Boston, MA -- (SBWIRE) -- 07/04/2013 -- Overall, we hold an optimistic outlook towards Indonesia's agriculture sector and see significant growth opportunities in sub-sectors such as livestock, palm oil and cocoa. However, while we believe that the government's goal to reach self-sufficiency in rice by 2015 is attainable, we are less confident about other commodities such as sugar and corn. We also highlight that the country's aim to become the second largest coffee producer in the world by 2015 is unrealistic. Much of our scepticism is owing to the lack of proper infrastructure and the existence of a large number of low-technology, smallscale farmers. We believe that the shift from raw commodity exports to refined exports (especially for palm oil and cocoa) will warrant more public and private investment in order for the raw inputs industry to keep pace with downstream industries. Wilmar, Golden Agri Resources and Barry Callebaut's investments are clear signs of the growing interest in these sectors.

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Key Forecasts

- Rice production growth to 2016/17: 21.2% to 44.0mn tonnes. We believe Indonesia will attain its goal of being self-sufficient in rice in the coming years, as the country is increasing initiatives to boost production. Growing use of high-yielding paddy varieties and agriculture intensification will help output record higher growth rates than in the past.
- Sugar consumption growth to 2017: 31.8% to 6.7mn tonnes. Consumption growth will continue to outstrip production growth, driven by rising incomes, greater urbanisation, population growth and the growing demand from the food and beverage industry.
- Palm oil consumption growth to 2017: 43.0% to 10.3mn tonnes. We expect new export tax regime changes to increase the amount of crude palm oil channelled into domestic refineries, which is likely to boost domestic consumption in the medium term. Industrial demand will remain subdued owing to a lack of government subsidy support for biofuels.
- BMI universe agribusiness market value: US$59.4bn in 2013 (up from US$58.7bn in 2012; forecast to grow annually by 3.5% on average to 2017).
- 2013 real GDP growth: 6.1% (down from 6.2% in 2012; forecast to grow annually by 6.3% on average between 2012 and 2017).
- 2013 consumer price index: 4.7% year-on-year (y-o-y) (similar than in 2012; forecast to grow annually by 4.9% on average between 2012 and 2017).
- 2013 central bank policy rate: 5.75% (similar than in 2012; forecast to average 6.50% from 2012 to 2017).

Key Revisions To Forecasts

- Corn production forecast revised up, to 8.8mn tonnes (compared with a previous forecast of 8.5mn tonnes). This is mainly due to slightly higher than expected area harvested.

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