Live Export

Indonesia confirms rise in livex weights to 450kg shipment average

James Nason, 27/02/2017

MONTHS of behind-the-scenes work by Australian livestock export industry representatives has helped to bring about a significant change in Indonesian cattle import policies.

The Indonesian Government has formally agreed to increase cattle import weight limits from a 350kg average to a 450kg “maximum average” per shipment.

It will also now accept cattle aged up to 48 months of age (previously 30 months), and will make import permits valid for 12 months (previously four months).

The changes will be introduced when new import permits are issued by Indonesia, expected to occur in a few weeks.

Beef Central first raised the likelihood of rise in weight limits to Indonesia in this article six weeks ago.

Indonesia is under enormous pressure to increase beef supply and reduce the price of beef for consumers, an aim not aided by Australia’s near record export cattle prices.

Hence its recent decision to open its market to imports of low-priced frozen Indian buffalo meat, despite the potential risk of Foot and Mouth Disease contamination the move poses to its own important domestic cattle industry.

Australian Livestock Exporters’ Council director and CPC CEO Troy Setter and LiveCorp CEO Sam Brown have spent considerable amounts of time in recent months travelling to Indonesia and working with the Government there on ways to reduce costs in the supply chain.

Expanding weight limits to allow exporters to compete for a wider pool of cattle, and allowing more beef per beast to be finished in Indonesian feedlots was one cornerstone of their suggestions for Indonesia to reduce beef costs.

Another key point was the need to remove unnecessary bureaucracy and costs from the supply chain.

For example, extending permit periods would allow exporters to plan shipments to meet Indonesia’s supply requirements well in advance, reducing the risk of expensive demurrage costs, and removing the artificial market pressure created by short-term permits.

“Exporters had narrow weight specifications for Indonesia which they had to realise every four months, so you had every exporter, every four months, entering the market with the same specifications and operating under the same time pressures,” one industry source explained.

Furthermore, the requirement to realise a high percentage of the quarterly import permit quota in order to receive further allocation in subsequent quarters “simply runs the price up over the market rate”.

As part of the negotiations, ALEC and LiveCorp developed a simple info-graphic, published below (click on image to enlarge), designed to communicate to Indonesian Government representatives how supply chain costs are caused by unnecessary bureaucracy contribute to higher beef prices for Indonesian consumers – particularly during peak demand periods.

Their efforts also focused on re-emphasising the mutual benefits of the Australia-Indonesia cattle trade to both countries: Northern Australia can breed large numbers of quality, healthy and productive tropical cattle, but is unable to effectively fatten them, while Indonesia, a short 4-5 day ship journey away, lacks the land to breed cattle in the volumes required to satisfy its population’s demand for beef, but can very efficiently feed imported cattle to market weights.

‘A whole new market for producers’: Cattle Council

While red meat industry opinions about the impact of the rise in permissible weights are mixed, the Cattle Council of Australia said the changes will be a boon to the northern cattle industry and would essentially open up “a whole new market for producers.”

“Cattle producers will have more flexibility to send higher weight gain cattle,” CCA president Howard Smith said.

“These changes bring more certainty and clarity for producers exporting to Indonesia and delivers benefits for the entire supply chain,” Mr Smith said.

Collision course

The expanded weight-ranges also now place live exporters on a collision course with lotfeeders and processors for limited supplies of heavier cattle in northern Australia.

For several years Indonesia has imposed a 350kg maximum average shipment weight limit on cattle imports from Australia (with the exception of a handful of emergency slaughter-weight shipments designed to alleviate beef supply shortages).

The weight-limit policy was driven by a desire to benefit Indonesia’s economy by allowing more value-adding of imported cattle in Indonesian feedlots, supporting local jobs and utilisation of its abundant low-cost crop by-products.

The narrow weight specification also meant that, for most Australian export shipments, exporters were buying lighter cattle, outside the heavier weight-ranges sought by feedlots and processors (although smaller export markets such as Vietnam, Malaysia and the Philippines take heavier weight ranges, meaning some direct competition between exporters and processors has always been present).

To achieve a maximum average of 450kg, exporters will now be able to buy cattle weighing over 500kg liveweight, (provided some cattle on the same shipment are light enough to bring the overall average to below 450kg).

Productive heifer policy

In October Indonesia’s new trade minister imposed a “five plus one” policy that requires importers to buy one breeding animal for every five feeder cattle they import, in an attempt to force greater production of locally produced beef in a very short time frame.

ALEC chair Simon Crean said dialogue to find sustainable arrangements for the export of productive heifers was still underway.

“A win win for both countries”: Crean

Confirmation of the changes coincided with a meeting with Indonesian Trade Minister Enggartiasto Lukita in Sydney on Saturday, attended by ALEC chair Simon Crean, ALEC Director Troy Setter and LiveCorp CEO Sam Brown.

Mr Crean said the meeting confirmed the importance of the live cattle trade to both countries, “Not just in terms of the commodity itself, but also because of the capacity building, industry services and supply chain investment that goes with it.”

“Reducing trade restrictions represents a win-win for both countries because it utilises Australia’s unique ability to breed large volumes of cattle and Indonesia’s capacity for finishing exported animals in local feedlots.

“It enhances market opportunities for Australian producers and helps to build further economic development in Indonesia’s supply chains.”

Mr Crean said Australian exporters would continue to support efforts to help build Indonesia’s cattle and beef self-sufficiency because it complemented the live trade of feeder animals.

“We support Indonesia’s policies around food security and building business confidence and industry capability through greater collaboration and investment via initiatives like the Indonesia Australia Red Meat Partnership,” Mr Crean said.

He said work by Australian representatives over recent months had been important.

“As we embark upon a positive new era with our Indonesian partners, we have seen again what effective leadership from Australia’s livestock export industry can achieve on behalf of the broader livestock sector,” Mr Crean said.

“Australian and Indonesian government and industry figures, including representatives from ALEC and LiveCorp, have worked with great determination over in recent months make today’s announcement possible.

“We’ve also seen how the Australian Government’s provision of additional specialist Agriculture personnel and resources in the Australian Embassy in Jakarta is paying dividends for producers and exporters.”

Federal agriculture Minister Barnaby Joyce said the changes would allow better business planning for Australian exporters, increase the range of cattle eligible for export and ultimately improve returns at the farmgate.

Trade minister Steve Ciobo said the new policy meant Indonesian importers would be able to source a wider range of live feeder cattle, which should lead to more sustainable prices through the supply chain.

Not all happy with the move

Not everyone in the Australia-Indonesia cattle chain is happy with the expanded weight ranges.

One exporter told Beef Central that while producers in northern Australia will welcome the move, it is not one that all importers in Indonesia will be happy with.

He said different customers in Indonesia had different requirements, but many wanted to buy light cattle to value-add.

“Their model is built on value-adding and they want a light animal,” he said.

“The only way they can get out of expensive cattle now is to value-add.”

Being able to sell beef from a heavier carcase could pose a challenge for importers in the current market, he said.

Subdued economic conditions in Indonesia, and difficulty competing with cheaper Indian buffalo beef due to the high price of Australian cattle made heavier carcases less attractive.

“When the market is buoyant they can probably sell a 500-550kg carcase, but right now they want a 450-480kg finished animal because they can’t sell all the hot meat in one day, they have to freeze it or store it.

“If they kill a big animal they can’t literally sell the whole body.”

  • Tomorrow: What does to 450kg weight adjustment for Indonesian live exports mean for the broader Australian cattle industry?

 

 

Click on image to enlarge

Click on image to enlarge

 

 

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