Australian feeder and slaughter cattle exports are forecast to rise by 15 percent to 590,000 head in 2013-14 as Indonesia lifts import orders for the first time in three years, and demand from other South East Asian markets continues to grow, according to ABARES’ latest commodity forecast.
Cattle exports to Indonesia are considered likely to rise this financial year following last month’s announced removal of the Indonesian import quota system and adoption of a price-based import mechanism in its place.
The Indonesian Government intends to issue permits for cattle and beef imports when the Indonesian beef price for secondary cuts exceeds the reference price of 76 000 rupiah (A$7.60) per kilogram.
Details provided so far suggest that when the reference price rises 15pc above that level, imports will increase, and when the price fall 5pc below that level, imports will be restricted.
Currently, ABARES reports that prices for secondary cuts in Indonesian wet markets are trading at around 90,000 Indonesian Rupiah (A$9.00) per kilogram.
In 2012–13 Australia’s feeder and slaughter cattle exports declined by 11pc to 513,000 head.
The largest decline was in exports to Indonesia, which fell by 109,000 head to
266,000 head, reflecting the country’s reduced import quotas (more detail on Indonesia’s recent import history below).
Shipments to Egypt also declined by 17,000 head following Egyptian concerns over Australian cattle being treated with hormone growth promotants.
Exports to Malaysia, the Philippines, Brunei Darussalam and Vietnam partially offset these declines with exports to these markets reaching a total of 95,000 head, 45 000 head more than in 2011–12.
The overall value of Australian cattle exports is forecast to increase by 15 per cent to $389 million in 2013–14, partially assisted by an assumed lower Australian dollar.
Indonesian import policy overview
ABARES has provided the following snapshot of Indonesia’s recent import history which helps to illustrate how policies have affected supply and prices in the country:
The Indonesian Government is aiming for 90 per cent self-sufficiency in beef production by 2014. This includes plans to reduce cattle and beef imports to 10pc of domestic beef consumption, from a peak of 39pc in 2010.
Since 2010 Indonesia has pursued this goal by limiting imports through trade restrictions that have resulted in significant upward pressure on prices. Indonesian beef prices reached record highs in August 2013 around the Idul Fitri celebrations that mark the end of Ramadan.
After Indonesia adopted trade restrictions, beef prices rose by as much as 150pc for some prime cuts of beef. In the Kebayoran Lama wet market in South Jakarta, the largest increase in price was for sirloin beef, from around 60,000 rupiah (A$6.02) per kilogram in May 2010 to around 141,000 rupiah (A$14.15) per kilogram in August 2013. The price of frozen Australian sirloin beef rose more than sirloin beef from local cattle, largely reflecting the declining availability of Australian beef in Indonesian markets.
Indonesian cattle census
According to Indonesia’s 2013 agricultural census, the Indonesian cattle herd (buffalo, beef and dairy cattle) declined by 15 per cent from 16.7 million head in 2011 to 14.2 million head as at May 2013. (Note from Beef Central – the official herd population figures reported by the Indonesian Government after its most recent cattle census earlier this year, quoted here by ABARES, conflict with official statements by the Indonesian Government after its previous cattle census in 2011, at which time the Indonesian Government reported that its herd stodd at 14.8m head (not 16.7m head cited in its latest census). Recent Indonesian media reports have also pointed to leaked Government reports suggesting the latest cattle census conducted this year showed that the herd had declined to 12m head). The decline reflects the continual slaughter of cattle (including breeding stock) for meat, as producers liquidate their herds to take advantage of the high beef prices.Recent liquidation of the Indonesian cattle herd has led to a 12pc increase in beef production from local cattle, from 411,000 tonnes in 2011 to 459,000 tonnes in 2012. However, this rise in production from local cattle has not been enough to offset Indonesia’s declining supply of imported beef and meat from imported cattle.
Imported beef and beef from cattle imports fell by 58 per cent from 234,000 tonnes in 2009 to 98,000 tonnes in 2012 because of Indonesian trade restrictions adopted in 2010.
In 2013 the Indonesian Government further reduced the import quota by 16,000 head to 267,000 head for cattle and by 9000 tonnes to 32,000 tonnes for beef, although there are indications there may be an increase of import permits for an additional 25,000 head of cattle. The Indonesian Government also permitted Bulog to import 3000 tonnes of beef exempt from the quota.
Reference price mechanism
In September 2013 the Indonesian Trade Minister and Agriculture Minister jointly announced that the Indonesian Government will disband the import quota system for cattle and beef and move to a reference price mechanism for imports aimed at stabilising domestic beef prices.
The Indonesian Government intends to issue permits for cattle and beef imports when the Indonesian beef price for secondary cuts exceeds the reference price of 76 000 rupiah (A$7.60) per kilogram by 15 per cent and restrict imports when the price is 5 per cent below the reference price. Permits will be issued quarterly and be valid for three months.
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