June 8, 2012

Australia's cattle trade to Indonesia looks optimistic

Despite some short-term difficulties, the longer-term demand outlook for Australia's cattle trade to Indonesia is bright, Rabobank said in a report issued Thursday (June 7).

The next 12-18 months will be difficult for the country's northern cattle industry given the market uncertainty following last year's suspension of live exports  and a new operating environment since the resumption of trade, Luke Chandler, a Rabobank general manager research, said in the report.

Last year, Australia suspended the trade for a month following televised images of brutality in Indonesian slaughterhouses.

"The industry is now operating in a changed environment under new Australian government animal welfare regulations for live exports, while Indonesia's import quotas for Australian cattle have also been significantly reduced in 2012 as the Indonesian government continues to push for the goal of beef self-sufficiency," Chandler said.

Indonesia dominates Australia's live cattle export industry, though shipments have fallen in recent years. Australian cattle exports peaked in 2009 at 954,143 beasts valued at AUD666.5 million (US$660 million), with Indonesia accounting for 81%. By 2011, total exports had fallen to 694,429 beasts and the value of exports had slipped to AUD629.4 million (US$620 million), with exports to Indonesia accounting for just 60%.

Chandler said time will tell if current Indonesian import quotas are a short-term issue or something the northern Australian cattle industry will need to readjust to in the longer term, but he believes Indonesia's live cattle imports will recover over time.

"Indonesia's strongly-growing economy and increasing consumption of beef suggests self-sufficiency goals may be difficult to achieve and there is likely to be an on-going need for live imports to complement the country's domestic production."

The northern Australian cattle industry is well positioned to capture additional demand and supply low-cost disease-free beef to the Indonesian market, to the mutual benefit of both countries, he added.