How northern cattle prices respond to Indonesia’s new order for 25,000 head of slaughter cattle is likely to hinge on whether import permits will include cows and how quickly the Indonesian Government wants the order to be filled.
Northern Territory Livestock Exporters Association chief executive Bernie Brosnan said the new quota allocation is very positive news for the northern cattle industry, but how it will impact on available supplies and prices will depend on the detail contained in import permits, which are only just starting to be issued.
Liveweight prices for slaughter weight cattle (420kg plus) delivered in Darwin are currently being quoted at 150c/kg, equivalent to the prevailing price for export feeder steers (up to 350kg).
Indonesia introduced a 350kg maximum weight limit for imported cattle in 2010 to ensure more value-adding could be performed in its own feedlots prior to processing.
Prior to that move Indonesia imported large volumes of ready-to-slaughter cattle, including older cows.
However Mr Brosnan said it was still unclear if Indonesia is prepared to take older cows in the current order.
The higher shrinkage factor older cows experienced during transport meant they may require lot-feeding upon arrival in Indonesia to return to slaughter weights, which may not suit the country’s current demand for ready-to-slaughter cattle for immediate processing for Ramadan.
Balanced against that is the fact that supplies of slaughter weight steers and heifers are unlikely to be in abundance across the north.
Indonesia’s own import policies have caused live-export geared producers to change the profile of their herds since 2010 to meet the market's demand for sub-350kg lightweight steers. Most steers that exceed that weight limit will have already been trucked south to buyers in Central Queensland or the Channel Country or feedlots for growing out.
Further limiting potential supplies of 420kg plus slaughter-weight steers and heifers has been the dry conditions in Queensland, and increasing shipments of slaughter-weight cattle in recent months to other South East Asian markets such as Vietnam, the Philippines and Malaysia.
Mr Brosnan said the question of how far exporters will have to search for suitable cattle, and where prices are likely to move will depend largely on the detail contained in import permits.
“Longer-term pricing is going to be dependent on availability of numbers and how soon they want those cattle,” Mr Brosnan said.
“We won’t really know until exporters have firm orders in their hands and importers are able to determine what their imported prices are.
“It is all very positive and we’re ready to supply, but commercial realities will be the driver of pricing.”
Indonesia’s stated reason for announcing the order for 25,000 slaughter cattle last Friday was to improve beef supplies during Ramadan and to allow beef prices to return to more affordable levels for consumers.
However, with Indonesian feedlots running at just 25 percent of normal capacity due to import quota restrictions and a shortage of locally produced cattle, it is likely Indonesia would need to import far more cattle to have any material effect on beef prices in wet markets.
“Our thought on that is that there would have to be a period of minimum six months but more likely a period of 12 months constant supply where feedlots were around 80pc capacity at least, combined with an injection of slaughter shipments and also chilled beef at opportune times to fill those gaps in the market to help put pressure on price,” Mr Brosnan said.
“Until that supply and demand imbalance is resolved, supply will continue to fall short of demand and it is unlikely that prices will come down.”
'Don't ignore small pastoralists: NT Government
Meanwhile, Northern Territory primary industries minister Willem Westra van Holthe has called on Territory live exporters to ensure smaller, local pastoralists share in export orders to Indonesia.
“The news that these quotas have been increased has been welcomed by the live cattle export industry as a whole, after two years of challenging times,” Mr Westra van Holthe said.
“The industry needs some relief, and this announcement is a vital shot in the arm for northern cattle producers.
“I urge the live exporters to now support our local, smaller pastoralists and to source the additional cattle from these smaller producers.
“Smaller, family based operators are at a distinct disadvantage when they’re competing against the big producers.”
Mr Westra van Holthe said he had spoken to the NTLEA on this matter.
“I want to ensure local pastoralists will receive the best possible outcomes from this announcement," he said.