Indonesia Lowers Sugar Output Forecast as Prices Fall

By Yoga Rusmana and Naila Firdausi

Dec. 18 (Bloomberg) -- Indonesia, Southeast Asia’s largest sugar buyer, lowered its 2009 production forecast by 12 percent, expecting low prices to deter farmers from harvesting sugar cane.

Sugar processed from domestic crop may total 2.9 million metric tons, compared with 2.78 million tons this year, said Achmad Manggabarani, plantation director-general at the farm ministry. The government had forecast in April an output of 3.3 million tons.

Falling domestic prices this year prompted farmers to plant fewer acres to cane. The price of white, or refined, sugar was at 4,950 rupiah a kilogram (46 cents) in August, less than the 5,000 rupiah minimum price set by the government, Kompas newspaper reported in August.

The price “is not giving incentives to farmers to boost output,” Manggabarani told a breakfast meeting of officials from ministries of trade, industry, agriculture and state enterprises in Jakarta today. The output will top estimated domestic demand, eliminating the need for white sugar imports, he said.

Indonesia’s sugar production from farms is used for domestic household consumption, estimated at 2.73 million tons this year. Industrial users must import refined sugar or buy from domestic processors of raw sugar purchased overseas.

The country, estimated to import 1.93 million tons of raw and white sugar this year for household and industrial users, may purchase 20 percent less in 2009, said Bayu Krisnamurthi, deputy to the Coordinating Minister for Economic Affairs in charge of agricultural affairs.

Stockpiles

The nation may hold 1.1 million tons of refined sugar by the year-end, equal to five months of consumption, Manggabarani said.

Makers of food and drink in Indonesia may use 1.85 million tons of refined sugar next year, Industry Minister Fahmi Idris said at the meeting this morning, without giving comparative figures for this year.

In 2008, Indonesian refiners bought 1.38 million tons of raw sugar to be processed locally, while food companies bought from overseas 500,000 tons of refined variety, the minister said. He didn’t give the estimates for next year’s imports raw.

“Hopefully in five years we won’t have to import raw and refined sugar because of higher cane output,” Idris said.

The country is planning to convert some old mills to plants that produce raw sugar from sugar cane for refiners’ needs, he said, without giving details.

Indonesia will stop allowing new investments in sugar refineries as current capacity is higher than demand, Muhammad Lutfi, chairman of Indonesia’s investment coordinating board, told reporters after the meeting today.

The Southeast Asian country has seven licensed refiners, five of them active, Minister Idris said. The companies, which have a total capacity of 2.87 million tons, produced 1.2 million tons of refined sugar this year to November, he added.

To contact the reporters on this story: Naila Firdausi in Jakarta at nfirdausi@bloomberg.net; Yoga Rusmana in Jakarta at yrusmana@bloomberg.net.