After a huge year in 2014 in which Australia exported in excess of 600,000 cattle to Indonesia – close to an annual record – an easing of export volumes was always on the cards for 2015.
The first signs that may be the case emerged yesterday when the Indonesian Government approved import permits for 98,000 cattle for the first quarter of 2015, down from a realisation of 133,507 head in Q1 2014.
The permits will be released to importers in Indonesia today.
It is believed that 10 Indonesian importers were also denied permits for the first quarter because they did not fulfil their commitments under the ‘80pc rule’ introduced in late 2013.
Under the rule importers are required to deliver at least 80pc of the cattle for which they are allocated import permits to the market as finished, slaughter-ready animals within the same calendar year.
After maintaining a frantic pace to satisfy Indonesian demand for more than 600,000 cattle in the past 12 months, the northern cattle trade has stalled in the past two weeks in the wait for Indonesia to release new import permits for the first quarter of 2015.
The delayed permit release has come amid renewed Indonesian Government commitments to striving to achieve self-sufficiency in meat production.
The recently elected Jokowi Government last week launched a new “People’s Farming” initiative to develop Indonesia’s domestic herd through small farmers and corporations.
The initiative aims to achieve meat self-sufficiency in Indonesia through the adoption of modern methods of farming.
Last week President Joko “Jokowi” Widodo presented Rp220 million (AUD$21,400) in cash to village cattle farmers in South Sumatra who are participating in a pilot program.
“This is the first people’s farming in Indonesia,” the President said at the launch, according to the Jakarta Post.
“If this works, we will develop it in all districts across Indonesia.
“I want to have our own farming and not to be dependent on imports,” he added.
The idea of forming people’s farming groups was reportedly raised by Muladno, a professor of the Bogor Institute of Agriculture, in 2013.
The professor told the Jakarta Post that the aim is to educate Indonesian village farmers–of whom over 90pc are just graduates of elementary and junior high schools–to become independent and get them to adopt modern farming.
Renewed talk of self-sufficiency goals within Indonesia will trigger fresh memories of the previous Government’s ill-fated self-sufficiency policy.
Under then agriculture Minister Suswono, Indonesia attempted to achieve self-sufficiency in beef production within an unrealistically short five-year time frame. The policy involved sweeping cuts to beef and cattle imports which quickly led to severe shortage of beef in Indonesia and forced prices to unaffordable heights for many consumers.
By forcing cattle prices to high levels the policy also encouraged many Indonesian farmers to sell breeding females for slaughter, thereby accelerating, as opposed to reversing, the run down of Indonesia’s domestic herd.
The delay in the release of import permits for the first quarter of 2015 is believed to have been caused by an ongoing deadlock between Indonesia’s Ministry of Trade and its Ministry of Agriculture over the size of the permit.
Officials from Indonesia’s Ministry of Trade have expressed concern that efforts to increase beef supplies by opening up imports of boxed beef and cattle since late 2013 have so far failed to substantially lower the price of beef in wet markets.
Some sources have privately indicated to Beef Central that the MoA, which prioritises domestic production, was proposing a first quarter permit issuance of just 60,000 head, and an overall permit for the year of 240,000 head.
At the request of industry, the MoT was said to be negotiating for a higher number of 90,000 head or 360,000 head for the year.
It is important to note that these numbers have not been confirmed at an Indonesian Government level and therefore should not be read as definitive statements of the Ministries’ positions. However, they were supplied by industry sources who are well placed to industry/government discussions and provide some support for the view that Jakarta, at this stage at least, will look to rein in imports somewhat from the hefty levels of last year.
One source from a cattle importing company who asked not to be identified said uncertainty was part of doing business in Indonesia.
But he said that within uncertainty lay opportunity and suggested that there was potential Australian producers to get involved with moves to improve cattle production in Indonesia.
“What is clear is the government’s renewed commitment to developing domestic herd through small farmers and corporations,” he said.
“I believe there will be new opportunities for the Australian producers to meet that challenge.”