten Index 90-99 90-99

Application Wet noodle All baking

Source: Sriboga

3. Domestic industry slowed down in 2008

Established in 1971, Bogasari Flour Mills which is currently named PT ISM Bogasari Flour Mills, is the first flour mill operating in Indonesia. Prior to establishment of Bogasari Flour Mills, Indonesia had to import all its flour needs. But it was later realized that after arrival at Indonesian ports, the flour quality degraded, such as infected by lice or it had musty smell due to long time transportation. Therefore, the government of Indonesia, through BULOG (the state owned logistic body) decided to mill the flour locally.

Up to the middle of 1998, PT Bogasari, was only operated as flour miller which received orders for milling from BULOG (the stated own national logistic body) which was entrusted by the Government to take the control of wheat import and flour distribution in the country. The deregulation in the flour industry in June 1998, following the country's economic crisis, removed the monopoly in the distribution of wheat flour and imports of wheat. Since then flour producers are free to manage their own supply of wheat, production of their own brands and set up their own distribution system.

For many years, there were only four flour Milling Industries operating in Indonesia, namely PT ISM Bogasari Flour Mills (Jakarta and Surabaya), PT Pangan Mas Inti Persada (Cilacap), PT Sriboga Ratu Raya (Semarang), and PT Eastern Pearl (Makasar). Since the last two years, however, new flour millers including PT Fugui Flour & Grain in East Java, has commenced their operations. Despite the entry of the new comers in flour milling, Bogasari is presently still the largest miller controlling some 60% of wheat flour production in the country.

Domestic production of flours generally follows the fluctuation in domestic market demand as almost all of the productions are for local market. Data of the Ministry of Industry and APTINDO, (the Association of Indonesian Flour Millers) shows that production has slightly fluctuated with down trend in 2008.

Difficult conditions were encountered during 2008, with high wheat prices and declining purchasing power, particularly affecting the small and medium-sized enterprises (SMEs) segment. Wheat prices hit record highs on the international market during the year, as a result of shortfalls in production in major markets due to bad weather and a general steep rise in the price of food crops.

During 2008, global food stocks had fallen to their lowest for 29 years as competition for land use from biofuel crops spiked and global demand increased, driven by higher sales in China and India. Wheat flour millers operating costs were also impacted by high crude oil prices in the first half of 2008. Shipping costs moved significantly higher during the first half, falling back in the second half.

This combination of factors led to price rises, but in the domestic market, small-and medium-sized end-product producers were unable to pass on higher costs to consumers, resulting in a reduction in sales volume. Further complicating conditions for existing flour millers, new competitors emerged and the temporary removal of Indonesian National Standard (SNI) quality certification led to a rush of flour imports. These factors led to drop in production and sales volume of domestic flour millers by around 7% in 2008. The drop in the production of flours of APTINDO members was even bigger namely around 18% from 3.37 million tons in 2007 to only 2.76 million tons in 2008.

In 2006, the utilization rate of the production capacity of domestic wheat flour industry ranges from the lowest of 47.8% of PT Sriboga Raturaya and the highest of 71% of PT ISM BOGASARI FLOUR MILLS with an average of 69.1%. However in 2008, there was a sharp decline of the utilization rate of major flour millers to an average of 57.5%, with the lowest experienced by PT Panganmas Inti Persada of 33.5% and the highest by PT Eastern Pearl Utama Flour Mills of 69.5%. At the end of 2008, the production capacity of flour by APTINDO members was around 4.8 million tons. According to a statement of APTINDO executive, with the operations of new flour millers, the total production capacity was estimated at around 5.7 million tons at the end of 2008.

Our checking to companies revealed that the production volume also reflects the sales volume of each producer, as the quantity of flour produced by the companies follow the amount required by the market.

[insert table 2]

a. PT ISM Bogasari Flour Mills

Bogasari Flour Mills which is now operating as a business unit of PT Indofood Sukses Makmur, has been a major force in the Indonesian food industry for more than three decades. It is not only the largest integrated flour miller in Indonesia but is also the largest installation of its type in a single location anywhere in the world.

Bogasari has two wheat flour factories, one in Jakarta covering 33 hectares and one in Surabaya of 13 hectares, that provide modern, integrated facilities for milling, storage and [un]loading ports.

Bogasari Jakarta and Surabaya have milling capacities of 10,000 and 5,900 metric tons (mt) per day respectively. Moreover, Jakarta has a palletizing capacity of 110 mt per hour and Surabaya 38 mt per hour.

To provide an adequate supply of wheat flour, Bogasari Jakarta has 140 wheat silos with a total capacity of [+ or -] 4000,000 mt, pellet silos with a capacity of 69,000 mt and warehouses for the storage of goods with a capacity of 65,000 mt. Surabaya has 84 wheat silos with a total capacity of [+ or -] 214,000 mt, pellet silos with a capacity of 60,000 mt, and storage warehouses that can hold 35,000 mt.

In its operation, the group is supported by shipping operation with five vessels-2 of the panamax type and 3 of the handymax type. These are used partly to transport wheat from both the southern and northern hemispheres.

The Packaging Division in Citeureup, West Java, stands on 8 hectares of land and can produce more than 4.5 million cotton and polypropylene sacks, nearly all of which are used by the two wheat flour factories.

Delivery of unloaded grain can be in bulk or in pack (upon request). The bulk delivery is done directly from the silo to the truck with the speed of 8,000-10,000 MT per day. Meanwhile, the bagging plant consists of ten lines with the total packing capacity of 6,000 MT per day and is completed with digital scale. To ensure weight accuracy during the delivery, the Bogasari GTS provides three weighing bridges with the capacity of 80 MT per weighing bridge.

b. PT Eastern Pearl Flour Mills (EPFM)

PT Eastern Pearl Flour Mill (EPFM) is the new name of PT Berdikari Sari Utama Flour Mills, a long established flour millers which commenced operation in early 1982. In November 2005, the company's status was changed from domestic investment company to foreign investment with the entry of Interflour, a foreign company as the shareholder.

Situated in South Sulawesi, Eastern Pearl Flour Mill is the world's fourth largest flour milling plant. The mill comprises of a seaside Buhler mill and a new modern city side Ocrim mill.

The Buhler mill has a milling capacity of 240,000 MT per year. It is situated on the mill's exclusive wharf and houses the majority of the storage space.

The Ocrim mill was commissioned in 2001 and has a milling capacity of 270,000 MT per year. It is 400 m from the wharf and both mills are connected by a 250MT per hour belt conveyor. The Ocrim mill was built for expansion, with every floor of the mill having the space to install additional milling equipment to a capacity that would double the current output. The total storage for both the Buhler mill and Ocrim mill is 110,000MT.

EPFM introduced several brands i.e. Gerbang, Gunung, Kompas, and Gatotkaca, in additions to other brands Pirana, Serdadu Merah, Kawan Baru, and Teko Mas. Of these brands, KOMPAS is the most popular brand in the eastern Indonesia market.

c. PT Sriboga Raturaya

The flour mill PT. SRIBOGA RATURAYA is built on 25.860 m2 of area port of Tanjung Emas, Semarang. Manufacturing plant consists of 12 floors which broadly equals to 17.192,25 m2. It also has an intake tower as high as 52 m above sea level and a dock facility whose length is 180 m and 10 m into sea. The dock is equipped with an equipment to unload up to 300 ton /hour grain and an equipment of loading grain with 150 ton /hour capacities.

In conducting the production process, PT. SRIBOGA RATURAYA has advanced technology machines consisting of 2 lines of mill system with total capacities of 1500 metric ton grain per day. The extraction of about 74% in average yields 1110 ton of flour per day or equals to 28.860 ton each month which is equivalent by 1,15 million ton of @-25-kg bags per month.

After the production process, two kinds of main product are yielded, they are flour and additional products; Pollard and Bran. Both types of the product will be stored in bins before packed. The capacities of bins to be a depository of bulk flour is 3.360 ton, while the capacities of bins for the additional products accommodate 480 ton Bran and 200 ton Pollard.

At present PT. SRIBOGA RATURAYA has a warehouse to store the products packed in bags with 80.000 flour bags and 26.000 bags of additional products capacities. With special apparatus, the bags can be directly loaded to trucks or stored in a warehouse. Besides that, PT. SRIBOGA RATURAYA has a facility of palletizing brand and a special warehouse for bran which have become pallet with 5.000 ton capacities. This enables the machine operators to load to ship by using loading-crane.

According to the company's executive, PT Sriboga has a plan to increase the production capacity by 10% in 2009. The company also is also assessing the possibility to produce mocal Modified Cassava Flour by fermenting tapioca .

d. PT Panganmas Inti Persada

The flour mill PT. PANGANMAS INTI PERSADA was built on 60,000 m2 of area port of Tanjung Intan, Cilacap, Central Java. Commenced operation in 1997, it has a milling capacity of 1,000 MT / day with a silo capacity of 75,000 MT. It also has a dock facility whose length is 120 m and 10 m into sea. The dock is equipped with an equipment to unload up to 400 ton /hour grain . As presented by table 2, production of PT Panganmas Inti Persada slashed from about 100 thousand tons in 2007 to only 74,000 tons in 2008. Despite the lower market demand, the slump is mostly likely connected with the increasing market competition from local and imported low price flours.

4. New producers entering the market

According to data of APTINDO (the Association of Indonesian Wheat Flour Millers), there are 16 new investment wheat flour milling projects up to 2008. Many of the new flour mill projects are planned by current distributors/ importers of wheat flour, or are associated with major end users of wheat flour.

However, according to APTINDO the implementation of these projects are quite slow. There are 4 companies which have commenced operation in 2008, but not all of them produce regularly. PT Fugui Flour and Grain (foreign investment) in East Java has invested some US$ 37.5 million in a 270,000 tons flour mill in East Java. This company started operation in 2008, and presently markets their products mostly to their affiliate company involved in instant noodle manufacturing, known as " Mie Sedap". PT Jakarana Tama, another producer of instant noodle industry in North Sumatera has also started trial production of wheat flour. As stated by an executive of APTINDO, the production of the factory in North Sumatera has not been regular yet.

PT Berkat Indah Gemilang (BIG) has also started operation in 2008 and markets their products under Mustafa and Swordish brands. The company has a milling capacity of 100 tons wheat per day producing 60 tons flour per day. This company was recently accused as producing flour with quality below the national standard (SNI). These "under standard" products were reportedly repacked by major hypermarkets in Indonesia under their own brands.

PT Federal Pundi Kencana which plans to produce wheat flour in its factory in Cilegon, Banten, is a foreign investment company with a Malaysian based company (Federal Flour Mills) as their foreign partner.

PT Kwala Intan New Grain in Asahan, North Sumatera plans to invest some US$ 13.9 million in wheat flour milling as well in rice and corn milling. Several new investment projects are as followed :

New investments in wheat flour milling

Company Location Planned

Fugui Flour & Grain Indonesia, PT Gresik 270,000
Purnomo Sejati, PT Sidoarjo 120,000
Asia Raya, PT Sidoarjo 72,000
Berkat Indah Gemilang, PT Tangerang 43,000

Federal Pundi Kencana , PT (Federal Cilegon 600,000
Flour Mills)
Kwala Intan New Grain, PT Asahan 210,000
Bungasari Flour Mills, PT East Java 175,000
Cerestar Flour Mills, PT Banten 123,000
Daya Agung, PT Banten 600,000
Tri Pilar Pangan Utama, PT North Sumatra 250,000
Prima Anugrah Mulya, PT Banten 270,000
Jakaranatama North Sumatra

Company Planned

Fugui Flour & Grain Indonesia, PT US$ 37.5 MIL
Purnomo Sejati, PT Rp 24 billion
Asia Raya, PT Rp 10 billion
Berkat Indah Gemilang, PT

Federal Pundi Kencana , PT (Federal Rp 682 billion
Flour Mills)
Kwala Intan New Grain, PT US$ 13.9 million
Bungasari Flour Mills, PT US$ 18.7 mill
Cerestar Flour Mills, PT US$ 23 mill
Daya Agung, PT
Tri Pilar Pangan Utama, PT
Prima Anugrah Mulya, PT

Source : BKPM

5. Flour import tend to increase despite a slide in 2008

The last five years shows a fluctuation in imports of wheat flour with a rising trend , from only 307 thousand tons in 2004, 478 thousand tons in 2005 to 581 thousands tons in 2007 and down to 532,000 tons in 2008. Substantial import growth was experienced in 2005-2007 due to rising domestic demand and penetration of low price flour from Turkey, Srilangka and China. In 2007, total imports reached its peak of 581,000 tons then dropped by 8% in 2008 due to high wheat prices and declining purchasing power, In January- March 2009, imports of wheat flours were recorded at 94,129 tons.


While, volume of wheat flour imports declined in 2008, their value continues increasing. In 2008, the total import value was around US$ 271 million or more than one and half of the value in the previous year. This increase was strongly connected with the hike of grain price as well as wheat flour rice.

6. Export still small and declining

A very small amount of wheat flour are exported by local manufacturers including Bogasari and Sriboga. Export continued declining over the last 4 years as local manufacturers focused on fulfilling the domestic demand rather than export.

Official export statistics indicated the following export figures :

Export volume of wheat flour, 2005-2008

Destination 2005 2006 2007 2008

Republic of Korea 13,491 631 2,941 5,371
Timor-Leste 5,055
Singapore 21,768 23,911 2,515 1,032
Sweden 708
Japan 14,021 8,524 5,517 665
Others 13,711 14,107 3,739 552
Total 62,991 47,173 14,712 13,383

Source : BPS

The value of the export also declined except in 2008 which rose b y around 40% as a result of flour price hike.

7. Antidumping committee looks into imports

The Indonesian Antidumping Committee (KADI), has since November 2008 looked into allegations of dumping practices by wheat flour producers from Australia, Sri Lanka and Turkey.

Self-dumping petition filed since October 2008 by three companies, the PT Eastern Pearl Flour Mills, PT Sriboga Raturaya, and PT Inti Mas Persada. Wheat flour producers ask the Ministry of Trade immediately set incoming anti-duty (BMAD) 57% of the wheat imports, which indicated the dumping. According to this petition, the practice of dumping during the period 1 October 2007 to 30 September 2008 has resulted in the loss of three flour mills such as the decline in domestic market of 8.7% and 7.9% of production. While the market of imported products even increased 28%.

Executive Director of the Flour Producers Association of Indonesia (Aptindo) Ratna Sari Lopies explained in evidence submitted to the Kadi, the price of wheat sold by wheat exporters from the three countries is far cheaper than prices in the international market, which is around US$ 650 per MT . This figure already includes the cost of production and profit of around 10%. She cited, that, the ex factory price of flour from Turkey is US$ 421 per MT, therefore the margin dumping of flour from Turkey is US$229/MT or approximately 51.51%. Meanwhile, the price of Australia's wheat is US$ 513.6/ MT and the margin dumping is estimated at 25.5%. Similarly, according to APTINDO executive, dumping margin of Srilangka's flour is estimated at 38.5% with their export price of U.S. $463/MT.

Until mid of 2009 this case is still under investigation and KADI has not issued its decision yet regarding allegation of this dumping practices.

8. Domestic consumption dropped by 7%

Domestic market size which reflects the domestic consumption of wheat flour is the sum of sales of domestic industries plus import minus export. The following table shows that the domestic market size of wheat flours has increased strongly in 2006 and moderately in 2007, but in 2008, the market size dropped by around 7% from around 3.9 million tons in 2007 to only 3.7 million tons in 2008.

As discussed earlier, difficult conditions were encountered by flour millers during 2008, with high wheat prices and declining purchasing power, particularly affecting the small and medium-sized enterprises (SMEs) segment which in fact, the main users of wheat flour in Indonesia. Wheat prices hit record highs on the international market during the year, as a result of shortfalls in production in major markets due to bad weather and a general steep rise in the price of food crops.

This combination of factors led to price rises, but in the domestic market, small-and medium-sized end-product producers were unable to pass on higher costs to consumers, resulting in a reduction in sales volume.


9. Despite declining share, Bogasari still dominating the market

PT ISM Bogasari Flour Mills, the largest flour miller in Indonesia Indonesia has for many years dominating the market of wheat flours in Indonesia. In 2008, the company has encountered a difficult situation as reflected from the drop in their domestic sales from around 2.6 million tons in 2007 to only around 2.1 million tons in 2008. Consequently their market share is estimated to have reduced from about 65% in 2007 to only about 57% in 2008 (in volume term). Despite the reducing demand for their products due to lower purchasing power of end-users, the drop is also attributed to the emerge of new competitors in the market, and the temporary removal of Indonesian National Standard (SNI) quality certification led to a rush of flour imports.

Except Sriboga, declining market shares have also experienced by other flour millers i.e. PT EPFM, and PT Pangan Mas Inti Persada. Pangan Mas market share is estimated to have slashed by 6 point from 2.5% to only 1.9%.

In value terms, the market share of all flour millers which are members of Aptindo have experienced a downturn. Bogasari shares down to 60% from 67%, Sriboga 's share dropped slightly from 4.2% to 4%, PT EPFM from 12.9% to 11.6% as presented by the following table:

Estimated market share in terms of value, 2006- 2008

DESCRIPTION January-December

 2006 2007 2008


ISM BOGASARI FLOUR MILL, PT 8.997 11.614 14.944
EASTERN PEARL UTAMA FLOUR, 1.665 2.217 2.883
OTHERS 2.340

IMPORTED PRODUCTS 1.687 2.233 3.106
TOTAL CONSUMPTION 13.286 17.209 24.746



Source: Data Consult

10. Import of wheat grain

Wheat flour producers in Indonesia still heavily depend on imported wheat grains reaching more than 90% of their raw material.

The soaring price of wheat in world markets during 2007/08 reduced Indonesian wheat imports by 4.4 percent to 4.5 million tons. Imports are estimated to rebound in 2009, mostly driven by several new wheat millers entering the market.

The three top exporters of wheat to Indonesia are Australia, Canada and the United States of America. In the last two years, export of wheat from China to Indonesia has also increased. The following table also indicates that in terms of volume, Australia is the largest exporter to Indonesia, while in value term, Canada has highest export to Indonesia in 2008.

In value term imports of wheat from Canada increased at an average of 44% a year in 2003-2007, while in volume term, the growth was 38%. Imports from USA also shows a strong annual growth i.e. 46% in value term and 40% in volume term. In the meantime, imports from Australia indicates a relatively slow growth i.e. 10% in terms of value and only 3% in volume term.

The trade indicator in wheat between Indonesia and its main supplying countries are as follows:

Wheat trade indicators between Indonesia and its main supplying
countries, 2003-2007

Partner 2007 Share of 2007
countries Import import import
 value (%) volume
 (US$000) 000 tons)

Canada 387,543 33 1,489,496
Australia 370,383 31 1,505,042
USA 259,605 22 997,809
China 116,837 10 432,802
Federation 23,928 2 98,091
Pakistan 9,728 1 42,041
Argentina 6,341 1 26,420
Singapore 6,160 1 22,000
Ukraine 789 0 1,993
World total 1,181,313 100 4,615,694

Partner Unit 2003-2007 2003-2007
countries price Import Import
 (US$/ton) Value Volume
 growth growth
 (%/year) (%/year)

Canada 260 44 38
Australia 246 10 3
USA 260 46 40
China 270 62 42
Federation 244 242
Pakistan 231 212
Argentina 240
Singapore 280
Ukraine 396 (49) (60)
World total 256 15 6

Partner Ranking Share of Export Growth
countries Of partner partner of partner
 countries countries countries
 in world in world in 2003-2007
 export expo (%/year)

Canada 2 14 19
Australia 6 5 (1)
USA 1 27 14
China 9 2 17
Federation 3 12 49
Pakistan 27 0 (20)
Argentina 5 7 17
Singapore 69 -- 21
Ukraine 17 1 28
France 4 11 10
Germany 8 3 16
World total 100 15

Source : ITC

11. Distribution system

Up to the middle of 1998, the Government ruled that the import of wheat and the subsequent distribution of flour was completely under the control (monopoly) of BULOG, the state-owned distribution and logistics company. At that time wheat flour millers were set up as only millers to receive orders for milling from the Government through BULOG. In June 1998, Indonesian Government liberalized (deregulated) the flour industry by removing the monopoly and, from that time forward, all national flour companies, , have operated as flour producers who regulate the supply of raw materials, the production of their own brands and types of flour as well as their distribution

In order to support its strategy of ensuring the availability of flour, PT ISM Bogasari Flour Mills has formed depots in various strategic locations and appointed distributors in many parts of the country. This company has 33 distributor's area and 18 depots all over Indonesia, including Java, Bali, Sumatera and Kalimantan. PT Sriboga Raturaya has also appointed several distributors mostly in Central Java. It has no distributor outside Java island. PT Eastern Pearl Utama Flour Mills has strong distribution networks in eastern parts of Indonesia especially in Sulawesi.

Local producers of wheat flours distribute the flour through their appointed distributors. From distributors, the flour are re-distributed to wholesalers/ cooperatives or to retailers. Along with the development of modern retail outlet, such as hypermarket, supermarkets, minimarts particularly in major cities of Indonesia, an increasing volume of flour is now distributed through these modern outlets. However, the traditional distribution system still plays the major important role. The distribution system of locally produced wheat flour is presented by the following table:


12. Price Development

Since December (2007) wheat flour price has increased gradually. Wheat flour price increase was triggered by higher price of wheat as raw material. Wheat flour producers in Indonesia still heavily depend on imported raw materials. Cost for wheat grain constitutes more than 90% of their production cost. in 2007 the average wheat price increased significantly compared with the year before; effecting wheat-based food producers across the globe.

Increased demand from China and India combined with reduction of output in major wheat producing countries resulted in tightening of global wheat stocks to a historical low for a period of 29 years. Unfavorable weather conditions and increased land usage for competing crops due to the growth in the biofuel industry are partly to blame for the reduction of wheat output.

These inauspicious conditions were further exacerbated by the increase in shipping costs because of higher oil prices, forcing flour producers to increase selling price. As a result of this price hike, consumption of flour increased slightly in 2007, decelerating from earlier trends that saw increasing per capita consumption of wheat products as urban dwellers demonstrated a lifestyle preference for fast foods and other wheat-based foods. Higher flour prices combined with weak consumer spending power mostly affected small and medium enterprises (SME). With limited working capital, the SMEs were forced to reduce the volume of flour purchased or to shift to cheaper grades.


The comparison of domestic wheat flour price and international wheat grain price in the last three years is presented by the following chart.


13. Recent related government regulations

VAT & Import duties

Due to the soaring price of wheat in the international market during trade year of 2007/08, in February 2008 the Government of Indonesia through the Minister of Finance regulation No. 010/PMK.011/2008 temporarily removed the 10 percent Value Added Tax (VAT) for wheat and wheat flour and the import duty for wheat flour to maintain an affordable wheat flour price for consumers. Removal of the duties prompted 8 potential new wheat millers to delay milling and to import instead enter the market because the 10 percent VAT imposed on domestically produced wheat flour would add to production cost. The import duty for wheat is zero.

The 10 percent VAT on wheat and wheat flour was reinstated in January 2009 (Minister of Finance regulation No. 234/PMK.011/2008) and the 5 percent import duty on wheat flour was re-imposed on January 28, 2009 by the Ministry of Finance decision (No. 07/PMK.011/2009)..

Indonesian National Standard & Fortification of wheat flour

On January 24, 2008 the Ministry of Industry issued a regulation temporarily lifting the Indonesian National Standard (SNI) fortification requirements on wheat flour through Ministry of Regulation No. 02/M-IND/PER/1/2008 replacing the regulation Nomor 153/MPP/Kep/5/2001 on SNI for wheat flour as food materials.

Formerly In 2001, the Ministry of Industry issued a regulation regarding mandatory fortification of wheat flour, known as SNI 01-3751-2000. Under this regulation, all wheat flour traded in Indonesia should contain Iron, folic acid, zinc and vitamin B1 and B2 in sufficient amounts as stated in the SNI to assure nutritional value.

The compulsory policy of SNI for wheat flour was re-enforced in July 2008 when Government of Indonesia considered that the price of wheat in international market was stable. This re-enforcement is stated on the Ministry of Industry regulation No. 49/M-IND/PER/7/2008 dated July 14, 2008 and at the same time, the government enforces the new SNI on wheat flour i.e. SNI 01-3751-2006. There is basically no significant change with the former SNI (SNI 01-3751-2000) only the institution issuing the certification was changed from previously the standardization center of Ministry of Industry (Pustan Depperin) to private institutions which have been accreditated by national accreditation committee.

14. Market segmentation

End users of flour include noodle, pasta, bread, biscuit, cake, cookies , pastry industries and fried food. Based on data of APTINDO, the consumers of wheat floor in Indonesia consists of wet noodle industry/makers (30%), Biscuit and snack Industry (15%), bakery industry (25%), instant noodle industry (20%), Fried food (5%) and household consume about 5%.

Flour has been widely used as a food ingredient for small-scale/traditional businesses up to large modern industries as well as for household use. In fact, the largest users of flour in Indonesia are the small-scale/traditional users such as the wet & dry noodle industry .Some 65 % of flour users are small/traditional industries, 5% are households and while the remaining 30% are large and medium size modern companies. Using this composition of the market, the consumption of wheat flours by market segment is estimated as follows:

Market segment of wheat flour by type of end products, 2008

Type of products 2006 2007 2008 Share(%)

Wet noodle 1,139 1,179 1,097 30
Biscuit, cookies & snack 570 590 548 15
Bakery, pastry, cakes 950 983 914 25
Instant noodle 760 786 731 20
Fried food 190 197 183 5
Household 190 197 183 5
 3,798 3,931 3,655 100

Source : Data Consult

About 65 % of consumption are made by traditional small and medium enterprises which are involved mainly in wet noodle industry, bakery, cookies and cake industry. Meanwhile Large and medium size industries controlled the instant noodle industry with Indofood Sukses Makmur which is connected with Bogasari dominating the industry.

15. Market prospect

After a consumption slump of around 7% in 2008, wheat flour consumption in 2009 is expected to recover steadily and increase by around 8% due to additional demand derived from campaigning political parties distributing free basic foods during general and presidential elections this year. In the following years demand growth rate is expected to be at around 5- 6% a year. The following table is the projection for wheat flour demand over the next 4 years.

With the entry of new flour millers and penetrations of low price flours from other countries, the competition in the domestic market is estimated to be stronger. Despites its lower market share, Bogasari is estimated to keep its dominant role in supplying flours to the domestic market.

Product specification of wheat flours produced by Bogasari

Product Cakra Cakra Segitiga Kunci
specification Kembar Kembar Biru Biru

Moisture(%) Max 14.3 Max 14.3 Max 14.3 Max 14.3
Protein(%) 14.0-15.0 13.0-14.0 12.0-13.0 Max 11.0
Ash(%) Max 0.55 Max 0.64 Max 0.64 Max 0.64
Falling Number(sec) Min 300 Min 300 Min 300 Min 300
Gluten Wet(%) Min 34 32-36 28-32 Max 26
Water Absorption(%) 62-64 60-64 59-63 56-58
Recommended for Premium Breads, Brownies, Cookies,
 breads, pastry, pound cakes,
 rolls noodles, cake, biscuits
 doughnut martabuck, and
 doughnut wafers

Product Lencana Kastil Taj Mahal
specification Merah

Moisture(%) Max 14.3 Max 14.3 11.0-12.0
Protein(%) 11.5-12.5 12.5-13.0 11.5-12.5
Ash(%) Max 0.69 Max 0.69 1.2-1.6
Falling Number(sec) Min 300 Min 300
Gluten Wet(%) 25-31 30-33
Water Absorption(%) Min 58 60-62
Recommended for Economic Breads Indian food
 noodles, and rolls
 and fried

Source: Bogasari


Production of wheat flour, 2005-2008 (January-December)

Year Production Growth
 (000 tons) (%)

2005 2,924
2006 3,308 13.1
2007 3,365 1.7
2008 3,136 -6.7

Source: several sources.


Production of wheat flour by main producers, 2006-2008

Producers Prod.Cap 2,006

 (000 tons)

ISM Bogasari Flour Mills, PT 3,600 2,550
Eastern Pearl Utama Flour Mills, PT 640 477
Pangan Mas Inti Persada, PT 220 124
Sriboga Raturaya, PT 330 157
Sub-total APTINDO members 4,790 3,308
Others ( estimate)
TOTAL 3,308

 Prod.Cap Production
 (tons/Year) capacity
 rate (%)

ISM Bogasari Flour Mills, PT 3,600 71
Eastern Pearl Utama Flour Mills, PT 640 75
Pangan Mas Inti Persada, PT 220 56
Sriboga Raturaya, PT 330 47
Sub-total APTINDO members 4,790 69.05

Producers 2,007 2,008

 (000 tons)

ISM Bogasari Flour Mills, PT 2,570 2,070
Eastern Pearl Utama Flour Mills, PT 519 445
Pangan Mas Inti Persada, PT 101 74
Sriboga Raturaya, PT 175 167
Sub-total APTINDO members 3,365 2,756
Others (estimate) 380
TOTAL 3,365 3,136

 rate (%)

ISM Bogasari Flour Mills, PT 71 58
Eastern Pearl Utama Flour Mills, PT 81 70
Pangan Mas Inti Persada, PT 46 34
Sriboga Raturaya, PT 53 51
Sub-total APTINDO members 70.25 57.53

Notes: production is assumed equal to sales
Source: Various sources


Imports of wheat flour by country of origin, 2005-2008 (Jan-Dec)

Country of origin 2004 2005 2006 2007 2008


Turkey 23,964 44,236 57,554 172,825 228,775
Australia 143,296 187,541 176,214 152,659 146,370
Belgium 17,516 61,939 53,176 45,761 70,704
Sri Lanka 14,328 71,071 155,410 114,961 61,067
China 61,991 42,808 35,565 77,508 13,718
Japan 3,570 6,230 6,271 7,508 5,290
Singapore 4,865 13,277 4,310 7,426 4,792
Others 37,853 50,875 48,504 2,289 1,731
Total 307,383 477,977 537,004 580,937 532,447
Growth rate (%) 55.50 12.35 8.18 -8.35

VALUE (US$ 000)

Turkey 5,862 9,390 12,653 48,429 104,223
Australia 40,184 54,321 51,060 52,623 85,246
Belgium 4,550 16,345 13,652 14,283 39,278
Sri Lanka 4,011 20,297 43,818 38,639 33,254
China 14,487 10,314 8,419 21,905 4,708
Japan 802 1,548 1,576 2,265 2,873
Singapore 1,393 3,700 758 1,417 805
Others 8,121 12,094 11,174 756 876
Total 79,410 128,009 143,110 180,317 271,263
Growth rate (%) 61.20 11.80 26.00 50.44

Source : BPS


Export volume of wheat flour, 2005-2008

Destination 2005 2006 2007 2008

Republic of Korea 1.249 168.000 1.321 3.302
Timor-Leste 0 0 0 3.397
Singapore 4.857 5.788 1.062 1.314
Japan 5.001 2.761 2.301 444
Others 4.883 3.867 1.750 767
Total 15.990 12.584 6.434 9.224

Source : BPS


Market size of wheat flour, 2006-2008 (January-December)

 (000 tons)
Description 2005 2006 2007 2008

Sales of local industries 2,924 3,308 3,365 3,136
Import 478 537 581 532
Export 63 47 15 13
Domestic market size
(consumption) 3,339 3,798 3,931 3,655
Growth rate of 13.7 3.5 -7.0
 consumption (%)

Source: Data Consult


Estimated market share of wheat flour in terms of volume, 2006-2008

DESCRIPTION January-December

 2006 2007 2008


ISM BOGASARI FLOUR MILL, PT 2,515 2,563 2,070


OTHERS 0.0 0.0 10.4
IMPORTED PRODUCTS 14.1 14.8 14.6
TOTAL CONSUMPTION 100.0 100.0 100.0

Notes: *) excluding export sales


Import of wheat, 2005-2008 (January-December)

Year Volume CIF Value Average CIF price
 (000 tons) (US$ million) (US$/ton)

2004 4,544.3 838.6 185
2005 4,428.5 799.0 180
2006 4,482.8 816.1 182
2007 4,615.7 1,181.3 256
2008 4,497.2 1,975.5 439

Source: BPS


Import of wheat by country of origin, 2005-2008 (January-December)

Country of origin 2005 2006 2007 2008

Volume (tons)

Australia 2,439,822 2,905,094 1,505,042 1,758,404
Canada 889,644 1,006,243 1,489,496 1,258,755
United States of 118,518 217,533 997,809 1,100,646
China n.a 34,859 432,802 211,052
Argentina 429,377 -- 26,420 79,346
Russian Federation 442 74,706 98,091 42,497
Others 550,708 244,371 66,034 46,493
Total 4,428,511 4,482,806 4,615,694 4,497,193

Value (US$000)

Australia 445,069 524,927 370,383 782,447
Canada 165,430 187,176 387,542 565,083
United States of 25,300 43,420 259,605 493,675
China n.a 6,811 116,837 59,858
Argentina 73,502 -- 6,341 34,801
Russian Federation 74 13,243 23,928 18,766
Others 89,628 40,544 16,677 20,850
Total 799,003 816,121 1,181,313 1,975,480

Average CIF price (US$/ton)

Australia 182 181 246 445
Canada 186 186 260 449
United States of 213 200 260 449
China n.a 195 270 284
Argentina 171 n.a 240 439
Russian Federation 167 177 244 442
Average (total) 180 182 256 439

Source: BPS


Projected demand for wheat flour, 2009-1012

Year Projected demand
 (000 tons)

2009 3.911
2010 4.106
2011 4.353
2012 4.614

Source: Data Consult


Import value of wheat flours by country of origin, 2008

Turkey 44%
Australia 27%
Belgium 13%
Srilanka 11%
China 3%
Others 2%

Note: Table made from pie chart.


Import value of wheat flours by country of origin, 2008

Turkey 39%
Australia 31%
Belgium 14%
Srilanka 12%
China 2%
Others 2%

Note: Table made from pie chart.
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Publication:Indonesian Commercial Newsletter
Article Type:Market overview
Geographic Code:9INDO
Date:Jun 1, 2009
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