Indonesian feedlots squeezed but boxed beef steady

Indonesian feedlots squeezed but boxed beef steady

Beef
BEEF OPPORTUNITIES: Indonesian president Joko Widodo and Prime Minister Scott Morrison.

BEEF OPPORTUNITIES: Indonesian president Joko Widodo and Prime Minister Scott Morrison.

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Update of bilateral trade in live cattle and beef to Indo during pandemic

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THE SHORT-TERM outlook for business in what is increasingly becoming one of the most important markets for Australia's cattle industry, Indonesia, is extremely unpredictable.

By 2050, Indonesia is projected to be the world's fourth largest economy with per-person consumption of commodities like beef and cereals predicted to be greater than China.

For that reason, big efforts are being made by Australia's agriculture sectors, and its government, to both understand the market and foster relationships.

ALSO IN BEEF:

For beef, the volatility at play at the moment - most of it on the back of COVID-19 - is creating both opportunities and challenges.

High costs and pandemic restrictions are squeezing profit margins in Indonesia feedlots. At the same time, Indonesia's beef sales are shifting away from traditional wet markets to supermarkets and online beef purchases have rocketed by 300 per cent this year.

These insights were provided in the latest update of the Indonesia-Australia Partnership on Food Security in the Red Meat and Cattle Sector's joint state of the industry report.

The report says while Australia's live cattle sales to Indonesia were down 15pc to June 2020 compared to the same period last year, boxed beef sales were comparable to 2019.

It says Indonesian feedlots have experienced significant profit declines this year due to high feeder cattle and feed prices, and increasing operational costs after the imposition of new measures to protect staff health.

The cancelling of the planned import of Indian buffalo meat and strong demand for beef during the Idul Fitri holiday period provided some relief but the recent re-issue of IBM import permits could mean feedlot owners may need to lower their beef prices in order to maintain demand from consumers with less buying power, the report says.

On the boxed beef front, some traders took the option to freeze chilled Australian beef for delayed sale and demand was buoyed by substantially increased supermarket sales as consumers avoided traditional wet markets due to health concerns.

Australian boxed beef export volumes to Indonesia between January and June 2020 were almost identical to the same period last year - 27,988 tonnes compared to 27,997t.

The report predicts volatile Australian dollar to Rupiah exchange rates and a significant economic contraction in Indonesia in quarter two of this financial year will see a further reduction in Indonesian consumer's purchasing power and additional increases in Indonesian feedlot and processor operating costs.

It warns the industry will need to evolve and become more efficient to remain competitive as Indonesian consumers opt for cheaper forms of protein, including IBM.

Mr Fajar Usman, acting Indonesian co-chair of the partnership, said the information contained in these reports was vital for investment planning and policy development in both countries.

"Indonesia and Australia have, for more than two decades, reaped the benefits from our strong partnership in the red meat and cattle trade," Mr Usman said.

"The annual industry report and its update will help both countries further strengthen this unique business partnership."

Pathways to export

Meanwhile, an Australian Food and Grocery Council export guide for Indonesia has been launched, aimed at helping food and beverage exporters learn more about Indonesia's consumer trends, import compliance requirements and pathways to export.

The Council received $91,000 in Agricultural Trade and Market Access Cooperation funding to support industry engagement and education activities.

"Indonesia has the fourth largest packaged food and non-alcoholic beverages market in the Asia-Pacific, recording average growth of 6.5pc per annum," Deputy Secretary Agricultural Trade Group David Hazlehurst said.

"Increasing demand for healthy, safe, high quality products in Indonesia presents exciting opportunities for our farmers and food and beverage industry.

"Given the recent ratification of the Indonesia Australia Comprehensive Economic Partnership Agreement and resulting reduction in tariffs, our exporters need to be ready to make the most of these opportunities."

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