Agriculture

Natural Gift

Agriculture in Indonesia

As of early 2017, the Indonesian agriculture sector comprised nearly 14% of GDP, or USD130 billion, making it the third-largest economic sector in the country. Over 32% of the local […]

As of early 2017, the Indonesian agriculture sector comprised nearly 14% of GDP, or USD130 billion, making it the third-largest economic sector in the country. Over 32% of the local labor force, or 49 million people, is employed in the agriculture sector, and 30% of the total land area of the country is used for farming or other agricultural purposes.

Indonesia’s most important agricultural commodities are palm oil, natural rubber, cocoa, coffee, tea, cassava, rice, and tropical spices. According to figures published in 2016, Indonesia is the world’s largest producer of palm oil, cloves, and cinnamon; the second-largest producer of nutmeg, natural rubber, cassava, vanilla, and coconut oil; the third-largest producer of rice and cocoa; the fourth-largest producer of coffee; the fifth-largest producer of tobacco; and the sixth-largest producer of tea. Though the vast majority of Indonesian farming activity is run by large corporations, there are many smallholder farms and traditional agricultural household. Typically, large plantations are either owned by state or private companies and focus on exports such as palm oil and rubber, while smaller operations supply local and regional food consumption with products such as rice, soybeans, fruit, and vegetables.
Indonesia’s extensive biodiversity includes 400 fruit species, 370 plant species, 70 tuber species, and more than 55 types of spices. With only a fraction of the country producing a small portion of potential crops, the Ministry of Agriculture has demonstrated a commitment to building the sector further. Melinda Tunjung Wulan, Country Manager of Kubota Machinery Indonesia, mentioned in an interview with TBY that the government, “gives farmers free access to tractors and combine harvesters, as well as other types of agricultural products, to help promote the development of this market.” According to Wulan, the level of mechanization in provinces such as South Sulawesi, South Sumatra, and East Java is already high, with the bulk of individual farmers already using technology in their operations.

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In 2017, a trade mission led by the Ministry of Agriculture of Indonesia to Malaysia offered to sell the smaller economy chicken and duck from micro-, small-, and medium-sized farms. Having since reached an agreement, Indonesia expects to start the export of poultry by the end of 1Q2018. The announcement comes just as several farms in West Java have been certified as free from avian flu by the Indonesian government. To meet Malaysia’s demand for poultry, Indonesia could export up to 30,000 chicks and 10,000 laying ducks per month.
Where poultry has taken off, Indonesia has struggled to reap profits from livestock, and cattle in particular. This has led to the launch of initiatives to identify prime cattle run locations, as well as the formation of partnerships with palm oil producers and cattle breeders. Still, there remains a need to establish an efficient logistics chain to ensure convenient supply and market access for cattle producers. Aside from the potential to pair cattle with palm oil production land that is not in use, the “semi-intensive” grazing method has been proposed by Indonesia-Australia Commercial Cattle Breeding Association (IACCBA) program director Dick Slaney. “A lot of Indonesia has great potential for grazing cattle,” he told the press in late 2017. “The dry land areas east of Java and east of Sumatra are primarily where the grazing of cattle can be reasonably effective.” So far, the entity has introduced 1,200 heifers and 70 bulls to the area, with calves already weaning in late November 2017.

Regardless, in order to meet growing domestic and export demand, Indonesia must produce significantly more chicken and beef over the next five-year period. With the antibiotics as growth promoters (AGP) ban coming down upon the country in January 2018, increasing production must also be done without the use of artificial methods. According to recent figures, Indonesia will need to supply 4.2 million tons of broiler meat by 2022, which amounts to 1.1 million tons more than current demand. Annual beef supply must also expand to 914,000 tons by 2022 from 809,000 in 2017, which almost certainly spells an increase in imports.

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