Jakarta takes emergency steps as tensions rise over soyabean price

John Aglionby, Financial Times 16 Jan 08;

Indonesia was yesterday forced to take emergency action to calm street protests over record soyabean prices triggered by US farmers reducing the crop to grow more corn for biofuel.

Rising Chinese demand for soyabeans and bad harvests in Argentina and Brazil have also contributed to the jump, which saw Indonesia suffer the biggest food-related protests since last year's Mexican tortilla crisis.

Susilo Bambang Yudhoyono, the Indonesian president, was forced to announce measures to boost local soyabean supply.

The move came a day after 10,000 people took to the streets in Jakarta to complain about the rising cost of one of the country's staple foods.

The government had already responded to the protests by lifting import controls on a commodity that hit an all-time global high of $13.20 a bushel this week, an increase of almost 90 per cent on last year's level. Indonesian prices have risen even higher.

Henry Saragih, the head of the Indonesian farmers' union, warned: "I think the social situation with soyabeans will probably get worse before it gets better."

The UN has warned that global food inflation could trigger social unrest and force governments to reintroduce price controls to maintain stability.

The social tensions in the world's most populous Muslim country follow unrest this week in Pakistan after shortages of wheat and Egypt's ban on rice exports to maintain local supply.

The rising use of agricultural commodities to make fuel last year unleashed a wave of food inflation and triggered mass protests in Mexico where corn is a staple food.

Indonesia, which imports two-thirds of its soyabeans, has suffered from the impact of rising shipping costs and the long-term neglect of its agriculture sector. Meanwhile, many Indonesian farmers have switched to corn cultivation and other more lucrative crops.

Mr Yudhuyono said he would offer incentives such as free seeds to farmers in a bid to increase production by a half this year to 900,000 tonnes.

Chris de Lavigne, analyst with research firm Frost & Sullivan in Singapore, said that soyabean prices were likely to keep rising this year. "We have only had one year of what is likely to be a long agriculture boom," he said.

Additional reporting by Javier Blas in London

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