Indonesian cattle import permits for the opening term of 2016 were formally issued to importers on Thursday.
Importers have been collectively allocated permits for 200,000 cattle for the first four months of the year, expiring on April 30.
Importers have told Beef Central that Indonesian officials also anticipate issuing permits for 267,000 cattle for the second four-month term starting on May 1, and permits for 150,000 head in term three, comprising an estimated 617,000 cattle for the year.
A respected trade source who requested not to be named said the permit volume is “appropriate”, but possibly too high for what northern Australia can supply and well below what Indonesia will need to satisfy consumer demand.
What are the implications of this?
“Prices will stay high in Australia for feeder weight cattle,” he said.
“Local cattle prices in Indonesia will stay very high and should put more impetus behind breeder programs which will drive good prices for heifers out of Australia.”
A key challenge for the trade will surround the ability of Indonesian importers and lot feeders to increase the selling price they receive for finished cattle to offset the higher costs they now face in sourcing feeder cattle.
The source predicted that some Indonesian importers and cattle feeders could go to the wall within months if they cannot get prices up.
“This clearly requires prices to push up across the value chain through to the wet market customers meaning home industry bakso makers,” he said.
“Politics of the industry in Indonesia will intensify as beef prices will go up – it will force the Government’s hand on boxed beef import policy.”
For these reasons, he said, 2016 was shaping as a potentially defining year for the Australian-Indonesian beef cattle customer supply relationship.