Imminent increases in live shipping orders are fuelling hopes of a desperately needed improvement in cattle prices for drought-stricken northern producers.

Indonesia’s recent decision to replace quotas with a price-based import trigger is expected to result in bigger orders from the market in coming months.

Under the new system, when the price of beef in Indonesian wet markets rises above a desired level, the Indonesian Government will release permits for the import of cattle and beef until supply catches up with demand and prices fall back to affordable levels.

At that point imports would then be stopped, and would only recommence if and when prices climb back over the trigger level.

The detail is yet to be articulated but Indonesia’s trade minister Gita Wirjawan has flagged a wet-market price of 76,000 Indonesian Rupiah ($A7.60) per kilogram as the desired benchmark.

With wet market prices currently averaging well above that, around IR 95,000-100,000/kg, expectations are high that import orders will increase substantially in coming months as Indonesia seeks to bridge the gap between supply and demand, and relieve pressure on inflation, as quickly as possible.

The sudden policy announcement has resulted in several thousand cattle being held up in holding yards in Charters Towers and Darwin.

The cattle were purchased by exporters who had moved early to assemble cattle for shipping under fourth quarter quotas, under the expectation the permits would be issued in early September, one month earlier than normal, as Indonesia had previously indicated.

However the new policy announcement has seen the issue of fourth quarter permits put on hold, leaving the exporters to carry the costs of holding the cattle they have bought in export yards and keeping ships on standby until the new permits are issued, which may not be until early October.

One of the most likely outcomes of the new policy, if orders increase in the short term as expected, will be to place greater upward pressure on northern cattle prices.

The new orders will add to existing competition from domestic processors and other live export markets for available supplies, which are not in abundance.

Most northern stations remain heavily destocked after a run of tough years financially and seasonally, and Indonesia’s 350kg weight limit which has discouraged the production of heavier cattle in the live export zone for more than three years.

Export buyers have reported increasing difficulty finding the right 400kg plus article for ready-to-slaughter export markets in recent times.

A recent export order for Vietnam was originally put out for heifers or bulls, but when they weren’t forthcoming was adjusted to include 450kg steers to fill the shipment, at a price reported to be around $1.45/kg.

Northern Queensland livestock agent Tim McHugh, Hogan and McHugh Townsville, told Beef Central that domestic processors have forward contracts out for cattle delivered from December to February for 380c/kg.

He believes supply restrictions will see physical market prices rise to $4/kg.

“Slaughter cattle in northern Australia in a very short period of time are going to be nil, they just won’t be available,” Mr McHugh said.

“I think by November at the latest our processors are going to become very highly reliant on feedlots, and to that end we have been putting a lot of cattle in feedlots both in the north and in the south.”

At the recent IndOz trade forum in Brisbane, Australian exporters urged Indonesian ministers to lift the 350kg weight limit on imported cattle to maximise available supply.

Indonesia issued a one-off permit for 25,000 ready to slaughter cattle during Ramadan, but for now at least the official 350kg weight limit remains in place.