Cattle shipments to Indonesia have recommenced for the first time in over a month, after the Girolando Express loaded in Townsville last night and departed for the Indonesian port of Lampung this morning.

Another eight vessels are scheduled to load at ports across northern Australia over the weekend and early next week.

New permits have been released to two major Indonesian cattle importing companies who have been able comply with, and commit to, new breeder-based import arrangements flagged by Indonesia’s trade minister earlier this week.

The new rules appear to be latest move in a long-running series of attempts by successive Indonesian Governments to fast-track self-sufficiency in beef production.

Ongoing quota-based policies to at times severely limit imports have invariably led to beef shortages, high prices, and the accelerated slaughter of Indonesia’s domestic cattle herd, in effect creating the opposite outcome to that intended by the policy.

Earlier this week the country’s trade minister Enggartiasto “Enggar” Lukita told Indonesian media the country will now be abolishing its quota-based system.

It will be replaced, according to Indonesian reports, with a new breeder based import system, which will allow importers to import the feeder cattle numbers they ask for, provided 20 percent of the numbers they import are female cattle for breeding purposes.

The new arrangements are based on a trade rule introduced in August, which stipulated that for every five feeder cattle imported, one breeder must be imported as well.

Importers who do not agree with the new rules will not have permission to import cattle, Indonesia’s Director General of Foreign Trade, Ministry of Trade Doddy Edward explained yesterday, according to local media reports in Jakarta.

There have been many times in the past when Indonesian Government officials have made media statements outlining big changes to import rules, only for the reported changes not to eventuate.

However, it appears the changes he announced are being put into practice, so far at least.

The Trade Minister explained yesterday that no ‘ministerial regulation’ has been introduced.

Instead, importers are being asked to commit to importing breeding cattle along with feeder cattle.

Those who don’t won’t get to keep their cattle, was the thrust of his message to a leading local Bahasa-language news outlet in Jakarta yesterday.

“There isn’t any ministerial regulation for this but there is commitment from businesspeople. If they fail to do so, the government will seize the cattle. It is called self-regulation,” Enggar said.

The importing companies issued import permits so far, to Beef Central’s knowledge, are Santori, the cattle division of publicly listed Indonesian agribusiness corporation Japfa, and Great Giant Livestock, which is a subsidiary of the Genung Sewu conglomerate, owner of the world’s second largest pineapple plantation, Great Giant Pineapple.

Santori has trialed breedlots in the past and has an existing Wagyu breeding program, while GGLC has for several years worked with local farmers at its plantations to raise breeding cattle. These programs have helped both companies to satisfy the new requirements to receive import permits.

Many of the 36 other feedlots which import Australia cattle to Indonesia do not have the size or access to a network of farmers or grass to initiate a breeding program, and have not yet been able to have permits approved.

Smaller feedlots have expressed concerns that their businesses will not be able to survive if they are required to occupy increasingly large areas of their feedlots with breeding females.

Carrying and feeding breeding cattle in feedlot is expensive. It will take three years for a breeding female to reproduce and provide a return. Also, there has been little success in tying to viably breed in a feedlot situation in the past.

An imported breeder from Australia costs 20 million Indonesian Rupiah ($A 2000) and needs 15 square meters to live compared to a feeder, which costs about Rp 16 million and only needs 3 sq mt, Indonesia’s Feedlot Association executive director Joni Liano explained to the Jakarta Post this week.

“The breeders should be kept for at least three years. They will drain our capacity and eat up the space for slaughter cattle, so this business would close down,” he said.

Banks considered cattle breeding a risky business, making it hard for them to obtain financing, he added.

The new arrangements come at a time when Indonesian cattle importers are being squeezed in a well-documented financial vice.

At one end they have been paying record high prices to purchase Australian feeder cattle; at the other end, their selling price has been artificially constrained by the Indonesian Government’s “ceiling price” regulations, designed to keep fresh beef affordable for local consumers. In effect, regardless of how high their cost of purchasing cattle becomes, they cannot transfer that price rise on. They must either absorb it, or cease trading.

The ceiling price is currently set at 98,000 Indonesian Rupiah per kilogram for forequarters and IDR 105,000/kg for hindquarters.

“If we cannot sell our cattle at the price that can make beef price at that level, there comes Indian Carabou beef at Rp 65,000 per Kg and Aussie frozen at Rp 80000,” one Indonesian cattle importer explained to Beef Central this week.

“If there are feedlots that still wanted the permits, it is only to keep their operation rolling and so their employees are able to put food on the table.

“No profit is possible in this situation. Hopefully the feedlots are able to stand this situation long enough and are still alive when things get better.”

The commercial implications will only become clearer as more detail is provided by Indonesia.

The early speculation is that it will make Australian cattle more expensive to Indonesian importers.

In the past Indonesian importers have been able to buy heifers from Australia at a 15-20c/kg discount to steers, because their weight gain performance is not as good as their male counterparts.

However, with heifers now in new demand as breeding cattle, and required to undergo testing to satisfy a more detailed and expensive protocol, they could soon be commanding a premium as ‘productive heifers’.

At the same time, the reclassification of heifers from feeders to breeders will also limit the amount of feeder cattle available to the market, which in turn would put upward pressure on feeder steer prices.

Steers suitable for live export in Emerald yesterday were commanding about 350c/kg on average, which equates to about 365c/kg landed in Townsville.