October 3, 2013

 

 

Following Indonesia's release of new permits for 75,000 head of slaughter weight cattle to improve beef supplies in Indonesia in the current quarter, Australia's saw a remarkable turnaround in demand in its live export trade.

 

The new permit issued on Tuesday (Oct 1) is for 75,000 head of slaughter weight cattle to be supplied between October and December. That is on top of the existing permits for 46,000 head of feeder cattle that remain valid for the fourth quarter under the previous quota system.

 

Beef import industry sources have confirmed that new import permits for frozen beef have also been issued, however definitive volumes could not be ascertained prior to Beef Central's publishing deadline.

 

Indonesian trade minister Gita Wirjawan and agriculture minister Suswono recently announced that Indonesia's future cattle and beef import requirements will be decided by a reference pricing mechanism, after the weight limits and quota restrictions introduced to help Indonesia achieve self-sufficiency in beef production led to a massive beef shortage and runaway prices.

 

Under the new system, Indonesia will open the gates to imports whenever the price of beef rises too high, until supplies stabilise and prices return to a level that is more affordable for consumers.

 

The rub is that the same self-sufficiency policies that have contributed to a shortage of beef in Indonesia have also contributed to a shortage in Australia's northern live export zone of the heavier cattle Indonesia now needs to rapidly improve its beef supply. Whether producers in the northern live export zone who are most in need of new orders for their cattle will have suitable stock on hand to capitalise on the reinvigorated demand from Indonesia remains a question.

 

Indonesia has imposed weight limits of 350 kilogrammes on cattle imports for the past four years, which has caused northern producers to adjust their breeding programmes to meet Indonesia's requirement for light weight cattle.

 

While a dry year has further disrupted the production of heavier cattle throughout the north, continually negative market signals from Indonesia in the form of repeated reductions in import quotas have also discouraged any thought of herd expansion.

 

The new 75,000 head permits are a one-off permit. Indonesia is yet to release new permits under its reference-pricing system, with a number of technical issues between Indonesia and Australia still delaying their release. To fill this latest round of permits, exporters are now likely to be forced to look further into states such as Queensland to find the 400 kilogrammes plus cattle that will be required to fill the new slaughter permits in the next three months.

 

The new slaughter permits cap off what has been a constructive visit by Prime Minister Tony Abbott, senior ministers and 20 industry leaders to Indonesia for the live export trade.

 

During a meeting with President Susilo Bambang Yudhoyono in Jakarta, Abbott said he had discussed Australia's desire to reinvigorate its live cattle trade with Indonesia.

 

While there was still "a bit of work yet to be done", he said there was enthusiasm for the trade on both sides, and the leaders had agreed that further details would be worked out between their respective ministers.

 

Abbott also indicated that his Government is committed to seeing through a US$60 investment announced by his predecessor Kevin Rudd on a trip to Jakarta in July for the development of a bilateral red meat partnership between Australia and Indonesia.