Summary
Indonesia is one of the major producers of various agriculture products such as crude palm oil, cocoa, coffee, rubber, tea and pepper. Currently, around 65 million hectares of land is cultivated and there are additional 71 million hectares potential land that can be utilized for paddy fields, horticulture farms or plantations. The Indonesian government has allocated the state budget of Rp. 8.17 trillion ($817 million) and Rp. 8 trillion ($800 million) in 2009 and 2010 respectively for agricultural development in Indonesia. Ministry of Agriculture will focus the agricultural development on expanding cultivated land for major agriculture commodities and maintaining the self-sufficiency of food. This report covers an overview of the agricultural chemicals (fertilizers and pesticides) industry in Indonesia.
Market Demand
With a population of 230 million people (2008), Indonesia is the largest archipelago country in the world. Forty-one percent of the nation's workforce is employed in the agricultural sector. Around 34 percent of the total land (approximately 65 million hectares) is cultivated, of which 19.2 million hectares are used for food crops (rice, corn, soy bean, cassava, sweet potatoes, peanut and green bean), 19.1 million hectares for plantations (cocoa, coffee, palm oil, clove, sugarcane, tea, coconut, rubber), and the rest are used for horticulture, fruit, lumber, etc. Given the country's extensive agrarian base, the agricultural chemicals industry has become one of the expanding markets in Indonesia.
In fiscal year 2009, the Government of Indonesia (GOI) budgeted Rp. 8.17 trillion ($817 million) for agricultural development. In 2010, GOI has allocated Rp. 8 trillion ($800 million). The fund will be used to increase food productivity, expand rice fields, and provide research to support the improvement of agricultural productivity, expansion of cultivated land, job creation, poverty elimination, and development of capital institutions in rural areas.
In addition, GOI also allocated public funds for a fertilizer and seed subsidy. The subsidy is intended for small farmers, who utilize land for agricultural activities smaller than two hectares. According to the Central Bureau of Statistics, there are 17.83 million small farmers which produce rice, corn, soybean and sugarcane. In 2008, the subsidy was Rp. 15.1 trillion ($151 million) which was increased to Rp. 17.53 trillion ($175.3 million) in 2009. Next year, the government has allocated Rp. 11.29 trillion ($112.9 million) from the state-budget for this subsidy.
Fertilizer:
Fertilizer consumption in the agricultural sector increased steadily for the last five year as shown in the table below. Urea has been the main fertilizer used by farmers in Indonesia. The country's urea production in 2008 reached 6.2 million tons per year, while demand from the agricultural sector reached 5.7 million tons the same year. Currently, installed annual capacity of Indonesian urea factories has reached eight million tons, while production capacity for superphosphate (SP-36), ammonium sulphate (ZA), and NPK are one million, 650,000 and 910,000 tons per year respectively. This production capacity has remained unchanged for the last five years.
Trade and distribution of fertilizer is highly regulated by the government. Subsidized fertilizers are fertilizers which are procured and distributed with the highest retail price (HET) set by the government. In 2009, subsidized fertilizer consisted of 4,550,000 tons urea, 1,000,000 tons SP-36, 923,000 tons ZA, 1,300,000 tons NPK and 450,000 tons organic fertilizer. The HET for urea is Rp. 1,200 while for nonsubsidized urea is Rp. 6,000 – Rp. 8,000. In 2010, GOI has allocated that subsidized fertilizer will increase to six million tons urea, one million tons SP-36, 950,000 tons ZA, 2.2 million NPK and 910,000 organic fertilizer.
There are more than 650 distributors of subsidized fertilizer registered with the five producers of fertilizer (PT Pupuk Kujang, PT Pupuk Kaltim, PT Pupuk Sriwijaya, PT Petrokimia Gresik, and PT Pupuk Iskandar Muda). These distributors sell subsidized fertilizer in their respective areas to registered retailers.
Non subsidized fertilizer and other products (organic, hormone growth, soil conditioner, etc) are sold through distributors to private and state-owned plantations/farms, hobbyist, and nurseries directly. These distributors do not have to register with the government.
Pesticides:
The growth of Indonesian agribusiness has increased the demand for pesticides. The total market for pesticides in Indonesia in 2008 reached Rp. 5 trillion ($500 million), and with locally produced local pesticides holding about 30% market share. Indonesia’s production capacity of pesticide amounted to 216,370 tons per year, including insecticides 110,350 tons, fungicides 33,800 tons, herbicides 49,320 tons and other products 22,900 tons. However, actual pesticide production from more than 15 companies are still below the production capacity.
Domestic production cannot meet the total demand for pesticides which reached 92,048 tons in 2008. The biggest consumers of pesticides are palm oil plantations (30,581 tons) and rice farms (20,729 tons). Imported pesticides dominate the market, with imported herbicides 82% total consumption, fungicides 60% and insecticides 22%.
The high price of pesticides has encouraged the distribution of "false" pesticides containing amounts of paraquat, a quaternary nitrogen herbicide widely used for broadleaf weed control, beyond the limited quantity permitted. These false pesticides have been imported from various countries such as China, Malaysia, Hong Kong, India, and Taiwan. Around 15-20% from 1,500 registered pesticides are false pesticides. The illegally imported false pesticides resulted in substantial financial losses to farmers, since the crops produced by using illegal pesticides are hazardous to human health. The rampant circulation of illegal pesticides also reduced the market share of the authentic pesticide industry.
By Anasia Silviati
