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High cattle prices threaten Indonesian feedlot sustainability

James Nason, 03/11/2021

The head of Indonesia’s beef cattle industry association has outlined his fears that if there is not a correction in the high price of Australian feeder cattle soon, the viability of an important trade partnership 30 years in the making will be in danger.

Australian cattle on feed in Indonesia.

Pak Didiek Purwanto, chairman of Gapusfindo, told the Queensland Livestock Exporter’s Association forum that the Indonesian beef cattle industry is under pressure and facing its most testing times in 32 years of operation.

Cattle numbers in Indonesian feedlots have dropped by 45 percent since 2018, he said, as high feeder cattle prices, and the domino effects of the COVID pandemic on retail sales, operational costs and supply of feed ingredients, combine to cause significant and prolonged losses for Indonesian cattle importers.

The average price of imported feeder cattle for Indonesian feedlots had risen from US $2.45/kg (AUD $3.29) in mid-2019 to US $3.60/kg (AUD $4.84) now, Pak Didiek said.

Record feeder cattle prices “that do not go down” had eroded trading margins to around minus Rp 6000/kg (AUD 57c/kg).

The sustainability of the Indonesian beef industry was now in serious jeopardy, he said.

Cooperative partnership threatened

“Due to the fact beef cattle industry in Indonesia is a series of activities that cannot be separated from the beef cattle industry in Australia, the beef cattle industry should be able to keep this business sustainable for a long time,” he said.

“Therefore it is appropriate for the beef cattle industry stakeholders in Australia to place feedlotters in Indonesia as cooperation partner whose sustainability must be maintained.

“The important thing that must be done is the correction of the feeder cattle prices which are currently still high, because if the trading margin for the lot feeder continues to be negative, it will threaten the cooperation that we have established for more than 30 years in the beef cattle industry will certainly stop.

“This condition also triggers the search for alternatives in other countries to supply feeder cattle.

“If the condition of chaos in the price of feeder cattle does not show any indication of improvement, it is possible that the Indonesian Government will use its discretionary power to maintain stability in the supply of the price of national beef.”

Vietnam

The conference was also addressed by a major customer of Australian cattle in Vietnam, Giang Vu.

Customers in Vietnam are also facing difficult times with the high price of imported cattle and disruptions to demand caused by COVID reducing feedlot sales  this year to about 20 percent of normal levels.

Vietnam has already taken the route of finding an alternative source of cattle to Australia, through the historic shipment of 14,000 bulls from Brazil in August/September.

Some of  cattle from that shipment had sold to the market so far, but not many, she said, while also noting that Australian cattle are still competitive with the price of Brazilian cattle.

While Vietnamese had a preference for the traditional lean mean from bulls, the freight distance of just 10 days by sea from Australia compared to 30 days from Brazil was a big plus for Australian cattle.

Like Indonesia, Vietnam has faced a torrid time with the Delta wave of COVID but there are signs of a slow return to normalcy occurring.

Higher vaccination rates, with 25pc of population now vaccinated, and a reduction in new case numbers from 15,000 to 3000 a day (albeit an uptick to around 5000 has occurred in the past week) has seen a return to in-person dining to recommence, with caps on numbers and limited trading hours.

 

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Comments

  1. David Heath, 04/11/2021

    Gee, talk about a nostalgic article, I clearly remember Pak Didiek , singing the same song in December 1997. “The Price, The Price” and that was before the AFC took full effect. Is it not also true Pak that the RI govt has fixed prices at wet markets, for some time now, based on the imports of Indian? daging. A commercial retail market your end might help the medium term problem. With kindest regards, always.

  2. Peter Hamilton, 03/11/2021

    Hang in there Pak Didiek.. cause nothing stays up forever.. .. Another 18 months and the Northern herd numbers will be back up. They will be on the phone wanting to sell you cattle and margins will go back to the importers side .. It will be your turn to sharpen the knives

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