Behind the rise in soybean price in Indonesia

JAKARTA, INDONESIA — Indonesia marked the start of its 2021 with numerous tahu (tofu) and tempeh (soybean cake) makers in Indonesia going on strike due to an increase in soybean price.

Indonesia still relies on imported soybeans–the essential ingredients of tahu and tempeh- from the US. The rise in the soybean price is due to the huge demand for American soybeans from China.

Also, the spike in demand from European countries can largely be attributed to a push towards a vegan lifestyle, lecturer at the Gajah Mada University (UGM) Catur Sugiyanto told Kompas.

Tofu and tempeh makers are reducing the size of their products without increasing the price. The price of imported soybeans rose from Rp 6,000-Rp 7,000 (S$0.57-S$0.66) per kilo to Rp 8,000-Rp 9,000 (S$0.76-S$0.86), Kompas reported on 5 January.

Why does Indonesia import soybeans?
Fadhil Hasan, a senior economist at The Institute for Development of Economics and Finance, told TOC that Indonesia’s production cost of soybean is not as competitive as other soybean-producing countries, adding that geographical and climate factors also play a role.

“Soybeans are more suitable in sub-tropical countries than in tropical ones. Therefore, cultivating soybeans is not as profitable as cultivating corn or paddy,” the expert stated in an interview on 6 January.

The Indonesian Farmers’ Association (HKTI) West Java chapter chief Entang Sastraatmaja told CNN Indonesia that Indonesia’s local soybeans’ quality is not as good as that of imported soybeans.

“Tofu and tempeh makers love imported soybeans as they are bigger than local soybeans. If they use local soybeans, they will worry that the size of tofu and tempeh will be smaller,” Entang said.

Indonesia is the world’s largest soybean consumer after China. The official data showed that Indonesia’s soybean import reached 1.27 million tonnes in the first half of 2020, and 1.14 million tonnes from the US.

Fadhil stated that he once wrote a paper focusing on the social and economic constraints of soybeans’ self-sufficiency at the beginning of the 1990s, adding that the situation remains the same.

“Maybe now we rely on 80 per cent of imported soybeans,” he stated, adding that Indonesia has yet to develop a variant of soybean suitable for tropical climate.

What to do?

Fadhil said that the government can improve the quality of soybean’s seeds to boost productivity.

“We can’t reach self-sufficiency in all types of food, but we can focus on food resilience,” he elaborated.

The government estimates that soybean production will reach 420,000 tons in 2021.

In 2020, the production was estimated to hit 320,000 tonnes, lower than that in 2019 (420,000 tonnes).

The government has taken steps to stabilise soybean’s price to Rp 8,500 (S$0.81) per kilo and ensure the supply is adequate.