Australia’s live export trade to Indonesia has experienced a remarkable turnaround in demand after Jakarta yesterday released a significant new round of permits for slaughter-weight cattle.
The question now is whether producers in the northern live export zone who are most in need of new orders for their cattle will have suitable stock on hand to capitalise on the reinvigorated demand from Indonesia.
The new permit is for 75,000 head of slaughter weight cattle to be supplied between October and December.
That is on top of the existing permits for 46,000 head of feeder cattle that remain valid for the fourth quarter under the previous quota system.
The new permit has been allocated by the Indonesian Ministry of Trade specifically to help improve beef supplies in Indonesia in the current quarter.
Beef import industry sources have confirmed that new import permits for frozen beef have also been issued, however definitive volumes could not be ascertained prior to Beef Central’s publishing deadline today.
Indonesian trade minister Gita Wirjawan and agriculture minister Suswono recently announced that Indonesia's future cattle and beef import requirements will be decided by a reference pricing mechanism, after the weight limits and quota restrictions introduced to help Indonesia achieve self-sufficiency in beef production led to a massive beef shortage and runaway prices.
Under the new system, whenever the price of beef rises too high, Indonesia will open the gates to imports until supplies stabilise and prices return to a level that is more affordable for consumers.
The rub is that the same self-sufficiency policies that have contributed to a shortage of beef in Indonesia have also contributed to a shortage in Australia’s northern live export zone of the heavier cattle Indonesia now needs to rapidly improve its beef supply.
For the past four years Indonesia has imposed weight limits of 350kg on cattle imports, which has caused northern producers to adjust their breeding programs to meet Indonesia’s requirement for light weight cattle.
Continually negative market signals from Indonesia in the form of repeated reductions in import quotas have also discouraged any thought of herd expansion, while a dry year has further disrupted the production of heavier cattle throughout the north.
The new 75,000 head permits are a one-off permit. Indonesia is yet to release new permits under its reference-pricing system, with a number of technical issues between Indonesia and Australia still delaying their release.
To fill this latest round of permits, exporters are now likely to be forced to look far further into states such as Queensland to find the 400kg plus cattle that will be required to fill the new slaughter permits in the next three months.
The new slaughter permits cap off what has been a constructive visit by Prime Minister Tony Abbott, senior ministers and 20 industry leaders to Indonesia for the live export trade.
Mr Abbott said he had discussed Australia’s desire to reinvigorate its live cattle trade with Indonesia during a meeting with President Susilo Bambang Yudhoyono in Jakarta yesterday.
While there was still “a bit of work yet to be done”, he said there was enthusiasm for the trade on both sides, and the leaders had agreed that further details would be worked out between their respective ministers.
Mr Abbott also indicated that his Government is committed to seeing through a $60 investment announced by his predecessor Kevin Rudd on a trip to Jakarta in July for the development of a bilateral red meat partnership between Australia and Indonesia.
Elders managing director Malcolm Jackman, who was one of the 20 ‘admirals of industry’ who accompanied the Prime Minister to Jakarta, said the visit was of significant benefit to the cattle trade.
“I think the whole 24 hours here has been really good, I think the speeches were outstanding from an Australian and Indonesian point of view, and particularly from a cattle industry point of view,” Mr Jackman told Beef Central.
“I could not be happier with the words that came from the prime minister about reinforcing the positive aspects of the live export trade.”
Mr Jackman said president Susilo Bambang Yudhoyono and trade minister Gita Wirjawan were equally as positive in their comments about the importance of re-establishing a strong cattle trade between the two countries.
* An earlier version of this article incorrectly stated that a dispute over technical issues relating to Indonesia's new reference pricing system had been resolved. Issues are still being negotiated and permits have yet to be released under the new reference pricing system.