21/11/2011 (Jakarta Post) - Indonesia’s total food and agribusiness trade will grow at a moderate annual pace of 4 percent over the next five years due to limited agricultural land and labor, an economist says.

John Baker, Rabobank International’s managing director for food and agribusiness research and advisory for Asia, said Thursday that Indonesia was currently starting to enter a plateau phase as limited expansion areas for farming, as well as limited labor on the production side, would affect production output.

“At the end of the day, you’ve got limited land and limited labor available, and these factors can ultimately constrain production, which can only grow by 3 to 4 percent over the next five years,” he said during a conference on the impact of the global economic turmoil upon Indonesia.

Indonesia’s total food and agribusiness trade was valued at US$44.5 billion last year, with exports and imports totaling $31.8 billion and $12.7 billion respectively, resulting in a surplus of $19.1 billion, according to the bank’s data.

Baker further said that if the land and labor constraints continued, exports would likely fall as domestic demands expanded and the domestic market absorbed more agricultural production.

Rising domestic demands would drive the development of the food and agribusiness industry in the downstream sector, including noodles, bakery products and soft drinks, he said.

Noodle sales, which reached $1.95 billion last year, were estimated to grow annually at 4.5 percent over the next five years on the back of increasing demands from lower- and middle-income customers.

Soft drinks, with a total sales volume of 17.5 billion liters last year and a sales value of $6.5 billion, are expected to book 4.5 percent growth in volume over the same period. Baker explained that Indonesia’s main commodities, such as palm oil, cacao, rubber and coffee would continue to push up exports as global demands also grew.

“Palm oil will continue to be a leading industry given the country’s position as the largest global producer. The rubber industry will be driven by the healthy demands for tires from China and India,” he said.

Indonesia, Asia’s third-largest net agricultural producer after China and India, is currently home to 1,032 food and agribusiness companies in both upstream and downstream sectors, including Wilmar, Indofood, Golden Agri-Resources, Japfa and Compfeed.

Around 53 percent of the total number of companies focus on the production of crops or livestock products.

Agriculture has been a vital sector for Southeast Asia’s largest economy with a population of around 240 million people. The sector absorbed 43 percent of the country’s labor force and contributed 15 percent to the nation’s gross domestic product in 2009, according to the bank’s latest available data.