Australian – Indonesian cattle Forum: the first step in strengthening Australian beef exports
In a recent meeting with Indonesia’s President Susilo Bambang, Prime Minister Kevin Rudd announced the establishment of the Indonesia-Australia Red Meat and Cattle Forum.
The Forum is intended to:
1 Increase collaboration between Australian and Indonesian cattle industries;
2 Enhance trade and investment in the beef and cattle industry of Indonesia; and
3 Recommend activities to strengthen the meat supply chain.
The Australian government will provide $60 million over the next 10 years to assist the Forum in advancing these outcomes.
The Forum’s members will be comprised of representatives of the beef and cattle industries and other industry figures as well as senior government officials.
Andrew Ogilvie, the president of the Cattle Council of Australia, was tempered in his assessment of the new Forum. While Ogilvie felt “very positive” that “maybe finally we’ve turned a corner” he reiterated that the cattle industry would continue in talks with government and would “just have to wait and see what develops”.
Indonesia – Australia relations
The talks will provide a foundation to continue developing the beef and cattle relationship between Australia and Indonesia, which has been strained in recent years, especially since the 5 week suspension of live exports to Indonesia in June 2011 following evidence of animal welfare abuses in some Indonesian abattoirs.
Approximately 750,000 live head of cattle were being exported to Indonesia at the peak of the industry in 2009. Since that peak, Indonesia has consistently reduced their annual live cattle import quota from Australia, which in 2013 totalled 267,000 head of cattle, less than 40% of 2009 levels.
Since reducing its import quotas, Indonesia has seen a shortage in beef supply and a subsequent rise in local prices. To combat this, in late May, Indonesia relaxed their import quota to exempt ‘premium’ Australian beef. In parallel with increased Australian beef imports, live cattle quotas set for the second half of 2013 will be brought forward and another review of the quotas will be undertaken at the end of 2013, in a positive sign for the Australian livestock export industry.
Where does this leave us?
Indonesia has a rising consumer class which is expected to expand to 135 million people by 2030 (increasing by 90 million people since 2010). This middle class expansion is expected to considerably drive up beef consumption. In a business breakfast speech last Friday in Jakarta, Prime Minister Kevin Rudd suggested that “[B]y 2015 Indonesian beef consumption of 530 000 tonnes will exceed domestic production” and will therefore require supplemented supply from foreign markets.
Australia is well placed to fill this void provided that suppliers have access to appropriate capital improvements. The announcement of the Forum may well deliver opportunities for investment both inbound into the Indonesian beef industry and outbound from Indonesian investors.
Ron Eames, Partner
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