Beef grief as Indonesia fails at self-sufficiency
Government quest to meet all local beef demand with domestic cattle stocks has stalled as cheaper buffalo meat imports surge
Its ambitious quest for beef self-sufficiency apparently stalled, Indonesia’s government is now importing substantial quantities of low-quality Indian buffalo meat to make up for an ongoing shortfall and reduce the country’s reliance on costlier Australian beef imports.
The State Logistics Agency (Bulog) has approval to import an additional 100,000 tons of buffalo meat this year, with the first shipment due to arrive shortly before the Ramadan and Idul Fitri Muslim holidays in May-June when beef consumption annually peaks.
Whether that import substitution is having the desired impact on prices, however, is another story.
President Joko Widodo has said he wants the price of buffalo meat imports set at 80,000 rupiah per kilogram. In many wet markets, however, it is now selling for up to 110,000 rupiah – only 5,000-10,000 rupiah less than locally slaughtered beef.
That, industry sources say, is due to supply chain irregularities in which there is a 50-60,000 rupiah mark-up between import and local retail prices, as well as the influence of criminal gangs whose control over the markets is seemingly condoned by local authorities for mutual benefit.
Still, buffalo meat is a cheaper substitute in many Indonesian dishes, such as rendang and semur daging.
According to Meat and Livestock Australia (MLA), a public authority that provides research on the red meat and poultry industries, that makes buffalo meat popular among small manufacturers and food service operators who often blend it with fresh beef.
Rejected in the past because of the threat of foot and mouth disease (FMD), buffalo meat, so-called daging kerbau, was first allowed into Indonesia in mid-2016 with 85,000 tons imported up until last December. That’s much higher than the 2016 volume of Australian imports to Indonesia
The government was forced to suspend buffalo imports briefly early last year after the Constitutional Court ruled that meat from FMD-prone countries could only be imported under emergency circumstances and with “maximum security standards.”
FMD is a highly infectious and sometimes fatal virus which causes fever, followed by blisters inside the mouth and on the feet of cattle and other cloven-hoofed animals. It can spread rapidly among herds and is widely feared in countries that rely on agriculture and primary produce as a main source of export revenues.
It is not clear what precautions are being taken by the main importer, PT Sumber Agro Semesta, a unit of influential tycoon Tomy Winata’s diversified Artha Graha Group. The company started in rice seed and has since expanded into other agri-business sectors.
But the ban only lasted seven months in the face of Widodo’s determination to ensure that Indonesia’s growing middle class and even poorer segments of its 266 million-strong population have access to cheaper meat, with locally produced beef prices nearly double those on international markets.
Although FMD is considered endemic, India long ago overtook the United States, Australia and Brazil as the world’s largest exporter of beef and buffalo meat, known as carabeef – all of it supposedly subject to microbiological and other testing.
Most of India’s 1.95 million tons of carabeef was exported last year to price-sensitive customers in Asia, Africa and the Middle East, but Indian traders have adopted voluntary vaccination programs in an effort to penetrate higher-value markets.
Animal health experts say there is a low risk of the virus being transmitted through frozen meat when millions of tons have already been shipped to Vietnam, Malaysia and other destinations across Southeast Asia without serious incident.
It is already having a significant impact on Australia’s US$1.2 billion-a-year beef trade, with live-cattle exports, mostly from the Northern Territory, falling by 15% to 493,000 head last year and boxed beef exports dropping by 19% over the same period.
That slump is having ripple-on effects. Australian agribusiness firm Elders is selling its 8,400-head South Sumatra feedlot and an abattoir in Bogor, Indonesia, saying both have been underperforming in a local market made increasingly chaotic by policy uncertainty and quota difficulties.
Another Indonesian-owned company, which requested anonymity, has closed its Australia-based live-cattle operation and also downsized its feedlot by 70%, with one executive complaining that the business climate “doesn’t make sense.”
“The president’s policies are confusing,” he says. “He wants food prices low, yet sometimes he favors the consumer and other times the farmer. There are too many interventions. We are asking now whether this is becoming a planned economy.”
According to the executive, government officials falsely suspect the companies running the 23 feedlots taking Australian cattle have formed a monopoly, instead of seeing the higher prices as a result of a long supply chain that goes through up to nine different stages.
In fact, the Center for Indonesian Policy Studies estimates that locally-slaughtered beef is 37.4% more expensive than imported beef, which has a shorter supply chain but is subject to trade restrictions and cannot be sold in traditional markets.
With pork not an option due to religious restrictions, beef consumption in Indonesia – officially at 2.9 kilograms per capita a year — is still among the lowest in the region, trailing Malaysia (8.7 kgs), Singapore (6.2kgs), the Philippines (5.6 kgs), Vietnam (4.4kgs) and Thailand (3.6 kgs).
Australia, which relies on Indonesia to take half of its live-cattle exports, infuriated the Susilo Bambang Yudhoyono government in 2011 by abruptly stopping shipments due to animal welfare concerns highlighted in an Australian television program.
Indonesia retaliated by slapping on a temporary live-cattle ban of its own and in the years since the trade has seen ups and downs, now marked by a new system that abolished quotas but stipulates that every five imported feeder cattle should be accompanied by one breeder.
Although that rule was introduced 18 months ago, the 15,000 breeders brought in last year have yet to be moved to government breeding stations and on to farmers, leaving the feedlots to bear the cost of sustaining them and seeing their profits slowly erode in the process.
Widodo had earlier declared beef self-sufficiency as a national goal, along with a basket of other commodities, but imports surged by 40% in 2016 and by a similar percentage last year while the domestic cattle population continued to shrink.
“Nobody knows what is going on,” says one veteran cattleman, who is strongly critical of Australia for taking the Indonesian market for granted and not doing enough to understand it. “It’s so perverse because everything we talk about is purely supposition.”
In an effort to reduce logistics costs, the government has built five specialized vessels to bring livestock from outlying islands to Java, including 55,000 head a year from West Timor in East Nusa Tenggara where there is larger-scale cattle ranching than elsewhere in the archipelago.
But the operation still has to be subsidized, and at 30,000 rupiah a kilogram farmers are hardly benefiting from the trade. Nor are traders plagued by poor handling and inspection delays that result in massive weight losses among cattle on the week-long voyage from outer islands to Jakarta.