Indonesia’s state-owned PT Pupuk Indonesia will invest more than $6 billion to boost fertilizer supply as part of a bid to temper food costs.
The company plans to spend 100 trillion rupiah ($6.4 billion) over the next five years, which includes a new $1.2 billion ammonia and urea fertilizer plant in Fakfak in Papua province and about $640 million of upgrades to its old Palembang complex, said President Director Rahmad Pribadi.
“We need it to improve food security in our eastern regions by providing affordable fertilizer with less logistic cost,” Pribadi said in an interview in Jakarta.
The expansion plan could help the nation boost food output for its nearly 280 million people. Rice imports have already surged sevenfold last year, and the government is issuing more import permits this year as production lags demand. Volatile food prices rose 8.47 percent in February, the fastest pace in more than a year, as the cost of staples like rice and chili climb.
Construction of the Fakfak plant will start next year with production set for early 2028, Pribadi said.
Here’s more from the interview:
• Company is considering debt financing or strategic equity partners to fund the expansion
• Pupuk Indonesia has picked advisers to arrange the IPO of its unit Pupuk Kalimantan Timur, pending better market situation and approval from the State-Owned Enterprises Ministry
• Company is also actively engaging with potential partners and likely M&A targets to boost its presence in Asia Pacific
• Pupuk Indonesia targets 8.5 million tons of urea output and 4.2 million tons of NPK fertilizer this year, with a goal of doubling its ammonia output in 2050 from 7 million tons currently
• Company will build a methanol plant in Aceh that will get gas supply from the Andaman project.
Export aid
The United States is seeing fervent industry support for its program to help the nation’s farmers win back overseas markets from rivals including Brazil and Russia, with agriculture groups seeking more than $900 million in aid.
The US Department of Agriculture (USDA) received applications for more than three times the $300 million made available in the first round of a five-year export promotion plan, according to Daniel Whitley, the administrator of the USDA’s Foreign Agricultural Service. The $1.3 billion Regional Agricultural Promotion Program, announced last year, is designed to help the industry tap new destinations for American crops.
The US is throwing money at the agriculture industry in a bid to recoup markets lost over the past decade. Brazil overtook the US last year as the world’s top exporter of corn, after earlier doing the same for soybeans, while Russia has surpassed the US with wheat.
“Many of our competitors are extremely busy and active promoting their products around the world,” Whitley said at the National Grain and Feed Association annual convention in Orlando on Monday. “It’s important that we give you all the tools you need to be successful, and that’s what this RAP program does—it allows you to grow and expand your market and promotion activities.”
Funds must be used to diversify markets, with one of the main bets to reverse the US’s decline being new export markets in Southeast Asia, the Middle East and Africa. Whitley expects applications to be selected by late spring or early summer.
The US is encouraging the private sector “to look at more markets, to be more diversified in where you’re promoting your products, and where you’re building your consumers,” he said in an interview at the event.
He is particularly bullish on Africa. The continent, which is expected to be home to 25 percent of the global population by 2050, has a growing middle class, increased buying power and a “strong recognition and appreciation for the US brand.”
“It is vital that we get our companies, our products and our industries there now, and we don’t wait until it’s too late,” Whitley said, noting that competitors such as China are already in the region. “I think Africa presents such a tremendous opportunity.”
Image credits: Doug Kanter/Bloomberg