JAKARTA, INDONESIA — Demand for wheat-based food in Indonesia is recovering as the government relaxes social distancing measures with COVID-19 cases declining.

As result, the country’s wheat imports are projected to rebound in the 2021-22 marketing year to 10.6 million tonnes, up 2% from an earlier forecast issued by the Foreign Agricultural Service of the US Department of Agriculture (USDA).

Indonesia depends entirely on wheat imports to supply its large flour milling industry, which consists of 30 mills with installed capacity estimated at 13.1 million tonnes (wheat equivalent), up from 12.8 million tonnes in 2020-21, the report said.

“However, running capacity is currently only averaging 60% to 70%, a decline from 80% in 2018-19,” the USDA said. “As more mills open and expand capacity, competition in the market is expected to further increase price sensitivities, already a major factor in determining the source of imports.”

The report noted that amidst overall high freight rates, Australia has a significant competitive advantage over other wheat suppliers with its much closer proximity and shorter lead time to export wheat to Indonesia.

Australia, which is producing its second consecutive bumper wheat crop, regained its dominant position as a wheat supplier in 2020-21, accounting for 36% of Indonesia’s imports, according to the report. Ukraine captured 25% of the Indonesian market and Canada had a market share of 23%.