FEED Business Worldwide March, 2012

 

 

By F.E. OLIMPOin Bangkok

 

 

There's a feeling of deja vu in Indonesia's feed industry.

 

In 2007, after growing at a heady pace of 8.5% for five straight years, feed production in Indonesia came crashing down.   From 9.9 million tonnes the previous year, it shrank to 7.7 million tonnes following a bird-flu crisis that saw chicken demand that year hurtle down 50-60%, according to a market intelligence report released in 2008 by a respected Indonesian business research group, Data Consult.

 

Recovery, in all fairness, was rather swift.  The following year, despite a global economic crisis, output - largely driven by the country's chicken sector -- leaped back to 8.13 million tonnes. Then it was boom time again, with production surging ahead to 9.7 million tonnes in 2010 and a staggering 11.2 million tonnes in 2011, statistics from the Indonesian Feed Millers Association show.

 

This year, exactly five years after the 2007 slump, the guess is that the expansion will hit a record-breaking 12.3 million tonnes, way beyond the industry's estimated annual production capacity of about 11 million tonnes.

 

All indicators point in that direction. A Rabobank report issued a few months back says Indonesia, with its continued strong economic performance, "looks set to lead the Southeast Asian growth story for the next decade." Although the central bank, Bank Indonesia, revised down recently the country's projected 6.7% economic growth for 2012 due to a worsening economic crisis in Europe, the new figure of below 6.5% remains solid and respectable.

 

Growth, particularly in its food and agribusiness, Rabobank predicts, "will be driven by resilient domestic demand for affordable food products from the middle and lower income segments, and exports of agricultural products to growing Asian economies."

 

And being the relatively cheaper source of animal protein, poultry will continue to witness strong growth, according to Rabobank.

 

 

 

Not surprisingly, capacity expansions are happening left and right in a sector that, just a few years back, shrank from 50 to 42 factories as feed demand plummeted in the aftermath of the 2005-2007 Asian bird flu contagion.  Just last month, Indonesia's second biggest animal producer Japfa Comfeed announced it would invest US$99 million this year to expand, among other things, the production capacity of its chicken feed mills in Medan and Padang in Sumatra by 96,000 tonnes a year. Under the new plan, which will be financed by this year's investment outlay, is to convert its feed mills in Surabaya, East Java, so that instead of producing fish feed, it would manufacture chicken feed instead beginning this year.

 

Japfa has 12 factories across the country. With the new expansions, it hopes to produce 3 million tonnes of animal feeds this year, up from 2.69 million tonnes it produced in 2011.

 

The country's number one producer, Charoen Pokphand Indonesia (CPI), said it would spend US$276 million from this year until next year to boost its chicken feed mill, breeding farm and food processing. Charoen had secured a $250 million bank loan to finance the expansions, which include increasing the capacities of its existing plants and building new plants in East Java and Bali.