Australia's beef exports to Indonesia drop by over 50%

Northern Australia's cattle exports to Indonesia have fallen by more than 50% from their peak of 750,000 over a period of three years.

 

Australia's live cattle exporters have been powerlessly watching their most important market shrinking over the past several years. Since a 2009 peak of about 750,000 cattle exports, the Indonesian government has been slashing the annual quota. It dropped to 520,000 in 2010 and 420,000 in 2011. After 2011's month-long ban over the abattoir cruelty scandal, the quota was further cut to 280,000 in 2012. This year, it is 260,000-a third of the 2009 figure.

 

Northern Territory Cattlemen's Association executive director, Luke Bowen, said northern producers are in distress. "We got a northern industry that is in serious financial crisis, and a lot of that is driven by the current import policy in Indonesia, which is in turn creating in Indonesia some real challenges for their local industry, because they got record numbers of local cattle going into the processing sector. So cattle numbers in Indonesia are falling rapidly and prices are escalating significantly. So consumers have to pay record prices for beef in the market-almost double what they were 12 months ago," Bowen said.

 

The Indonesian government has set self-sufficiency targets for a range of agricultural products. For beef, it aims to locally produce 90% of the nation's supply by 2014. But with some of the most expensive beef in the world now-at around US$10 a kilogramme-the question being asked in Indonesia is, 'At what cost?'

 

According to Risti Permani, a research fellow at the University of Adelaide's Global Food Studies, "Beef on the 2011 livestock census, the government concluded that we have 14.8 million head of cattle and argue that this should be sufficient to meet the local consumption. But because of the problems along the supply chains and then the typical farmers, who have only between one and three cattle, there's a big question whether we actually have enough cattle to meet the local consumption.'

 

That's a hot debate in Indonesia. The government insists it's not an issue of supply but of distribution. Thomas Sembiring, the executive director of the Indonesian Meat Importers Association, said there's no large-scale production and the nation's nearly 15 million head of cattle belong to 6.4 million farmers.

 

It's not only live cattle imports that have been cut. Australia sent 70,000 tonnes of frozen beef to Indonesia in 2010. This year, the total import quota for boxed beef to Indonesia is less than half that. Sembiring said most of that goes to manufacturers.

 

In recent months, the Indonesian beef import industry has been racked by claims of corruption and bribery, extending through to key political figures. Permani said there's a lack of transparency in the import permit system. He argued the Indonesian government has not done enough to improve farming practices to create a self-sustaining beef industry.

 

"The Indonesian government has introduced various programmes, especially on-farm, including providing subsidised credits to farmers to help them to buy calves for the fattening industry. And some people doubt about the progress of such programmes, because there's still a lot of homework needs to be done on-farm, we still have issues with the animal health-just basic farm practices. We also have problems along the supply chains," she said.

 

As Indonesia's middle class expands, so too does the demand for beef. In 2010, beef consumption averaged 1.7 kilogrammes per person; this year, it's half a kilogramme more. That equates to an extra 750,000 live cattle. Sembiring said the government will save political face by achieving its goal of self-sufficiency through reduced consumption.

 

Australia's not the only country affected by the agricultural import restrictions. The US is taking the matter to the World Trade Organisation. Next year's quotas are not due to be announced until the end of the year, but Australian beef producers are hoping for some reprieve in coming months, according to Bowen from the Northern Territory Cattlemen's Association.