September 29, 2020
Indonesia's feedlots face challenges against profit margins due to high costs, pandemic restrictions
Indonesian feedlots are experiencing a squeeze of profit margins due to high costs and pandemic restrictions, according to the latest update of the Indonesia-Australia Partnership on Food Security in the Red Meat and Cattle Sector's joint state of the industry report.
Additionally, Indonesia's beef sales are now focusing more on supermarkets than wet markets. Online beef purchases have also spiked by 300% this year.
While Australia's live cattle sales to Indonesia dropped 15% to June 2020 compared to the same period in 2019, boxed beef sales were comparable to 2019, the report said.
It stated that Indonesian feedlots have experienced serious profit declines this year due to high feeder cattle and feed prices, and increasing operational costs after the imposition of new COVID-19 measures to protect staff health.
The cancelling of the planned import of Indian buffalo meat and strong demand for beef during the Idul Fitri holiday period provided some relief but the recent reissue of IBM import permits could mean feedlot owners may need to lower their beef prices in order to maintain demand from consumers with less buying power.
On the boxed beef front, some traders took the option to freeze chilled Australian beef for delayed sale and demand was buoyed by substantially increased supermarket sales as consumers avoided traditional wet markets due to health concerns.
Australian boxed beef export volumes to Indonesia between January and June 2020 were almost similar to the same period last year - 27,988 tonnes compared to 27,997 tonnes.
The report predicted volatile Australian dollar to Rupiah exchange rates and a significant economic contraction in Indonesia in the second quarter of this financial year will see a further reduction in Indonesian consumer's purchasing power and additional increases in Indonesian feedlot and processor operating costs.
It warned the industry will need to evolve and become more efficient to remain competitive as Indonesian consumers opt for cheaper forms of protein, including IBM.
- North Queensland Register