The Australian beef industry has been buoyed by the recent news that Indonesia will more than double Australia’s quota of live cattle imports over the next quarter (amounting to an extra 53,000 cattle), a move which has been called “vitally important for Australian agricultural outcomes” by federal Agriculture Minister Barnaby Joyce.
The announcement closely follows an Australian delegation to Indonesia led by Prime Minister Tony Abbott and has restored a sense of optimism to the sector after the previous Government’s ban on live cattle exports to Indonesia in 2011 (triggered by public concern over practices in Indonesian abattoirs) led to Indonesia subsequently imposing tough quotas on Australian cattle once the ban was lifted.
Prior to the Gillard Government’s ban, Australian cattle exports to Indonesia numbered up to 600,000 head of cattle annually, but once the ban was lifted, Indonesia responded by applying quotas on Australian cattle, limiting live export numbers to about 260,000.
Beef prices are continuing to soar in Indonesia, and with domestic consumption expected to exceed production by 21,000 tons per year within 2 years, Australia’s beef industry would likely benefit substantially if quotas continue to rise, or are removed altogether.
The recent increase in the quota coincides with the Indonesian Government revealing its intention to secure Australian land to breed its own cattle and Santori, Indonesia’s biggest importer of live cattle, buying two of the Northern Territory’s most well known cattle stations (comprising more than 5,500 square kilometres of pastoral land and 40,000 cattle).
In relation to the former, federal Trade Minister Andrew Robb has commented that the Indonesian Government should consider joint ventures as a good way to learn more about the industry from local farmers, and in relation to both, this has lead (as to be expected), to further debate on foreign investment, to which Craig White, the CEO of Australia’s biggest beef producer, AACo, has commented that the beef industry “needs foreign investment” given that the “pools of capital that are available [in Australia] are limited”. Keith Warren, the CEO of Consolidated Pastoral, Australia’s largest exporter of live cattle to Indonesia and who holds property near the Santori-acquired land, has stated that the agricultural house is “very supportive of [the] transaction”.
Tony Abbott has also noted that restoring the cattle trade with Indonesia meant an inevitable increase in foreign investment in the Australian agricultural sector, which would be welcomed by an Abbott Government so long as foreign investment criteria were met. While the Government has announced its intent to move towards lowering FIRB thresholds, it has also reiterated that Australia is very much open for business.
Calls have also been made for Australia to establish a beef industry taskforce to ensure that Australia capitalises on the boom in global demand for protein. The country only consumes about one-fifth of total beef produced and given the excellent reputation of Australian beef abroad, Australia is in prime position to take advantage of the beef boom.
Indonesia is an integral part of the Government’s plan for Australia to become the “food bowl of Asia” and both countries stand to gain if restrictions are eased.
Meanwhile, Western Australia is set to commence exporting cattle to Zhejiang province in China after the signing of a deal involving a joint feasibility study, but which could see beef cattle shipments from WA start as early as next year. Australia’s live cattle exports to China in recent times have predominantly been dairy cattle. Exports of Australian beef to China have grown almost 1,000% over the past 12 months and the ground-breaking WA-Zhejiang deal could lead to similar agreements with other Australian states and territories, and encompassing other livestock including sheep.
Ron Eames, Partner
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