Australian cattle exporters have just embarked on what looms as one of the biggest quarterly supply challenges the industry has ever faced.
On the weekend the Indonesian Government released permits for the import of 273,000 cattle for the second quarter of 2014, closely confirming volumes pointed to by Indonesia's deputy trade minister in mid-March (see Beef Central's earlier article here) .
That volume for a single quarter exceeds the entire import quota Indonesia had originally allocated for the full 2013 year (267,000 head), and almost matches the 278,000 head it imported in 2012.
Finding and delivering 273,000 cattle in a single three-month period poses an enormous supply test for exporters, and they’re wasting no time in getting on with the job.
Two livestock ships are already in the Port of Darwin this morning loading cattle for delivery under the Q2 permits.
Beef Central was unable to confirm before we sent out today’s daily news email whether the 273,000 cattle would be a record volume for a single quarter, but it seems likely.
In 2009, when Australia sent a record 770,000 cattle to Indonesia, exporters shipped 274,432 head in the final three months of the year, but those figures include exports to other markets, not just Indonesia.
Exporters have already passed one major supply test for the year, successfully delivering the 160,000 cattle required to fill Indonesia's permits for the first quarter, which officially closes today.
Exporters have faced a race against time in recent weeks to get ships into the busy Darwin port and loaded with cattle in time to make the 4-5 day sea journey to Indonesia and unload before today’s March 31 deadline for Q1 permits expired.
Two weeks ago, with eight ships and 48,000 cattle still left to load, the Australian livestock export industry asked the Indonesian Government for special dispensations to allow ships carrying cattle under Q1 permit to unload after the March 31 deadline, if required.
On the weekend Northern Territory Livestock Exporters Association chief executive officer Ben Hindle received confirmation via the Australian Government that the Indonesian trade minister had granted the dispensations as requested.
However, thanks to the support of the NT Government and the Darwin Port Corporation, all eight ships were able to load and leave Darwin in adequate time, with the final vessel unloading the last of the 160,000 Q1 cattle in Jakarta yesterday, 24 hours before the deadline expired.
500,000-600,000 head most sustainable level for trade: Warriner
At the Northern Territory Cattlemen’s Association annual conference in Darwin last Friday, president David Warriner cautioned the industry against expectations that Australia should export volumes of 700,000 cattle from now on, year in, year out.
In his view, 500,000-600,000 head per year is the most sustainable level of trade between Australia and Indonesia, meeting the mutual needs of Australia's cattle industry and Indonesia’s meat trade without impacting negatively on the livelihoods of Indonesian cattle producers.
Mr Warriner said the last time Australia exported more than 700,000 cattle to Indonesia, there were significant ramificaitons for the trade. The big volumes and the negative impact they had Indonesia's six million small cattle farmers was seen as the catalyst that convinced the Indonesian Government the following year to implement a five-year plan to achieve self-sufficiency in beef production by 2014.
“They need the price manipulation mechanisms imposed by the Indonesian Government to work, or I am sure we will feel the ramifications one way or another as we did in 2010,” Mr Warriner told the NTCA conference.
“I will once again say, with some trepidation as there is much wiser opinion contrary to this, that the sustainable Indonesian market level for Australian live exports is more around the 500,000-600,000 head mark.
“I can see no reason right now that the Indonesian farmers will not be subject to the same supply based downward market pressure on their livestock that was the case in 2009.
“The only way it could be mitigated is if the livestock price ex-Australia is higher, thus sustaining their local price.
“Market manipulation usually does not deliver the anticipated results. Indonesia does not wish to see its cattlemen subjected to the pressures of 2009 again.
“Indonesia has such as synergy with northern Australian production systems that we need to assist their cattlemen where we can. Indo is a massive market.
“We need to leverage their cattle industry for the benefit of our own. The big picture needs to be considered. “