A YEAR into Indonesia’s out-of-left-field breeder policy rule which threatened to severely disrupt Australia’s live cattle trade, it has become “bleedin’ obvious” the policy won’t meet its target.
That was how live export trade leader Simon Westaway described the situation unfolding in what is Australia’s biggest market for live cattle.
Breeder volumes are running at just 3.6 per cent of total cattle exports to Indonesia, no where near the 17pc they should be if the requirement was being met, Mr Westaway revealed at a recent Agforce forum in Townsville.
With no way to ‘catch up’, the policy - which requires one breeder for every five feeder cattle imports in order to drive self-sufficiency and make beef more affordable in Indonesia - simply won’t be successful.
It is scheduled for the first audit at the end of next year.
“We believe Indonesian self sufficiency is not a policy that can be achieved by them and it’s certainly not in the interests of the Australian economy,” said Mr Westaway, the chief executive officer of the Australian Livestock Exporters’ Council (ALEC).
“It’s not the export community here that has the issue, it’s the importers in Indonesia - it’s their regulations.”
There were already discussions being led by Indonesia’s equivalent of ALEC looking at ideas around feedlot management to find more practical ways to deal with the 5:1 ratio, Mr Westaway said.
Australian feeder and slaughter cattle exports are travelling 25pc down year-on-year, with the latest industry figures reported by LiveLink showing showing 565,000 head have been shipped to the end of September.
That trend has been driven by the shortage of cattle, and thus high prices, in Australia but in-market challenges such as Indonesia’s regulations are also playing a part.
“The reality is a strong Indonesian market takes a lot of pressure off not just the export business but producers,” Mr Westaway said.
“It’s a ready-made supply chain - three and a half to four days on a vessel out of Darwin.”
Hundreds of millions in Australian investment had gone into feedlot infrastructure in Indonesia - it’s a trade that makes a lot of economic sense to both countries.
There was no reason it shouldn’t be running at 600,00-plus head per annum, which was the record number set a few years ago, Mr Westaway said.
The issue is continually shifting bars.
Indonesia has made 16 regulation changes in the past 18 months, according to Mr Westaway.
“That is really impacting confidence in the sector,” he said.
He did say, however, free trade talks between the Indonesian and Australian governments were progressing well, with live beef “right in the frame” and the industry was feeling quietly confident of some good news.
With respect to the good people of Indonesia, Australia’s live trade operators recognised the need to open up new markets, Mr Westaway said.
China seems to be the way they are looking.
Vietnam has had some animal welfare hiccups this year and Livelink figures show volumes were back 15pc year-on-year to 13,000 head in September.
MLA analysts reported feedlots in Vietnam are relatively well-stocked and that has coincided with lower beef consumption at this time of year to further underpin the lack of demand.
However, MLA’s latest industry projections saw a slightly higher revising of cattle exports to an estimated 800,000 head total this year, buoyed by the prospect of growing demand from Vietnamnow from Vietnam.
Malaysia also recorded a 60pc year-on-year decline in the latest figures and the figure to Israel showed a similar decline.
The vast majority of live cattle to China are breeder exports and that trade has seen a 39pc calendar year-to-date decline, with no recorded shipments at all in September, primarily due to weak dairy demand.
There is movement in the slaughter and feeder trade to China, with one vessel carrying 1200-odd head going so far this financial year, another planned for later this year and more in early 2018.
Slaughter and feeder cattle to China presents great opportunities but there are a number of complexities, including around protocols, management of blue tongue virus and just getting a profitable and sustainable supply chain in place, Mr Westaway said.
“It will have to transition but some big businesses are certainly focussed that way,” he said.