World Grain - July 2006 - 7

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Indofood to buy
Singapore-based
shipping company

FAO forecasts volatile food prices in upcoming months

JAKARTA, INDONESIA - PT Indofood Sukses Makmur, owner
of the world's biggest flour mill, will buy a controlling stake in Singapore-based shipping company Pacsari Pte for U.S.$42.5 million to
cut the cost of transporting wheat to the Indonesian plant, Bloomberg reported on June 13.
A 55% stake will be purchased from Shinetown Holdings Ltd., Jakarta-based Indofood said in a statement posted on the Jakarta Stock
Exchange's web site. Pacsari owns two bulk carriers with a capacity
to carry 77,755 tonnes each, the statement said.
Indofood needs to import large quantities of wheat and often ships
are "non-comparable with the total wheat to be carried," which increases from time to time, the statement said. "The timely supply of
raw material will affect productivity and quality of the product."
Indofood, which is also the world's largest maker of instant noodles, is trying to cut costs to boost its profit margin, which fell in the
first quarter on higher raw material and fuel costs. Unit PT Bogasari
Flour Mills contributed one-third of the sales at Indofood.
Profit margin before interest and taxes fell to 8.8% in the first
quarter from 11.2% a year earlier.
Indofood also said it agreed to buy a noodle-making plant owned
by Medan Pulangan Sdn. Bhd. in Malaysia for U.S.$3 million, the
statement said.

PROCESSOR
Cost Effective
FIFO Principle

Simple Retrofit
Process Data Recording
Improved Conditioning
Flexibility

WASHINGTON, D.C., U.S. and ROME, ITALY - World cereal demand is forecast to surpass supply in the coming 2006-07 marketing
year, pushing down stocks to an uncomfortably low level and continuing the steady upward trend in prices, according to the June issue of
the Food and Agricultural Organization's (FAO) Food Outlook report.
"Amid political uncertainties and surging energy prices, agricultural markets over the past year have also had to confront abnormal
incidences of natural disasters, ranging from devastating hurricanes to
fast-spreading animal diseases," the report said.
"Based on current indications, several agricultural commodities
are likely to experience still more unstable months ahead and, in most
instances, the fundamentals point to even further gains in prices," according to the report.
FAO is forecasting an increase of over 2% in the world food import
bill in 2006 compared to 2005. Given their higher share as importers
of food and feed, the developing countries' bill is forecast to grow by
3.5%, while that of low-income food-deficit countries is forecast to
jump by nearly 7%.
According to the report, a 10-million-tonne decrease in world wheat
production is forecast this year, with a strong demand outlook set to
drive up world trade in 2006-07 to 110 million tonnes. The world balance sheet for 2006-07 is expected to show a sharp drop in ending
stocks as well as a decline in the stocks-to-use ratio to 25%, the lowest
in over three decades.

Against this backdrop, and even barring any major or unexpected weather problems in the coming months, wheat prices
are likely to remain generally high and volatile in the new season, FAO said.

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World Grain - July 2006

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