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99th Edition: February 2022
- World food prices including beef are rising fast, with no end in sight
- Australian cattle prices continue to climb but our customers retail prices remain steady. Something has to break
- If Lumpy Skin Disease reaches Australia, the result will be catastrophic
Indonesia: Slaughter Steers AUD $5.05/kg live weight (Rp10,400 = $1AUD)
There was only a very slight rise in prices this month with the indicator rate lifting from Rp52,000 to Rp52,500 per kg live weight for slaughter steers. My advice is that this small increase in price is a reflection that next month is Ramadan so there is logic in resisting selling at a discount as lot feeders know that demand will be at its peak during the coming month of Ramadan and the following week of Lebaran celebrations. Prices ranged from the high Rp49’s in Lampung to Rp55,000 per kg for the very best yielding animals in West Java.
Slaughterhouses and meat traders in the Greater Jakarta area went on strike during February (see article here) in protest against high cattle and beef prices in the expectation that the government would be able to reduce prices and increase supply. Unfortunately, the current high prices for live cattle and beef are a symptom of global food inflation and not a simple supply chain hiccup that governments can rectify. The whole world was already facing rapidly rising inflation well before Russia invaded Ukraine. A secondary effect of the war will now be higher world energy, fertilizer, and wheat prices. This will push the food inflation even higher with no country immune to the impact, especially those that rely on significant levels of imports. Costs of beef production, processing and freight will keep rising as fuel prices go through the roof so there appears to be little hope that any measures by government or industry will have sustained downward pressure on the retail price of beef.
The Indonesian government have made a number of policy changes to try to reduce the impact of rising prices.
- Meat traders called off a second planned strike after the government guaranteed to import 78,000 head to Java for the Eid celebration. Stock would be sourced from 10 provinces with the assistance of the Ministry of Agriculture. This is good news for Java but seems likely to push prices up in the provinces where these stock will be sourced.
- The National Food Agency (Bapanas) has asked private importers to join in the beef import process to help increase supplies and stabilise prices. Previously, the government had reduced the capacity of private enterprise to get involved with State Owned Enterprises given the main role in beef and Indian Buffalo meat imports. Private enterprise can move much faster than large government bureaucracies so this move may well have a positive impact although prices of imported beef will be subject to world market rates, so the result is likely to be more beef imported in good time for consumer demand but still at high prices.
- Bapanas will also develop strategies for accelerating the distribution of meat reserves from national stockpiles.
- Importers have been encouraged to try to source beef from markets other than Australia, including Brazil and Mexico.
- The Ministry of State-Owned Enterprises, through Bulog, has started holding cheap markets in urban villages in the Jakarta area presumably using SOE stockpiles.
Wheat import/export map from Peter Zeihan: Russia is the world’s largest exporter of wheat, Ukraine is the 5th largest exporter. Indonesia is an importer.
Last month, one of the suggestions to reduce the cost of livestock feed in Indonesia was to switch from local agricultural waste products to imported Australian wheat. Given the likely impact of the war on global wheat (and other grain) prices, this option is probably no longer under consideration.
Another new government initiative in respect to food security is the Commodity Balance. This policy aims to support transparent imports/exports, provide accurate commodity trading data, increasing investment and jobs in these sectors, guarantee the availability of consumer goods and take into account the interests of all parties in the supply chains including small businesses. Currently there are five commodities in the commodity balance including rice, meat, sugar, fish, and salt. I note that in Bali this week, a number of people advised me that sugar was no longer available in many retail outlets and where it was available it was being restricted to small purchases only.
Knuckle in the Pasar Modern wet market in BSD City, Tangerang, Jakarta. It doesn’t get much leaner than that. Price is unchanged at Rp150,000 per kg.
There was no knuckle in this BSD SuperIndo supermarket during this visit but there was plenty of topside at a discount rate of Rp149,500/ kg or AUD$14.38.
Darwin feeder steer prices just keep climbing with the price increasing slightly to AUD$5.45 at the end of February up from $5.35 in January. World demand and supply don’t appear to have been affected by the war at the moment, so it seems likely that these prices are sustainable for the short term at least.
These feeder steer prices translate to a CIF price in Indonesia of USD$4.50 = AUD$6.16 CIF @ Rp10,400 = delivered rate Rp64,100 per kg against a selling price of the fattened animal of Rp52,500 per kg.
5 vessels exported live cattle from the Port of Darwin to Indonesia during February with a total shipped of about 17,800 head of which roughly 800 were buffalo.
Vietnam: Slaughter Steers AUD $5.09 / kg (VND16,500 to $1AUD)
Once again slaughter cattle prices have edged up by an average of Dong 1,000 to Dong 84,000 per kg live weight during February although this will provide importers with no joy as their selling prices are still well below their buy in rates. My advice is that the CIF rate for slaughter steers/bulls delivered to Vietnam at the moment is about USD$4.40 per kg live weight. USD$4.40 @ AUD73 cents = AUD$6.03 per kg CIF @ Dong16,500 = CIF 99,450 Dong per kg live delivered. With a selling price of Dong 84,000 you don’t need a calculator to see how much pain the importers are in. Importing low fat, high yield bulls and cheaper buffalo is a good strategy but not nearly good enough to have any hope of breaking even. No cattle were exported from Townsville or Darwin to Vietnam this month.
Vietnamese farmers are having no luck at all with African Swine Fever (ASF) and Lumpy Skin Disease (LSD) causing huge losses to their pig and cattle populations but now extremely cold weather has resulted in large number (1,000+) of deaths in cattle and buffalo in some of their northern provinces. See the photo below where farmers have made campfires to keep their cattle warm.
Photo from the internet: Farmers in the north of Vietnam are protecting their cattle from extreme cold by lighting fires to keep them warm.
VinMart imported Australian Knuckle @ AUD$16.18 per kg. Retailers appear to be managing to keep a lid on prices despite the recent price hikes around the globe.
Vietnam has had a good relationship with Russia since they were their most loyal supporter during the Vietnam/American war. During the first half of 2021, Russia became the largest meat exporter to Vietnam. From January to June Russia exported about 55,000 tons of pork, 6,100 tons of chicken and 990 tons of beef to Vietnam with a total value of USD$121 million. This trade is now likely to be interrupted as even commercial shipments of products to and from Russia are being restricted due to a combination of financial sanctions and the inability of traders to obtain insurance for commercial cargoes entering or leaving Russian ports.
This FAO graph shows the trends in live pig prices in Southeast Asia and China. Most commercial pig farms use grain-based rations so the prices above are likely to be moving higher in the near future.
China: Slaughter Cattle AUD $7.70 / kg live weight (RMB 4.60 = 1AUD$)
Slaughter cattle prices did not change during February with the indicator rate holding at Yuan 35.4 per kg live weight which converts to a slightly lower AUD rate than January due to currency movements. Beef prices in the wet and supermarkets were also unchanged while pork prices eased substantially in both Beijing and Shanghai.
China is a large importer of wheat and the world’s largest consumer of petroleum products so they will be watching the Russia/Ukraine war with great concern as it appears certain that energy prices will spike around the globe and food inflation is just getting started. Both of these factors will have serious implications for the Chinese economy and the daily lives of consumers. The National Bureau of Statistics reported that the prices for fresh vegetables in China surged by 30.6% last November compared to a year ago. This followed a year on year rise of 15.9% in October with these rises attributed to the severe floods and other extreme weather events. Rising global grain prices will be a huge blow for the chicken and pork industries that rely heavily on imported grains primarily soybeans from north and south America. While wheat is the first to be affected by the war this will cascade to all other grains as the world markets adjust to the Russian and Ukraine deficits.
Philippines: Slaughter Cattle AUD $3.40 / kg (Peso 37.6 to AUD$1)
No change in domestic slaughter cattle price in Peso this month with similar stability in the price of beef in the wet and supermarkets. Given the Philippines high sensitivity to energy prices this stability seems likely to come to an end quite soon. Sharply higher fuel prices will slam the entire Filipino economy which relies so heavily on transport logistics across its far-flung archipelago.
My local agent tells me that the petrol tank in his car which used to fill for about 2,000 Pesos now costs R3,500. Gasoline prices are now at 54 pesos per litre. The Russia/Ukraine war and the upcoming presidential election have pushed Covid 19 off the front page.
The FAO ASF map below shows that Filipino pig farmers continued to experience new outbreaks during February. Other new outbreaks have been reported in Thailand, Laos and Cambodia this month.
Thailand appears to be reporting the majority of new outbreaks in February.
Thailand: Slaughter Steers AUD $4.64 / kg (Baht 23.7 to $1AUD)
Slaughter cattle and wet market beef prices have remained steady in Thai currency terms during the month. My agent reports that official Thai inflation figures rose by 5.3% during February so it is likely that beef prices will soon be on the rise. The large number of ASF outbreaks as shown on the FAO map above would suggest that their pork industry will be under severe stress trying to control the disease so there will no doubt be flow on affects to beef consumption trends. New Covid 19 infection rates are also very high at the moment.
Finally, back in Bali after 23 months away.
That’s the good news. The bad news is the official advice that Lumpy Skin Disease (LSD) has been confirmed in cattle in the Riau region of Sumatra. Given that this disease is transmitted by biting insects, the virus is likely to spread throughout the Indonesian island chain despite the best efforts of the government to control the spread using vaccination and biosecurity measures. Once the virus reaches Timor it is only about 800km from the north of Australia and its large cattle and buffalo herds. If the virus is transmitted by insects then movement is likely to occur during the northeast monsoon season when prevailing winds are blowing from Timor towards northern Australia.
In Asia and most other parts of the world, cattle are under close daily care by their owners. This means that a largely non-lethal disease like LSD can be managed with prompt attention using topical treatments, shelter from harsh weather, general care and if necessary, antibiotics to treat any secondary infections. But the situation is far more serious in the case of pastoral cattle and wild buffalo herds in the north of Australia. Have a look at the photos of the clinical signs in the calves below. Now imagine what the result might be if young calves in an extensive pastoral breeding herd suffer this type of skin lesions (and many other clinical symptoms) during the wet season without any capacity for individual care. In Indonesia and most other parts of the world achieving a 100% vaccination coverage is not a difficult task. Normal musters in the north of Australia are usually well below 100% so vaccination coverage will be incomplete leaving a susceptible nucleus of animals for the virus to survive and continue transmission. This is the reason I have made the statement that I believe that this is the most serious threat to the Australian cattle herd since I graduated in 1975. See below a list of clinical signs of the disease copied from the Merck veterinary manual. They suggest that about 50% of animals will develop these signs although mortalities are quite low. But these comments refer to cattle that are intensively managed and provided with timely and appropriate treatment. The list below does not include abortions and a significant reduction in fertility which can also be expected. Having lived in the top end of Australia for over 40 years I believe that the outcome of the introduction of this viral infection to northern pastoral herds will be catastrophic. Vaccines are available but are in my view far from perfect. We need an urgent effort to develop new vaccines that can provide better protection for this incredibly valuable resource. Since I arrived in the Northern Territory in 1979 the prices received by our producers have been appalling until the last few years. After waiting all this time for a reasonable return for their hard work and investment, northern producers are now staring down the barrel of a loaded gun that has the potential to devastate their productive capacity and incomes, not to mention the horrendous animal welfare implications.
Notes on LSD from the online Merck Veterinary Manual.
This photo is from the Pirbright veterinary laboratory in the UK. Even if the lesions on a pastoral calf in the northern wet season were only 25% as severe as this, the life of this calf would be at serious risk.
This photo is from the Farmers weekly in Zambia.
Another photo from the Farmers weekly in Zambia
These figures are converted to AUD$ from their respective currencies which are changing every day so the actual prices here are corrupted slightly by constant foreign exchange fluctuations. The AUD$ figures presented below should be regarded as reliable trends rather than exact individual prices. Where possible the meat cut used for pricing in the wet and supermarket is Knuckle / Round.
|Rp10,200||Dec 21||14.71||15.49 B13.04||4.21||4.80|
|THB 24.8||Oct 21||9.27||NA||3.02||3.27|
|THB 24.4||Nov 21||NA||NA||NA||4.51|
|THB 24.0||Dec 21||NA||NA||2.88||4.58|
|THB 23.2||Jan 22||11.59||NA||3.43||4.72|
|THB 23.7||Feb 22||11.39||NA||3.59||4.64|
|China Beijing||Sept 21||16.87||20.00||3.72||7.32|
|Pork per kg||Oct 21||20.62||25.16||3.81||7.46|
|Beijing Y24.6||Nov 21||20.60||25.32||4.29||7.55|
|Darwin Feeder Steer||June 19
|Feb 2020 $3.80||March 2020
A great and sobering report Dr. Ross. One would hope that multiple photos of that LSD are printed, laminated and placed on the exquisite dining tables on the forcoming NTCA conference. Lets hope full awarness is forthcoming. A cure vaccine is to be wished for.
As BTEC forced the building of much infrastructure in Northern Australia in the 70s and 80’s, and improved mustering rates, so will LSD.
BTEC allowed capture and sale of livestock. LSD unless vaccinated may mean euthanasia on property.