Wednesday, July 6, 2022

Indo beef market will rebuild

Despite sliding to a shadow of its former volumes, the Indonesian beef export market continues to hold good prospects for the future. For the 2012 calendar year the market managed only 10,300 tonnes of beef and offal exports from New Zealand, 20% of its 2010 volumes. In 2010 the Indonesian market could claim to be NZ’s second-largest by volume for manufacturing beef, after the US.

This rapid reversal in fortunes has come about through the Indonesian Government’s declared goal to be self-sufficient in domestic beef supply. It has also been complicated by trade issues with Australia after that country shut down its live exports due to cruelty issues arising within Indonesia.

For the 2013 year the Indonesian Government has set the beef import quota at only 34,000t for boxed beef, with a similar amount for live animal imports, predominately from Australia.

Ministry for Internal Affairs CEO Tim Ritchie likens the growing pressures this policy has brought with it to those behind a dam ready to burst open, as consumers grapple with soaring beef prices.

Beef + Lamb NZ chairman Mike Petersen reported supermarket prices for some beef cuts as high as $60/kg when he visited there late last year. Despite these high prices at retail, the price signals the quota is generating are not translating into farmers growing more beef domestically.

“It seems to be going to others along the supply chain,” Ritchie said. “The exporters like NZ are missing out on what has been a good market, consumers are paying more, and farmers are not receiving any more money. There are no real winners; the quota is not delivering on what it set out to do and is almost counterproductive.”

Ritchie’s concerns over the quota system are shared by other industry insiders, who have pointed to claims of corruption circling the means by which quotas are decided.

Australian producers have also lambasted the self-sufficiency policy.

Last year David Farley, the head of Australia’s largest livestock Australian Agricultural Company noted both Australia and Indonesia had been short-sighted in their policies, following the live trade cruelty issues.

The restrictions come as population growth continues strongly at 1.5% a year, effectively adding NZ’s population to itself year in, year out. In addition economic growth remains strong at 7.5% a year.

Farley noted these twin drivers alone made the self-sufficiency goal unattainable by the nation that comprises 12 million head of cattle, farmed by six million farmers. Average farm size is typically small, less than 1ha.

Tim Ritchie said many of those farmers were part-time, and the few cattle they had were viewed almost like a bank deposit, something to be drawn upon when the time demanded, such as a special occasion.

Mike Petersen noted the nation had real issues replacing its capital stock, running ahead of breeding replacements coming back into herds. If anything, the high prices have given farmers an incentive to slaughter some of that capital stock.

There are also inherent reproduction issues blighting cattle in Indonesia. Indonesia cattle are poor breeders, producing only one calf every 21 months, against one every 14 for Australian tropical cattle.

Tim Ritchie said part of Indonesia’s drive for self-sufficiency in beef was due to a desire for greater food security, but also to get more Indonesians eating more meat protein in their diets. Indonesians are the greatest consumers per capita of rice on the planet, eating 139kg a head a year, compared with 63kg in Malaysia and 100kg in China. In contrast, beef consumption averages only 2kg a head a year.

Dieticians maintain the ideal proportion of diet should be 60kg a person a year for rice.

Government estimates are that around 50% of daily calorific and protein intake is rice sourced, while in recent years rice production has faltered and consumption has increased.

The Government has stated its intention to try to get Indonesians to reduce their rice consumption by 10% over the next five years, in part to moderate the country’s dependence on the grain, and to also improve dietary balance.

Ironically, just as Americans are being prompted to consider “Meatless Mondays” (see article this issue), the Indonesian Government is prompting its citizens to consider going without rice in its “One day no rice” campaign. It has commissioned chefs to redesign traditional dishes, taking out rice and replacing it with alternatives including sweet potatoes and cassava, a tuber.

Meantime, there is tacit acknowledgement among NZ trade officials that with its rapidly growing middle class and continuing strong economic growth, Indonesian officials will come to acknowledge a need for more imported beef product.

“NZ is playing a long game,” Ritchie said. “We want to be there. The United States has taken the quota issue to the World Trade Organisation (WTO), and that demonstrates Indonesia’s trade partners are increasingly frustrated by it.”

Ritchie believes sensible diplomacy will go a long way to easing NZ’s future passage.

“We are fortunate; we have a very good ambassador up there with David Taylor.”

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