The Australian Government has reported that Indonesia will import 25,000 head of slaughter cattle as an emergency measure to head off a worsening beef shortage and to stabilise beef prices during Ramadan and the Idul Fitri holidays in August.
Importers and exporters were aware of the pending announcement yesterday but have been waiting for the official release of permits before publicly confirming the allocation.
Beef Central understands that permits have still yet to be formally issued, however the Australian Government has issued a release this morning stating that Indonesia confirmed the decision to increase imports during discussions between Prime Minister Kevin Rudd and Indonesian President Susilio Bambang Yudhoyono.
The new permits are expected to allow for the import of 25,000 slaughter cattle from Australia in the next three months.
A signficiant element of the new order surrounds the fact it is for slaughter cattle, representing the first order from Indonesia since early 2010 that does not require imports to have a maximum weight of 350kg.
The move reflects Indonesia's immediate need for beef to satisfy demand during the current Islamic holy month, which is the peak annual period for beef consumption.
Exports of slaughter-ready cattle, particularly cows, were commonplace to Indonesia until 2010 when Jakarta imposed a 350kg weight limit on imports to ensure more value-adding was achieved within its own feedlot industry.
Whether Indonesia is considering relaxing the 350kg weight restrictions longer-term to ease the supply shortage remains a key question of interest.
Federal Government statement
In a statement released today federal agriculture minister Joel Fitzgibbon said the Rudd Government looked forward to Australian and Indonesian industry collaborating with producers and shipping companies to source cattle from Northern Australia for export.
“The Australian Government understands Indonesia's desire to stabilise the price of beef during Ramadan and into the future," the statement said.
“The Rudd Government and Australian industry are keen to work with Indonesia to plan for longer term certainty in the market to ensure Indonesia’s requirements are met.
“This includes the Indonesia Australia Red Meat and Cattle Forum announced during the Prime Minister's visit to Indonesia on 5 July and the $60 million allocated by the Rudd Government to support improvements in the Indonesian beef supply sector.”
It said further imports for the second three month period will be advised by the Indonesian Ministry of Agriculture.
Indonesia assesses supply requirements
News of the additional permit allocation follows a high level meeting of agricultural and trade ministry officials in Jakarta on Wednesday.
Following that meeting Indonesia’s Coordinating Economic Minister Hatta Rajasa told the Indonesian media that the government would allow more imports as current stocks had been deemed inadequate to meet rising demand during the religious festival.
Mr Rajasa said further imports would be required outside the additional 3000 tonnes recently allocated to the state logistics agency Bulog to help prevent the price from skyrocketing during the festivities.
“Based on our calculation, current stock is not adequate to meet demand so we will import more beef according to needs as recommended by the Agriculture Ministry,” the minister told a media conference in Jakarta on Wednesday.
In comments reported by the Jakarta Post, Agriculture Minister Suswono said the ministry had yet to calculate the need, but added that the government was ready to bring in more beef to adjust to market demand and reassured that the additional supplies would enter the country before Idul Fitri, which falls in early August this year.
Suswono said the government had yet to decide whether or not Bulog would be assigned to import the beef.
“We will grant the import permit to those who are ready to carry out the importation,” Suswono said.
The Jakarta Post said about 800 tonnes of beef will be air transported to Jakarta this week under the additional 3000t allocated to the Bulog, with the remaining 2200 tonnes to be transported by cargo ship by the end of July.
The chief of Bulog, Sutarto Alimoeso said the beef would be distributed in a way that ensured distributors would not stock up on the commodity to affect prices for their own benefits.
Trade Minister Gita Wirjawan has also urged feedlotters and sellers to not pile up the beef.
“Feedlotters have to release 109,000 live cattle to the market and stop stockpiling,” Gita said.
Import industry sources have told Beef Central that Indonesia’s preference is to give permit to those importers who have integrated feedlot/abattoir systems and can sell direct to retailers at a price which supports what the government wants.
As with all exports from Australia now, the cattle must be delivered into ESCAS approved supply chains.
It is understood that decisions surrounding additional quota and/or whether Indonesia will continue to import “ready to slaughter” cattle will be made at a later date.
Supply challenge for exporters
One of the biggest challenges for Australian exporters will be to marshall and ship cattle in time to help Indonesia to improve its supply situation before the Lebaran festival on August 8-9, which is just 20 days away.
One source said that the reality is that the requirements of mustering, depot protocols, shipping, and quarantine means it is likely to take at least 30 days before the first cattle for the new orders can be delivered.
Northern Australian cattle producers say the longer term lifting of the 350kg weight restrictions on exports to Indonesia would make a big difference in enabling them to sell older cattle and to reduce pressure on dry paddocks.
The special permit announcement is the latest sign that Indonesian attitudes to cattle and beef imports are changing, amid increasing evidence in the form of soaring beef prices that the country’s beef requirements and available domestic supplies remain a long way apart.
Any increase in import orders from Indonesia is positive news for Australia’s northern cattle industry, which is more focused on breeding the type of cattle that Indonesia needs than it is on supplying any other market, both within Australia or overseas.
However the difficult irony for the many northern cattle producers who rely heavily on Indonesian orders for income – and who have adjusted their operations to supply Indonesia’s demand for 350kg or lighter steers since 2010 – is that they may not now have many cattle of the right specifications on hand to benefit from this order for slaughter cattle.
Some will have cows and heavy heifers on hand to sell into export orders, but many have also been sold to lighten stocking loads on country in the wake of the dry 'wet season' just passed.
"A lot of them have sold cows for a lesser rate because they were put under a bit of pressure for feed, and if not feed, money," Northern Territory-based cattle supply chain specialist Barry Groves said.
The order will create additional competition for available supplies of slaughter cattle across the north, with two orders currently being filled for slaughter cattle orders to Malaysia and Vietnam out of Darwin and a further three orders being filled out of Wyndham.
Mr Groves said it was likely that exporters would look right across northern Australia to find the cattle required to fill the order, with exports likely out of Townsville and Karumba in Queensland where heavier cattle are on hand, as well as south to Alice Springs in the Territory and in the Kimberley region of WA.
Australian Livestock Exporters Council statement:
The Australian Livestock Exporters Council released the following statement in response to the permit allocation announcement this morning:
EXPORTERS GEAR UP TO SUPPLY ADDITIONAL CATTLE TO INDONESIA
Finding suitable cattle and shipping capacity are the key immediate priorities for exporters as
they gear up to take advantage of the Indonesian Government’s decision to release permits for
25,000 head of slaughter ready cattle, Alison Penfold, Chief Executive Officer of the Australian
Livestock Exporters’ Council said today.
“Exporters have welcomed the Indonesian Government’s decision to release additional quota
for slaughter ready cattle for import over the next three months and we now wait for permits to
be supplied to enable shipments to be prepared, Ms Penfold said.
“There are important logistical and regulatory processes that must be followed but exporters are
eager to assist Indonesia with additional cattle ready for slaughter as soon as possible. This will
certainly be hearty news for many producers in northern Australian who may have suitable stock
“We recognise that the supply situation has become critical in Indonesia and it is vital that we
move as quickly as possible to export cattle to the market.
“ALEC has long said that we stand ready to work with Indonesia to meet their food security
needs. While we would like to see more long term policy certainty and stability around import
numbers, exporters will work hard to fulfil orders at short notice.
“In achieving this outcome, ALEC and its members would like to acknowledge the significant
efforts of the Prime Minister and Ministers for Agriculture from the Northern Territory,
Queensland, and Western Australian Governments in helping to secure additional cattle export
opportunities to Indonesia.”
Ms Penfold said that animal welfare concerns will continue to be a priority for exporters as these
additional cattle flow through the export supply chain.
“The directive issued by the Ministry of Trade includes a requirement that cattle must only enter
Exporter Supply Chain Assurance System (ESCAS) approved supply chains. This will ensure that
suitable controls are in place to deliver humane treatment and slaughter and the welfare of
cattle will continue to be overseen by Animal Welfare Officers in approved facilities.
“Over 2000 Indonesians involved in the care, handling and slaughter of Australian exported
cattle have now been trained by Australians and Indonesians in welfare, handling and slaughter
practices. This has been achieved through a great deal of cooperation and commitment by our
Indonesian customers and their staff based on their shared interest in improving animal