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Indonesia to beat beef self-sufficiency deadline, says official, but industry sceptical

| 28 March, 2018 | General
 Richard Whitehead
Indonesia to beat beef self-sufficiency deadline, says official, but industry sceptical
FILE PHOTO: People stand as they wait to buy beef at Bumi Serpong Damai market in Tangerang, Indonesia's Banten province December 21, 2012. Picture taken December 21, 2012. REUTERS/Beawiharta

History is destined to repeat itself in Indonesia’s quest to become self-sufficient in beef, with its current fifth attempt since the 1970s making spluttering progress, according to industry watchers. However, a government official told Salaam Gateway beef self-sufficiency can be attained even before the new 2025 deadline.

Indonesia’s latest attempt at a self-sufficient beef industry, initiated by Joko Widodo soon after he was elected president in 2014, got off to a bad start. Having promised self-sufficiency within five years, Jokowi, as he is commonly known, was quickly forced to extend his target to 2025.

Now, the Ministry of Agriculture’s animal husbandry and health department director general, Ketut Diarmita, tells Salaam Gateway self-sufficiency can be reached ahead of that deadline.

“[It] should be achieved in 2022,” Diarmita said, adding that official forecasts indicate Indonesia’s cattle population will reach over 23.2 million by that year, bringing supply in line with demand and even producing enough to ramp up beef exports.

However, Diarmita’s optimism has not spread to the industry. Rochadi Tawaf, general secretary of the Indonesian Cattle and Buffalo Farmers Union (PPSKI), said it is unlikely Indonesia will meet its 2025 deadline due to a laundry list of factors.

“I think beef self-sufficiency will be difficult to achieve in Indonesia,” Tawaf, who is also a lecturer in animal husbandry at the University of Padjadjaran, told Salaam Gateway.

According to industry watchers and analysts, the constraints range from an unwieldy concept of self-sufficiency and wavering accuracy of livestock data to inconsistent import policies and an ineffective breeding programme.

MOVING IN WRONG DIRECTION

A self-sufficient beef market is defined as one that produces over 90 percent of its own livestock before imports. To this end, Indonesia’s performance has been woeful since the Jokowi policy was announced—indeed official statistics suggest the balance is moving in the wrong direction.

According to Ministry of Agriculture figures, domestic beef and cattle production shrank 19.7 percent last year compared to 2016 and imports actually rose to 41 percent of national beef consumption from 32 percent the year before. At the same time, domestic demand went down by over 45,000 tonnes—a fall of 7.1 percent.

To Tawaf, these figures are “irrational”, especially as it is established that beef has a strong income elasticity factor of 1.2 in Indonesia. This means that beef consumption should have risen at a higher rate than GDP, which grew at 5.07 percent last year.

If the government’s figures are to be believed, which many in the industry do not, a reason for faltering domestic consumption could be the high price of locally produced beef, which currently costs up to 120,000 Indonesian rupiah ($8.70) per kilogram.

To offset this, the government turned to imports of buffalo from India, which can be up to a quarter cheaper to buy in stores.

CHEAP IMPORTS HURT LOCAL PRODUCTION

The Indonesian state food procurement agency, Bulog, has obtained licences from the Trade Ministry to import 100,000 tonnes of Indian buffalo meat this year—almost doubling last year’s total and equivalent to 40 percent of imports, based on 2017 supply figures.

Though this massive increase in imports is hoped to go some way to stabilising prices for consumers, the low cost of Indian buffalo will have a knock-on effect that will “greatly disturb” Indonesian beef production, Tawaf said.

“A further impact will be that Indonesia will come to depend on beef or buffalo meat imports and fall into the food trap,” he added.

Dr Ross Ainsworth, an Indonesia-based meat and livestock consultant with 40 years of experience in the Australian and Southeast Asian beef industry, was even blunter in his assessment.

“The cheap buffalo has put the last nail in the coffin of the national herd,” Ainsworth told Salaam Gateway.

“If you make cattle worthless in your country by importing extremely cheap foreign products, it’s hardly encouraging for the domestic producers. They are in fact liquidating their herd rather than expanding it.”

According to figures provided by market research company Frost & Sullivan, Indonesia currently produces only 2.5 million slaughter cattle per year, relative to domestic demand of four million.

Yet a Salaam Gateway analysis using 2017 official data puts the domestic slaughter herd at only 788,377 strong based on 354,770 tonnes of domestic production and per cattle weight of 450 kilograms. This highlights the unreliability of Ministry of Agriculture statistics, which also do not factor in the large number of cattle owned privately or by many smallholders.

Either way, to have any hope of achieving self-sufficiency, Indonesia must grow its herd.

Ainsworth estimates that Indonesia’s slaughter cattle population is currently “way short” of the government’s target and unlikely to increase further.

“The government has a sort of conflict whereby they want to provide cheaper meat for their consumers—an admirable aim—but they have tried to achieve that by importing cheap Indian buffalo. This has just messed up the local beef and live cattle growing industry.

“You can only have it one way or the other,” he added.

Abhineet Kaul, Frost & Sullivan’s director of consulting for the public sector and government, told Salaam Gateway: “I would be surprised if Indonesia becomes self-sufficient any time before 2025. Indonesia [first] needs to undertake radical reforms… and encourage foreign direct investment (FDI) in the sector.”

Photo: A sales woman selling locally reared animals for the upcoming Muslim Eid al-Adha festival, waits for customers at a temporary cattle market in Depok, on the outskirts of Jakarta, Indonesia, September 11, 2015. REUTERS/Darren Whiteside

GOVERNMENT PUSH

The government is already pursuing the FDI avenue, and has adopted other policies and regulations to increase cattle production over the last couple of years.

Most recently, the Ministry of Agriculture launched a scheme in February to encourage Indonesian and foreign businesses to invest in livestock production—partly in a bid to reduce the cost to the government of financing its cattle industry.

Under the terms of the package, businesses involved in breeding and fattening beef cattle and livestock would be given tax incentives, based on their minimum investment of one trillion rupiah ($72.5 million). It has also set out to streamline Indonesia’s traditionally cumbersome requirements for setting up businesses in this segment.

"The livestock sub-sector needs support from all parties, not only from the government but also from the private sector and society,” the husbandry department’s director general Diarmita announced at the time.

Other substantial measures to boost production have included the introduction in 2016 of a 1:5 ratio governing all cattle imported into Indonesia: there must be one heifer, a female that has never had a calf and is raised for breeding, for every five head of feeder cattle that are bred for slaughter.

The controversial policy leaves exporters that prefer not to give up their breeding stock with just two basic options, according to Ainsworth. They will either have halted their shipments to Indonesia when the policy was implemented, or have ignored it completely and taken a chance that the government will abandon the ratio altogether before officials start to audit for it. Data suggest most have chosen the latter option.

MORE NEEDED

In the end, while the director general of the animal husbandry and health department is bullish, his department has acknowledged in the past that more needs to be done in terms of optimising cattle breeding initiatives, improving the technical ability of its artificial insemination programmes, controlling the number of productive female cattle sent to abattoirs and encouraging the development of cattle integration with plantations and forestry.

“The government has been encouraging feedlots to participate in increasing Indonesia’s cattle population, so domestic animal protein sufficiency will be fulfilled while also stimulating exports to overseas countries.

“The Indonesian government will facilitate and give privileges to feedlots that are eager to export their products,” added the senior official.

(Reporting by Richard Whitehead; Editing by Emmy Abdul Alim emmy.alim@thomsonreuters.com)

FILE PHOTO: A farmer walks with his cattle as Mount Agung volcano erupts in the background in Karangasem, Bali, Indonesia November 28, 2017. REUTERS/Johannes P. Christo

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