An important step towards the development of a large-scale feeder cattle industry in China will be undertaken early next year when major Indonesian lot feeder Santori builds the largest feedlot in the country.

Speaking exclusively to Beef Central this week, Santori's general manager said the decline of the Indonesian and Australian live cattle trade was behind the company's decision to broaden its base into China.

Santori is the beef cattle division of the large publicly listed Indonesian agri-company Japfa and has more than 17 years experience in integrated beef operations in Indonesia. It is now the largest feedlot operator in South East Asia.

“Santori has been investigating an entry point into the fast growing China beef market as a consequence of the demise of the Indonesian and Australian live cattle trade,” Japfa Beef Division general manager Samuel Wibisono told Beef Central this week.

Mr Wibisono said Santori’s accelerated move to China is driven largely by the fact the company sees no change in the Indonesian Government’s stance on cattle import permits, or in its drive to achieve self-sufficiency in beef production for the next couple of years. 

“The Government has demonstrated its commitment to beef self-sufficiency, at the expense of inflating beef prices, by continuing to reduce import quota, thus forcing consumer substitution to lower-priced animal protein,” Mr Wibisono said. 

Santori will continue its efforts to support the Indonesian Government’s self-sufficiency program through its operations which include feeding local Indonesian cattle in the Probolinggo feedlot in East Java and expanding its 14,000 head breeding program with the addition of an integrated cattle-under-palm program in Kalimantan.

However it has now also moved to develop a new foothold in China, which represents a market of strong potential growth.

A team from Santori recently surveyed potential feedlot sites in China, and last week signed a Memorandum of Understanding to build a 30,000 head feedlot on a 200 hectare plot in Shandong Province. The development will also include an additional 500ha of associated cultivation.

Shandong province is located in the Central Plains of China, a region in the lower reaches of the Yellow River renowned for agriculture.

The eight provinces around Shandong province are home to more than 500 million people, twice the size of Indonesia, while Beijing, Shanghai and other fast growing provinces lie further south.

Mr Wibisono said Santori was attracted by the “tremendous reception” it had received from Chinese local governments in terms of infrastructure development and subsidies for farming. 

A delegation from the Hekou District, Shandong province, visited Santori’s Bekri feedlot near Lampung last week to sign the MOU.  It was signed by Samuel Wibisono and Baowen Ma, Deputy Head of the Hekou District government.

The delegation, headed by Tongzhu Yang, Vice-Mayor Dongying Municipal government, was impressed by the "high level of sophistication by the management team and is confident Santori will be a major player the beef industry in China".

Drawing on the experience and resources available from Indonesia, Santori said it was looking forward to feeding local Chinese dairy calves and beef cattle in 2013.

Mr Wibisono told Beef Central the feedlot will rely on two sources of cattle – local bull calves from China’s dairy industry, and beef cattle from the North East region, which are typically European type cattle such as Limousin, Charolais and Simmental.

China’s cattle lot feeding industry currently consists of a number of small family run operations feeding less than 200 head, and a small number of mid-sized feedlots feeding less than 10,000 head.

The 30,000 head Santori feedlot will be the largest in the country.

Mr Wibisono said there appeared to be strong interest in the development of a new feedlot industry at an official level in China.

While statistics were difficult to verify, he said there were signs the country was already eating into its beef herd.

“So I believe China will open their doors to feeder and slaughter cattle as Indonesia did in the 1990's because they already see the benefit of value adding by feedlotting after inspecting our feedlot,” Mr Wibisono said. 

While the Santori feedlot will be focused on feeding locally bred Chinese cattle, he said countries seeking to develop a feeder cattle export trade with the country should be acting now.

“Australia needs to move quickly to get market access, but even if they start lobbying today, it would probably take a couple of years before we see a working protocol.

“But it needs to start today.”