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Indo trade minister goes, uncertainty reigns over new 50,000 head permits

James Nason, 13/08/2015


The Indonesian minister responsible for issuing dramatically reduced import permits for cattle this quarter was yesterday sacked as part of a Cabinet reshuffle by Indonesian President Joko Widodo.

The Indonesian President yesterday replaced six ministers in a cabinet shake up which Indonesian media has reported was designed to reassure investors worried about policies that have allowed Indonesia’s growth to slip to a six-year low.

The casualties included Minister for Trade Rachmat Gobel, who has overseen the issue of cattle import permits in the Jokowi Government, and the coordinating minister for economic affairs Sofyan Djalil.

Just a day before the reshuffle both ministers had held meetings with NT minister for primary industries Willem Westra van Holthe and Queensland agriculture minister Bill Byrne to discuss cattle import arrangements. There is nothing to suggest the sackings were related to the handling of cattle import permits, but the ministerial changes basically mean that negotiations will have to start again with their replacements.

Three days after the allocation of additional import permits for 50,000 head of slaughter cattle was announced, confusion still clouds what impact the new order will have on Australian cattle supply and prices.

These permits were not issued directly to importers from the Department of trade or agriculture as has occurred previously but through an Indonesian Government owned enterprise called Bulog.

It is still unclear as to whether all private importing companies will have a chance to receive permits under the new allocation as normally occurs, or whether permits will be limited to a confined number of selected importers.

Several sources have told Beef Central that importers are being asked to commit to supply cattle for the order at a low price, in keeping with the Indonesian Government’s desire to lower the price of beef in wet markets and quell consumer dissatisfaction over soaring prices.

Beef prices have risen in recent weeks to a reported IDR140,000/kg (A$14), with the rise occurring after the cutback in Indonesian import permits to just 50,000 head this quarter exacerbated a beef shortage in the market.

The reported lower-priced focus of the new order will make it harder for buyers to purchase cattle in the increasingly dear Australian cattle market, raising questions about what sort of cattle will be bought and whether Indonesia will be able to secure the volume it is seeking.

The order comes at a challenging time of year to find 50,000 slaughter-weight bos Indicus (380-500kg) cattle in northern Australia, particularly within a short six week time frame (assuming this order is linked to the quarterly permit allocation process and must be filled by the end of September).

It is getting to the back-end of the dry season across the north when producers face a challenge to hold cattle condition, while export orders for Vietnam and strong demand from Australian processors have been cleaning out large numbers of heavier cattle from the north in recent months.

Exporters will also have existing shipping schedules locked in to other markets that would need to be moved around to accommodate the new orders from Indonesia.

Had this order been placed at the start of the quarter in July, when then trade minister Gobel issued permits for just 50,000 feeder cattle, the availability of suitable cattle would have been greater.

The Indonesian Government reportedly wants Indonesian feedlots to release slaughter-ready cattle they have on feed to the market to improve beef supply now, however lot feeders are reluctant in a rising market to clear heavy cattle from their feedlots when there are no permits coming through for feeder cattle to replace them.

Feedlots are producing kilograms of beef. When the numbers they can feed are reduced through lower import permit allocations, the only option they have to compensate is to feed cattle for longer to add more weight and increase the kilograms they can sell from a smaller number of cattle.

In the wake of the June 2011 Indonesian export ban, when Indonesian import permits were slashed for more than two years, many feedlots were feeding imported Australian cattle out to 500-550kg. The return to volume permits since November 2013 has seen a return to the preferred weights of Indonesian butchers in the mid-400kg range, but the reduced permits available for feeder cattle now is again likely to see existing cattle fed to heavier weights.

Heavier feeder steers in Darwin are reportedly bringing about $2.50/kg at present.

The new coordinating minister for economic affairs is former central bank governor Darmin Nasution, while the new trade minister is investment firm owner, Thomas Lembong.


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