Esther Samboh, Jakarta – The government has temporarily scrapped taxes on soybean imports to make more affordable. Soaring prices have made soybean cake (tempeh) and tofu makers threaten to stop production.
Coordinating Economic Minister Hatta Rajasa said on Wednesday that the previous 5 percent import duty on soybean would be scrapped until the end of the year ahead the planned strike from Wednesday to Friday. Indonesians are big consumers of soybean derivatives from tempeh and tofu to cooking oil and soy milk.
"We urge traders to adjust prices according to the scrapped import duties and not take advantage of it," Hatta told reporters after a coordination meeting with economic ministers on the country's food security.
The meeting also agreed to allow tempeh and tofu makers' cooperatives to import soybeans on their own. The government will ask state banks to help the financing and state logistics firm Bulog to cope with the import procedures. Importation of soybeans was previously conducted by private entities.
"By allowing tempeh and tofu makers cooperatives to import, they can get soybeans from the cheapest source," Deputy Trade Minister Bayu Krisnamurthi said.
Indonesia imports 60 percent of its 2-million-ton annual soybean consumption mainly from the United States, which is seeing record soybean prices amid the worst drought in over half a decade. Other leading growers such as Brazil and Argentina are also short on supply due to water shortages.
The retail price of imported soybeans is currently at about Rp 8,000 per kilogram, up about 50 percent from what had been recognized as the norm price of about Rp 5,000 per kilogram.
The Indonesian Tempeh and Tofu Producers Cooperatives Association (Gaptindo) head Sutaryo called the elimination of 5 percent import duty on soybeans a temporary solution.
"The price will still be high. The association and the government still need to find a long-term solution to this price problem," he said, adding that the producers would continue to go on strike as planned until July 27.
The permanent solution for the rise in soybean prices would be to increase domestic productivity in order to be self sufficient and no longer dependent on external markets. Imported soybeans cost less than those locally produced, which sell for about Rp 9,000 per kilogram.
Indonesia needs an additional 2 million hectares of productive land to make the country self-sufficient in key commodities, of which 500,000 hectares should be allocated for soybean cultivation, Agriculture Minister Suswono has said.
The Indonesian arm of one of the world's top agricultural firms, Cargill, warned that prices may soar even higher if the US drought persists in the next four weeks, given that August is the defining period for soybean industry in the country.
"If there is not enough rainfall in August, we will see lower-than-average soybean crops and a possible shortage," PT Cargill Indonesia country head and general manager Jean-Louis Guillou said in Jakarta on Wednesday.
Cargill Indonesia, one of the main soybean importers in Indonesia, had no plans to reduce the volume of its soybean imports even though drought had affected crops in the US, Cargill Indonesia corporate affairs director Rachmat Hidayat said.
This year, the company plans to import between 240,000 and 250,000 tons of soybean, up 9 to 13.6 percent from 220,000 tons last year. About 90 percent of them are from the US, while the rest are imported from Brazil and Argentina.
Guillou said soybeans from the US were preferred in the Indonesian market due to its larger size and whiter color. Cargill sells imports to 30 wholesale buyers across Indonesia.
With tempeh and tofu makers allowed to import soybeans directly, Sutaryo of Gaptindo said Bulog would assist the importation. Small traders should not have to compete with existing importers get fair prices.
Bank Indonesia (BI) has estimated that the soybean price surge will be temporary, without an alarming impact on overall consumer prices.
Soybeans and derivative product account for about 8 percent of overall inflation, but it is a big component of the volatile food prices component, BI spokesman Difi A. Johansyah said. (tas)