THE implications behind JBS’s surprise announcement on Friday night that it plans to sell 25 percent of its Australian and NZ business to Indonesia’s Danantara sovereign fund (click here to view Beef Central’s earlier report, published Friday evening) are now starting to be absorbed by industry.
One of the key underlying messages in the deal announced on Friday is that JBS sees enormous opportunity for growth in the southeast Asia region, and Indonesia in particular.
In addition to Danantara’s A$3.57 billion equity contribution for a 25pc stake in the JBS Australia division, the joint venture is expected to provide incremental investment capacity of another A$3.57b, bringing total available capital to up to A$7.1b to fund acquisitions, greenfield and brownfield investments and other growth opportunities across Indonesia, Australia, NZ and Southeast Asia.
Completion is still subject to regulatory approvals and other customary closing conditions.
JBS’s deal with Danantara was described by a veteran Australian red meat processor this morning as a ‘master-stroke’, marking a clear recognition of the rapidly growing and developing economies to Australia’s north.
Effectively, JBS will soon have access to a A$7 billion war-chest for investment in the Asia Pacific region, and speculation is already well underway about how that may be spent. Here’s just a sample of some early thoughts across the industry:
- Given its history of diversifying into other proteins, could JBS make a play to become a major chicken meat and/or egg producer in Australia, as it has in the US and Brazil?
- For some years JBS Australia has spoken about the potential to expand pork production in Australia, with a view to moving into export in a serious way.
- Could JBS invest in, or purchase feedlot and beef processing assets in Indonesia, relying on Australian-bred live export cattle for supply?
- Could JBS now make a play for either (or both) the mothballed AA Co Livingstone beef processing plant near Darwin, or the 90,000 head Mort & Co Grassdale feedlot asset near Dalby on Queensland’s Darling Downs?
Australia-Indonesia relations
Indonesia and the broader southeast Asia region is rapidly emerging as an economic powerhouse, with millions of residents transitioning out of lower income into middle income status. And as MLA has frequently illustrated in the past, when that happens, animal protein consumption inevitably rises.
Underpinning the investment announcement made on Friday night are closer and more amicable working relations between the governments of Australia and Indonesia, which have improved considerably since the tense days seen a decade or more ago.
The Australian Federal Government has worked hard to mend bridges and has made significant progress. The Jakarta Treaty struck in February this year is clearly a major step forward in how Indonesia and Australia work together, tying security to economic growth and making the region more stable.
Its focus on “talking things through, connecting people and following international rules” comes at exactly the right time for a business deal like this.
It may be that the JBS/Danantara deal is the first tangible, commercial evidence of that process.
Early days for investment targets
Overnight, Beef Central spoke to JBS Australia chief executive Brent Eastwood, currently in London on business, to better understand the new venture and what it means for the industry.
Brent Eastwood
Mr Eastwood said the discussions with Danantara had been underway for about a year.
Despite early industry speculation about likely investment targets, he said the company did not yet have any specific investments in mind.
He confirmed, however, that the initial investment focus would be on investigating opportunities in Indonesia itself, to strengthen the regional protein supply chain.
“We want to broaden that market access situation, and help accelerate the development of Indonesia’s protein sector,” he said.
“That’s our initial plan, but ultimately it is not only about investment in Indonesia – it may include southeast Asia in general, as well as Australia New Zealand. Over time, we will look at acquisitions of existing businesses, or building greenfield or brownfield (redeveloped) sites.”
He said it was way too premature to start speculating about potential investments in Australia.
“I can certainly imagine people speculating about that. Anything in the ag or food space that comes on the market over the next few years may be linked to JBS as a potential buyer.
“But the reality is that while there has been significant work to get the agreement to this point, while we have significant ideas where we can begin to direct these funds to achieve these goals, it’s way too early to talk about specifics.”
Other proteins?
Mr Eastwood cautioned against assuming that any investment in Indonesia would ‘automatically’ be beef-related.
“It might be opportunities in the poultry sector or aquaculture, for example. Beef is certainly an increasingly consumed protein in Indonesia, but it’s not just about beef – and there’s a lot of beef now being imported there from other parts of the world – not just Australia.”
While there were certainly options in the beef sector in Indonesia for the new venture, it would be a “somewhat narrow view” to assume that that would simply be importing Australian live export cattle and feeding and processing them in Indonesia, he said.
“The reality is, this agreement represents a multi-protein opportunity. After all, JBS is the largest protein producer in the world – and operates across a wide range of species. This agreement is about partnering with a vastly experienced global protein producer to help achieve Indonesia’s desire to accelerate the development of protein within its own country, and across southeast Asia.”
“It’s a region that JBS does not currently have a footprint in, and being a region of 800 million people where economies are growing rapidly, it makes common sense to establish a presence.”
Danantara sovereign fund
So what is known about the Danantara entity?
A nationally-owned sovereign fund, Danantara represents most of the state-owned enterprises in Indonesia. Investments cover fields like infrastructure and utilities, real estate, financial services, food and agriculture, renewables and energy, minerals, digital infrastructure and healthcare. In combination, Dantanara controls funds worth around A$1.28 trillion, despite being created only less than two years ago.
The JBS deal is understood to be Danantara’s largest investment to this point – certainly in the agriculture/food space.
Halal advantage?
Beef Central asked whether the deal might include some element of additional Halal opportunity for JBS protein sales.
Mr Eastwood pointed out that Indonesia was the largest Muslim population in the world. With a total population around 288 million, Indonesia is the fourth largest in the world.
“But while the majority are Muslim, even Indonesia’s population with Christian beliefs numbers around 35 million – bigger than Australia’s entire population.”
“So there are a number of opportunities – it’s not just a Muslim (or Halal production) specific move – but is more broadly based on Indonesia’s close proximity to Australia, and the growing spirit of collaboration and working together on many, many things.”
“We see this as a great opportunity in the food sector, and more specifically animal protein – that both sides can add significant value to.”
Asked whether food security was an underlying factor for Indonesia in the agreement, Mr Eastwood said “one hundred percent.”
“With Indonesia’s large and growing population, the President has frequently stated that he wants to increase average income, provide more cost-effective protein options and lift education.
“He wants to be able to give Indonesian people better food options, and the cornerstone of that is protein.”
- JBS announces its FY 2026 second quarter financials tomorrow. Any commentary around the JV with Danantara will be added in a later report.
It seems to me JBS are global traders of protein. Brazil is their home base, but they trade large volumes of protein from and to third party countries. Here, JBS invested heavily in the assets purchased to gain competitive advantages. Thailand is a large producer of poultry and aquaculture. Taiwan supplies large volumes of pork to Japan. In beef, north Asia was shared by USA and Australia. Indonesia will be a growing market for Brazil and therefore JBS. Indonesia needs meat protein at low cost. Australian beef processors sell cattle feet into this market as an example of what they seek. Poultry and aquaculture are investments JBS understands and trade heavily. Maybe these are proteins JBS might seek to develop.
Following the devastation caused in north and south America by H5N1, once Australia counts this cost maybe there will be opportunities for new entrants with available funds.