Don’t get too excited about Indo beef access announcement

Jon Condon, 29/05/2013


Twenty four hours after the Federal Government announced that premium beef access to Indonesia is to be excused from quota calculations, mystery still surrounds the definition of the term, ‘premium’.

In a media statement issued by the Federal Government yesterday morning, Australia’s trade and agriculture ministers Emerson and Ludwig said Indonesia had confirmed that imports of ‘premium Australian beef’ will be exempt from quotas.

‘What does that mean?’, the industry has been asking since: ‘chilled’, ‘grainfed’, ‘MSA’?

While there has been widespread speculation, the fact is nobody knows, and the Government is yet to provide any clarification to the Australian Meat Industry Council, Meat and Livestock Australia or other industry channels.  

Adding further confusion to the issue, the English translation of the original Bahasa Indonesian Government announcement obtained by Beef Central makes no reference to the word ‘premium’, but uses the term ‘Prime cut beef.’

It says among the regulatory changes in the new policy, that ‘prime cut beef’ will be excluded from the calculation/analysis of national demand.

Most significantly of all, the official English translation says the import of these products may only be conducted through the Jakarta international airport (Soekarno-Hatta), Denpasar airport (Ngurah Rai), and Medan airport (Polonia).

That aspect has huge implications for any future prospect for development in beef trade, but was entirely overlooked in yesterday’s Australian ministerial statement.

If it is true, it means any export beef benefitting from quota exclusion must be shipped by air-freight only. Because of cost, air-freight currently only accounts for a tiny fraction of total trade into Indonesia.

Historically, airfreight has been used to supply very small volumes of chilled Australian cuts into Jakarta, finding its way into the upper end of the hotel and restaurant trade.

While reasonably attractive back-load freight rates apply, even at a freight rate of $1/kg, in round terms, the airfreight option is prohibitive to cheaper frozen cuts, and is limited to higher quality chilled cuts, trade contacts said this morning.

“It might work on chilled meat worth $10-$12/kg or more, where there is more room to write a margin, but you can’t shift $3.50/$4 frozen meat into Indonesia at a freight rate like that – even if the air-freight capacity existed to take it,” a respected export trader said.  

The overwhelming majority of Australian beef exports into Indonesia is in sea-freighted cheaper frozen manufacturing type beef, at prices too low to justify air-freight.

“Australia is certainly not going to be getting back to 60,000 tonnes a year-plus beef trade to Indonesia, using air-freight,” another export trader said.

“Air-freight rates into Indonesia aren’t too bad, but it is severely limited in capacity. It is used primarily to service the HoReCa (Hotel, Restaurant & Catering) trade, but that is only a very small component, volume wise.”

“There’s always that percentage of the population prepared to pay well for good meat, and Indonesia, having such a large population, is no exception. But it won’t become a big market any time soon – with or without quota advantage.”

“Maybe it will become a somewhat bigger trade as a result of freer access on the better end, but it’s not going to deliver a significant shift in volumes. I don’t think anybody should be high-fiving themselves yet,” the trader said.

While Medan is listed as one of the Indonesian entry points for air-freight, locals say that in reality the Medan airport cannot take the large aircraft that take international chilled freight. "Consequently everything has to be shipped to Singapore, and reloaded into foam eskys to get it back to Medan," a source said. "Hardly the stuff of efficient international transfer of beef." 

While Australian media generally has been celebrating yesterday’s announcement as a ‘major breakthrough in trade access’, any limitation to air-freight delivery would savagely reduce volume potential – quota or no quota.  




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