Indo beef prices soar as illegal imports fuel FMD fears

James Nason, 20/08/2012

Prices for a kilogram of beef in Indonesian wet markets have reportedly climbed above 100,000 rupiah (A$10) as the Ramadan holy month nears its celebratory conclusion, the equivalent of one week’s wage for many of the country’s consumers.

Widespread beef shortages, exacerbated by Indonesia’s decision to halve live cattle and boxed beef import quotas from Australia this year, have pushed prices to higher than usual levels during the peak consumption period.

Last year the price for beef during Ramadan reached about Rp70,000 (A$7) per kilogram, but has been reported to have reached Rp 95,000-105,000 this year as Indonesian families increase beef purchases to mark the end of the month-long daily fasting period.

While the Indonesian and Australian Governments have denied that this year’s quota cutbacks are linked to Canberra’s sudden decision to ban exports without notice in the approach to Ramadan last year, there is little doubt the move has spurred Indonesia on to pursue its self-sufficiency goal and to diversify its supply options with greater-than-ever resolve.

While a shortage of beef pushes prices to unaffordable levels, the Indonesian Government is sending strong signals that it is looking to anyone other than Australia to help fill its supply shortfall.

Rather than ease quota restrictions on Australia to free up supply, Indonesia has moved in the opposite direction and placed even further barriers on the trade, including a new 5pc tariff on cattle imports and a requirement for pedigree information on imported breeding cattle.

At the same time it has been making no secret of its desire to diversify its supply options.

Since May, as reported on Beef Central, the Indonesian Government has been openly discussing its plans to amend legislation to allow cattle and beef imports from Foot and Mouth Disease-free zones in FMD-affected countries, such as Brazil.

As it moves towards that policy, the high beef prices caused by the shortage have attracted beef and buffalo meat imports from non-Australian sources into Indonesia in recent months, through legal and illegal channels.

In one email sent to its customers, an Indonesian wholesaler is offering chilled topside and rump sourced from the US as a less expensive substitute for Australian boxed beef. Despite the higher freight component, a lower $US means US product can still be landed in Indonesia at lower cost than Australian product.

While the volumes involved are said to be small, the shortage is creating another opportunity for US exporters to establish a foothold and to invigorate relations with the potentially high-volume export market.

Perhaps more concerning for Australia though are continued reports that illegally-imported buffalo meat from India is making its way into Indonesian wet markets via the Malaysia border.

Foot and Mouth Disease is endemic in India, and the flow of smuggled meat into Indonesia has raised concerns that the disease could re-establish a presence on Australia’s doorstep.

Meanwhile, the high prices caused by the beef shortage are also reported to be having the unintended consequence for Indonesia of encouraging farmers to sell large numbers of female cattle to abattoirs, which in turn is working against Indonesia’s goal of achieving self-sufficiency.

Australian Livestock Exporters Council chief executive Alison Penfold said Australia was in a prime position to help Indonesia to deal with its shortage of beef and to build its herd with high quality breeders, but Indonesia was still looking to risk its FMD free status by importing cattle from FMD-affected countries.

“They’re looking elsewhere for animals when they have a complementary market at their doorstep,” Ms Penfold said.

“We have got breeders and feeders and slaughter cattle ready and waiting to support their needs, that are free of FMD and take only a couple of days sailing time compared to a couple of weeks which has an impact on the freight side and the ultimately cost of the animal.

“We have a genuine long term commitment to supplying Indonesia, with all of the investment and infrastructure and an entire northern production system geared towards it.”

Australian Veterinary Association president Ben Gardiner described Indonesia’s stated intentions of allowing beef and cattle to be imported from FMD-free zones within FMD-infected countries as a concerning development.

“Australia spent a lot of money helping Indonesia get rid of FMD, and to achieve eradication in 1983,” he said.

“Now we’ve got an issue where they’re choosing to make decisions to put that at risk again.”

He said the closer FMD was to Australia, the greater the risk that Australia’s valuable FMD-free status could be jeopardised.

“There is the massive $16 billion risk that has been worked out (if FMD was to establish in Australia), but even if Indonesia did get FMD again and we did not, there is still going to be a cost for Australia in going up there and helping them to eradicate it.

“Because of our level of exports and our level of dependency on being free, we have to help our immediate neighbours to manage FMD and that is a cost in itself.”


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