WASHINGTON, D.C., U.S. – Indonesia’s self-sufficiency campaign for rice and corn is causing market distortions and raising domestic prices well above international levels, according to a report from the Foreign Agricultural Service of the U.S. Department of Agriculture (USDA).

The self-sufficiency campaign includes “clumsy market interventions, import restrictions and overly optimistic domestic production forecasts,” the USDA said.

The Ministry of Agriculture (MOA) is not allowing feed corn imports and will not issue import recommendations for substitutes such as feed grade wheat, barley or sorghum. This has resulted in high corn prices of $311 per tonne, compared to the government reference price of $296 per tonne.

Wheat has become highly competitive as a feed ingredient. Feed mills have been buying imported wheat from flour mills. In October, the ministry said it would allow 200,000 tonnes of feed wheat imports as a complementary ingredient for feed production.

“Local feed millers purchased the full quantity, mostly of Black Sea origin, and the imported wheat arrived in late October through early November,” the USDA said. “However, alarmed about the potential for more imported wheat to enter feed channels, which would be counter to MOA’s corn self-sufficiency drive, reportedly MOA is seeking measures to further clamp down on feed wheat imports next year.”

As a result, the 2017-18 wheat import forecast remains unchanged at 10.5 million tonnes. Wheat flour imports in the first part of 2017 decreased 74% because of an additional 5% duty.

Corn consumption in 2017-18 is slightly increased due to growing demand from wet mills. A new corn starch wet mill in East Java started production in April and is running at full capacity of 600 tonnes of corn per day. It produces corn gluten meal and corn gluten feed in addition to starch. The facility uses only imported corn because of its better quality and higher protein.

“To obtain approval to import corn for wet milling, mills must declare that the imported corn will only be used for industrial food use and will not be used as a feed ingredient,” the USDA said.

The Indonesian Bureau of Logistics (BULOG) is struggling to meet its target for rice procurement. Prices are well above the government purchasing price, and competition with private rice millers for domestic supplies is hurting BULOG’s efforts.

As a result, BULOG lowered its procurement target to 2.5 million tonnes from 3.7 million tonnes. It is required to maintain a minimum year-end stock level of 2 million tonnes.

“BULOG’s stocks were 1.2 tonnes at the end of November 2017,” the USDA said. “However, MOA maintains its steadfast stance that imports won’t be allowed, even for BULOG to rebuild stocks and stabilize climbing prices.”