The deal will allow Australian farmers to export 500,000 tons of feed grains such as wheat into Indonesia tariff free in year one, with 5% annual growth in volume thereafter.
The agreement comes as forecasts for commercial poultry feed consumption in Indonesia are buoyant.
Analyzing the agreement between the two countries, which is to be formally signed off in November, commodities data provider, S+P Global Platts, said Australia will now gain access to the Indonesian feed grain market, with the ability to export duty-free feed barley, feed wheat and sorghum.
Indonesia is fully reliant on wheat imports to fulfill demand for wheat flour-based food and as an ingredient for poultry and livestock feed, according to data from the US Department of Agriculture (USDA).
Currently, Australia's grain trade to Indonesia is solely wheat for milling purposes, said the analysts.
Economic partnership
“A renewed economic partnership with Indonesia is particularly a major boost for Australian farmers with the grains, live cattle, dairy and horticulture sectors to benefit from greater certainty of access and lower tariffs,” said Simon Birmingham, Australia's minister for trade, tourism and investment.
He said the agreement would also expand the two-way investment relationship between the two countries. “Australian investors will now have greater certainty under Indonesia's foreign investment regime, which will help to drive more Australian investment in Indonesia.”
Australia will immediately remove all remaining tariffs on Indonesian imports into Australia.
Indonesia is Australia's largest wheat trading partner. Australia accounted for around 28% of the wheat supplied to Indonesia over July 2017-March 2018, as per USDA data.
Australia's leading market share is attributed to the Indonesian noodle industry's preference for Australian milling wheat and the countries' proximity to each other, said the S&P Global Platts analysts.
However, Australia has been facing increasing competition from relatively cheaper wheat origins, such as Ukrainian wheat, moving to Indonesia, they noted.
The outcomes for both countries arising out of the deal can be read here.
