FBA Issue 30: January / February 2010
Indonesia: Southeast Asia's emerging feed giant
What is Indonesia's current feed demand and how do you expect it to grow going forward?
Last year, we produced 8.13 million tonnes of feed and have a capacity for 14 million tonnes. Feed companies will expand to increase market share and that means upgrading capacity, as we already have enough, though in the case of CP we opened a new feed mill in late 2008.
With the recession behind us, we are expecting even better economic growth next year. We project feed demand growth of 6 percent this year but expect it to grow by 8 percent next year. Over the long run, we expect a 4 percent annual increase in per capita egg consumption while poultry consumption per capita will rise 6 percent per annum.
What are the greatest opportunities and challenges facing Indonesia's feed industry?
Avian influenza remains a serious challenge. Relying on an avian influenza vaccination program means it will be more difficult to eradicate H5N1, as was done in Thailand. The government cannot do this as it does not have the money embark on H5N1 eradication, as Indonesian poultry supply is too close to actual demand.
After the avian influenza crisis, do you believe Indonesian feed demand is about to embark on a new era of growth?
Yes, the impact of H5N1 is not due to its effect on poultry mortality but the fear of consuming poultry meat products it creates. After a few slow years after the H5N1 crisis broke out, we're back to normal growth.
In the early part of this year, we are growing faster and beyond our expectations. Because of the recession, we would have very been happy just to have had the same growth as last year but we are actually having more growth. However, we are not exporting poultry products, as we have a market of 231 million people to feed. Poultry on its own contributes 65 percent of animal protein consumption, so it is the major source of meat demand in this country.
Do believe that Indonesia will one day be self-sufficient in corn or become an exporter?
For now the government is just pursuing self-sufficiency. However, we did have a small quantity of corn exported from Sulawesi/Celebes (Gorontalo region) this year. If the corn production continues increasing, we are likely to export more corn next year. If all those programs go on the right track, Indonesia will be able to export much more corn within a few years time.
To make this happen, we are pushing Indonesian farmers to use hybrid seeds and this will increase crop productivity. Two years ago, less than 20 percent of Indonesian farmers were using hybrid seeds but now with the influence of government policies, the proportion has jumped to 40 to 50 percent. The education of corn farmers is holding back adoption because the government is giving it away for free.
What role is infrastructure construction playing in Indonesia's drive to achieve feed raw material self-sufficiency?
The private sector cannot jump into infrastructure construction, as it is a government responsibility. But if we do have a better infrastructure, then we can get the crop more easily to storage and this would make more of it available for feed. In Indonesia, unlike another country, you may have to use ships instead of roads to transport feed grains. We are probably not fully utilizing river transport in Kalimantan and the Celebes.
Is CP Indonesia currently raising poultry without AGPs as it does in Thailand or intending to do so in the future?
Since we are not exporting chicken to other countries, there is no export-driven push to raise feed safety standards like there was in Thailand. However, the industry direction is such that we can expect to see a strong push to replace AGPs, probably after five years. This though, also depends on changes in consumer demand and awareness.
How is it more difficult to raise poultry without AGPs in Indonesia compared to Thailand or the EU?
There are two issues with regards to withdrawing AGPs from feed. First, the performance impact in terms of higher feed conversion ratios, and secondly, mortality is much higher. Take into account that in Indonesia, unlike Thailand, we have an open poultry housing system, so the latter challenge is higher. For AGP-free poultry-rearing to work, we would have to move climate controlled closed house systems.
Is there a lot of scope for integrating Indonesia's feed industry with its livestock and meat processing sector?
In Indonesia there is a tendency for farmers themselves to form cooperatives or groupings in order to have a bigger bargaining power with feed millers. At the same time, feed mills deal collectively with large livestock raisers such as CP.
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