Freshly-produced Indonesian soymeal: Building a Soybean-Crushing Industry

Indonesia is South-East Asia’s second-largest soymeal consumer, but it has no crushing industry. This is partly because it is one of the smallest soy oil consumers, due to the abundance of cheaper palm oil. This limits a crusher’s revenue from selling soy oil domestically, and requires domestic crushers to move soy oil largely into the export market (similar to Malaysian soybean crushers).

“Investments in soybean crushing facilities in Indonesia could generate positive margins and could be economically feasible if the produced soy oil is exported,” says Oscar Tjakra, Senior Analyst – Grains & Oilseeds. “South Asian countries are suitable export destinations due to their strong soy-oil import demand growth and their proximity to Indonesia.”

Rabobank sees opportunities for establishing soybean crushing in Indonesia. This is due to:

1. The large and increasing demand for animal feed in Indonesia
2. Indonesia’s proximity to large soy oil importers
3. A good sales network and efficient logistics for edible oil exports
4. Weather and trade policy uncertainties

The strength of the rupiah will also play an important role in crusher margins, as soybean needs to be imported for processing. Similarly, the rupiah will also determine the competitiveness of Indonesian soy oil exports to South Asia, compared to South America.

For soybean crushing in Indonesia to work, several factors are needed:

A large scale facility benefits from economies of scale, Soybeans origination and efficient handling capabilities from vessel to crushing plant, Domestic soymeal sales and distribution capabilities, and An edible-oil export sales network and efficient logistics (already in place in some Indonesian ports).