Indonesia Country Commercial Guide
Learn about the market conditions, opportunities, regulations, and business conditions in indonesia, prepared by at U.S. Embassies worldwide by Commerce Department, State Department and other U.S. agencies’ professionals
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Agriculture
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Overview

Indonesian agricultural imports surpassed $28 billion in 2022, as wheat, soybeans, rice, beef, fresh fruit, and various feed ingredients were the main categories. Australia, the U.S., Brazil, China, and India are the top five suppliers of agricultural products to the market, representing about 58% of the total imports by value.

Indonesia is the 11th largest export destination for U.S. agricultural products, and the U.S. was the second-largest exporter of agricultural goods to Indonesia, accounting for $3.3 billion. The top U.S. agricultural exports to Indonesia are soybeans, dairy products, distillers’ grains, cotton, wheat and beef products.

According to the USDA, soybeans and dairy products were the top products exported to Indonesia by the United States and had the largest year-over-year increases in 2022. Exports of soybeans increased by $164 million (15 percent), and dairy product exports increased by $135 million. Exports of wheat, distillers’ grains, and cotton also performed well, increasing by $45 million, $45 million, and $18 million, respectively. Price increases for bulk commodities were responsible for much of the export value increase in 2022, but some commodities also had notable volume increases, including wheat (13 percent) and dairy products (14 percent).

President Jokowi in his official statement in early 2023 mention that Indonesia needs supply of more than 13 million tons of fertilizer. However local production so far only accommodate 3.5 million tons and current import are only 6.4 million tons. So, the country still lacks 3 million tons of fertilizers. With this high demand, and lack of supply the ongoing problems is the high price of fertilizer. With Russia being one of the biggest sources of fertilizer for Indonesia, and the ongoing Russia-Ukraine war, the country is now impacted with the short supply and high price of fertilizer. Every year the GOI prepares subsidized fertilizer to Indonesia farmers. In 2022 the type of subsidized fertilizer slimmed down to only UREA, NPK and a modest amount of organic fertilizers and soil amendment.

GOI efforts to accelerate the horticulture industry in Indonesia included the establishment of the Agricultural War Room (AWR) in 2021 which connected to Agricultural Operation Room (AOR) in provincial government. In 2022 the system received Digital Innovation Award from President Jokowi, and in 2023 the system empowered with new Data Collection Platform (DCP) system that can collate agricultural data from various sources and systems.

GOI also launched The National E-agriculture Strategy Roadmap, with the vision that by 2027 Indonesia will have an integrated database for farmland and farmers, as well as providing a digital early warning system for disasters that threaten agricultural production, and run a system for agricultural data collection, extraction, and analysis.

Indonesia’s startup ecosystem has seen particularly rapid growth in AgTech. Starting in 2021 with GOI launched Indonesia Maps of Agricultural Commodities Export (IMACE) application to help the industry players, buyers, farmers to become more resilient and inclusive. 2022 also the year where several startups launching their platform to accommodate the farmers, fisheries in rural areas of Indonesia. Namely, TaniHub, Ekosis, GoKomodo, Aruna, E Fishery, Fish log. Indonesian AgTech actors have helped advance many aspects of traditional agriculture and made important contributions to the needed transformation of the agriculture sector starting from production, supply chain, market access, and transaction to financing solutions.

PLN, Indonesian Electrical Company, successfully launched their “Electrifying Agriculture” (EA) program in 2021 for Agriculture, Horticulture, Plantation and Farm in Indonesia. In the first quarter of 2023 the program successfully converses the current fossil fuel usage, to modern farming electricity-based technology. As of March 2023, there are 217.818 customers as part of the program. The technology conversion mostly for milling machine (Penggilingan Padi) from diesel to electricity which resulted in efficiency, cleaner in milling process, and decrease in sound pollution.

Leading Sub-Sectors

Beef & Dairy Products: U.S. dairy exports shows strong sales in Indonesia, where year-over-year gains in exports increase by 40 percent. As the economy continues to recover, consumer demand is expected to return to pre-pandemic levels, creating great opportunities for more imports. U.S. beef is also experiencing growth in usage in traditional Indonesian dishes such as soto (meat soup in coconut milk) and bakso (meatballs) as well as retail sales. However, the sales of high-end hotels, restaurants, and institutions (HRI) have still been negatively impacted since the start of the pandemic.

Opportunities & Challenges

Snack Foods: Modern retailers report strong demand for snack foods at locations all over the country. Imported packaged food products are predominantly sold through supermarkets or hypermarkets. Although registration requirements for retail packaged products can be burdensome, exporters who find the right importing partner are often rewarded with little competition.

Indofood, Mayora Indah, Garuda Food Group, and Wings Group are some of the largest food processors in Indonesia, producing a variety of goods including snack foods, noodles, dairy, and beverages. Many processors rely on overseas suppliers to meet their demands for raw materials such as wheat, milk powder, chipping potatoes, onion/ garlic powder, cheese, raisins, and corn starch. International brands have expanded their stores to meet demand from an increasingly large middle class and younger and more urban consumers who are shifting their consumption trends to a healthier, on-the-go lifestyle. Therefore, many of these brands now incorporate higher-quality imported ingredients.

For years, Indonesia has been importing fertilizers. In Indonesia and many countries, it is supported by government subsidies to enhance its usage. GOI mostly subsidizing chemical fertilizer to the farmers. In 2022 GOI through the Ministry of Agriculture is starting to increase organic fertilizers subsidy and for the first time in 2023 subsidize soil amendment and bio stimulants. However, with the combination of organic fertilizers, soil amendments and bio stimulants, the percentage are still less than 3% of the total IDR 24T or USD 1.2billion Fertilizer Subsidy. High potential market for US products such as Bio Stimulants, Soil Amendment, Water retention and other microbiome-based fertilizer. GOI are encouraging greater take-up of composting and other natural farming techniques in Indonesia even though it’s challenging due to a long-standing reliance on chemical fertilizers and pesticides.

The application of appropriate technologies and innovations can assist Indonesia in achieving its food security. Transformation of technological innovations will continue to be an essential driver of future agricultural growth. Cleaner energy for farming machines and technology for the irrigation sector is often locked into a vicious cycle of poor performance and infrastructure degradation.

Given the geographic distribution, food distribution & logistics remains a challenge. In order to develop a sustainable and resilient food system, invest in transportation for distribution especially in Sulawesi and Kalimantan are key.

With an estimated population of 273 million, Indonesia is the fourth-most populous country in the world and has the largest economy in Southeast Asia. Indonesia’s growing middle class provides excellent growth opportunities for U.S. exports.

Resources

Interested parties may contact Commercial Specialist Trianie Ananda at Trianie.Ananda@trade.gov