Indonesia Agriculture Production Market Outlook to 2030

Indonesia Agriculture Production Market Overview

• The Indonesia Agriculture Production Market was valued at USD 140 billion. This growth is attributed to increasing government support, technological advancements in farming, and the expansion of agribusiness activities. Key drivers also include the rising global demand for palm oil and rubber, as well as domestic food security initiatives.
• Major players in market include PT Astra Agro Lestari Tbk, PT Perkebunan Nusantara III (Persero), PT Sinar Mas Agro Resources and Technology, and PT Indofood Sukses Makmur Tbk. These companies dominate the production of palm oil, rubber, and food staples. Their strategic investments in sustainable farming practices and innovative supply chain management have enabled them to maintain a leading position in the market.
• In 2023, Indonesia's rice production fell to 30.2 million tons, a drop from 31.5 million tons in 2022 due to a prolonged dry season. To boost production, the Ministry of Agriculture is implementing strategies such as optimizing swamp lands and increasing water pumping for rain-fed fields, targeting 1.1 million hectares of planting by mid-2024.
• East Java is the dominant region in Indonesias agriculture production, by the regions fertile soil, favorable climate, and access to irrigation have made it a key producer of rice, corn, and tobacco. East Java's proximity to major export ports also facilitates the export of crops, particularly rubber and palm oil, making it a strategic agricultural hub.

Indonesia Agriculture Production Market Segmentation

The market is segmented into various factors like product, farming method, and region.

By Product: The market is segmented by product type into rice, palm oil, rubber, and horticultural crops. Palm oil held the largest market share by its high demand both domestically and internationally. The dominance of palm oil is due to its versatile application in food, cosmetics, and biofuels, as well as the large-scale plantations that have been developed for its cultivation.

By Farming Method: The market is segmented by farming method into traditional, mechanized, and organic farming. Traditional farming dominates the market largely due to the prevalence of smallholder farmers who rely on manual labor and traditional practices.

By Region: The market is segmented by region into North, South, East, and West Indonesia. East Indonesia, dominated the market in 2023 with the favorable agricultural conditions, including rich volcanic soil, ample rainfall, and advanced irrigation systems. Additionally, its access to key export ports enhances its agricultural export capabilities.

Indonesia Agriculture Production Market Competitive Landscape

• PT Perkebunan Nusantara III (Persero): PTPN Group and Suntory Garuda recently made their first export of Indonesian Oolong tea to Vietnam, marking a significant development for the Indonesian tea industry. This export is part of PTPN's strategy to expand into international markets, with Vietnam being a key destination. This move will strengthen Indonesia's position in the global tea market.
• PT Sawit Sumbermas Sarana: PT Sawit Sumbermas Sarana Tbk has increased its 2023 capital expenditure budget to IDR 1 trillion from IDR 500-600 billion in 2022. This investment aims for a 10-15% rise in crude palm oil production, driven by strong demand, despite potential price fluctuations and weather-related risks.

Indonesia Agriculture Production Market Analysis

Market Growth Drivers

• Expansion of Arable Land: In 2023, Indonesia's sustainable landscapes initiative aimed at achieving its FOLU Net Zero goals saw progress. The country plans to rehabilitate 12 million hectares of degraded land by 2030 and restore 2 million hectares of peatland. This effort is critical for reducing greenhouse gas emissions and supporting global climate targets.
• Growing Global Demand for Palm Oil: In 2022, Indonesia's palm oil exports reached USD 28.7 billion, making it the largest exporter globally. The main export markets were India ($5.4 billion), China ($3.61 billion), and Pakistan ($3.21 billion). The fastest-growing export market was India, which saw an increase of $1.91 billion in 2022.
• Government Subsidies for Fertilizers and Seeds: In 2023, Indonesia reduced its fertilizer subsidy budget from IDR 25.3 trillion (USD 1.67 billion) to IDR 24 trillion (USD 1.59 billion). This adjustment aims to combat inflation and enhance agricultural productivity, supporting the country's goal of food self-sufficiency amidst economic challenges.

Market Challenges

• Infrastructure Deficiencies: Many rural areas in Indonesia still lack adequate transportation and storage facilities, leading to post-harvest losses. In 2023, the government supports for developing farm-to-market roads and cold storage facilities, but logistical challenges continue to impact the efficient distribution of crops, especially in remote areas.
• Dependence on Imported Agricultural Inputs: Indonesias reliance on imported fertilizers and seeds increases production costs for farmers. In 2023, fertilizer imports tons, straining local farmers profitability. Although the government is implementing subsidies to offset these costs, dependency on global supply chains makes the market vulnerable to price fluctuations and availability issues.

Government Initiatives

• Indonesia Government Initiatives for Rural Area: In 2023, the Indonesian government, with support from IFAD, launched initiatives to boost rural livelihoods and strengthen climate-resilient farming, benefiting over 200,000 smallholder farmers. The initiative focuses on transforming dryland farming areas by providing financial and technical support, ensuring higher yields and sustainable income growth for farmers by 2024.
• Investment in Digital Agriculture: The government has partnered with tech firms to launch a USD 500 million digital agriculture initiative by 2024. This initiative will provide farmers with access to real-time weather forecasts, market prices, and pest control measures via mobile applications, thus optimizing farming practices and increasing productivity.

Indonesia Agriculture Production Market Future Outlook

The future trends in the Indonesia agriculture production market include the adoption of smart farming technologies, increased focus on organic farming, diversification of agricultural exports, and development of climate-resilient crop varieties.

Future Market Trends

• Growth in Organic Farming: Organic farming is expected to gain traction in Indonesia over the next five years, with the government investing high amount to promote organic practices. This initiative is aimed at meeting the rising global demand for organic produce and improving domestic food quality standards.
• Increased Focus on Export Diversification: Indonesia will increasingly diversify its agricultural exports, particularly in the rubber and cocoa sectors. By 2028, the country aims to reduce its dependency on palm oil, with investments targeting the expansion of rubber and cocoa production for international markets.