Australian Cattle - Live Export to China Agreed

​China: new market for livestock exports

20 July 2015​
Minister for Agriculture, Barnaby Joyce, has today announced a breakthrough in live cattle export trade negotiations with China.

Minister Joyce said the Australian and Chinese veterinary authorities were in the process of formalising agreement on animal health certification requirements, which would allow industry to begin to prepare the commercial and ESCAS arrangements for trade to commence.  “I was very pleased today to sign the agreement of health conditions for trade of Australian feeder and slaughter cattle to China—now it’s over to my counterpart, Minister Zhi Shuping, to sign on the dotted line and finalise the agreement between our two nations,” Minister Joyce said.

“Over the past five years we’ve had a significant trade in breeder cattle with China, primarily for dairy heifers. Now, I’m pleased to announce we are a step closer to the commencement in trade in live slaughter and feeder cattle to China. “Getting the groundwork right for any new market can take time, and now the industry can prepare to begin this trade.

“This will be the seventh livestock slaughter cattle export market that I’ve opened since becoming Minister—adding to Lebanon, Bahrain, Egypt, Iran, Cambodia and Thailand.

“Market access is a major priority for the Australian Government—we have sent a clear message—Australia is open for business.  “And it’s not just our cattle producers who are experiencing greater market access opportunities, with the announcement earlier this year of agreed health protocols for breeder deer to Malaysia, and breeder sheep and goats to the Philippines.

“The Australian Government has worked hard to make sure our livestock producers and exporters have every opportunity to trade with other nations.

“Once the agreement is formalised, exporters will be able to begin working with importers in China to implement the Exporter Supply Chain Assurance System (ESCAS) and establish supply chains that meet those requirements.

“This industry is a real Australian success story. We are known world-wide for our high-quality and reliable livestock trade, and now industry has another opportunity for trade to increase,” Minister Joyce said.
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brahman cattle - NT

That is the formal PR media release.

More work yet, and the big question will be............where are the cattle coming from since we already have large  boxed beef sales to China..

There is no slaughter agreement nor supply chain arrangements and anyway, why not slaughter here in Australia as we do now?

Yes, some positive news after Indonesia dropped the import quota to less than 30% of the previous quarter.  They might come to rue that decision, or will NT and other northern pastoralists continue to support the Indonesian trade?  It could be 6 months before live cattle start moving to China for slaughter, there is much to be done.  In the meantime, will the import permits to Indonesia increase?

The talk is a million head of cattle per year to China within 10 years.  It might be a tough gig to get that number which is basically double the already 1 million exported live to other Asian countries !  It is a numbers game and with more cows being slaughtered, where are the breeders coming from to achieve those numbers?

Curiously, a Chinese completed the purchase of a large pastoral property on the NT / Qld border earlier this week, for about A$46 million, including the stock.  Not sure I believe in coincidence!

Australia's Northern Beef Industry - Maybe Unsustainable??

A recent analysis seems to be proposing that the northern Australian beef industry is unsustainable financially.

What it does not seem to say though, is that the analysis was focussed on the almost worst period in many years for the region - somewhat akin to the shock of the US stopping the purchase of northern beef in the mid 1970s, when a lot of properties went to the wall.  This period is the same as the dramatic drop in live cattle exports to Asia, especially Indonesia, a trade dramatically stopped by the government of Australia on animal cruelty grounds [arguable, at best].

NT brahman cattle for export

Since the conclusion of the report, prices and volumes have increased rapidly and are now at around A$2.30 per kg live and numbers are on track for maybe 800 000 head this year to Indonesia alone, and with new markets opening in Vietnam and China, although prices may be a bit lower.

It is all doom and gloom........BUT - a few critical points emerge from the study, one being that a herd size of 3000 head is seen as the minimum.

Read the summary below, and available on the MLA web site, as is the full report.

The Northern beef report - 2013 Northern beef situation analysis

Project code: 

B.COM.0348

Date commenced: 

June 26, 2013

End date: 

April 11, 2014

Project status: 

Completed

Description/Abstract:

The 2013 Northern Beef Report comprehensively details the performance of the northern beef industry, by region, market and herd size over the 12 years since the start of the century. On average, the profits achieved over that time frame have been low, but not trending down. However the profitability of the top performers across the industry has been trending down over the period analysed. Profit after interest is decreasing, and is mostly negative, as a result of increasing debt with no increase in profits. The majority of Northern Beef producers are not economically sustainable as they are not able to fund present and future liabilities. There is wide variation in performance across the industry; this report clearly identifies what separates the top performers and what factors determine the profitability of a beef business. This report provides analysis of a wide range of measures, providing the means for individual producers to understand their herd and business performance and to improve by setting realistic targets.

Final report summary:

• This report analyses in detail the performance of the northern beef industry for the 12 years from 2001 to 2012. Incorporating quality private and public data, this report provides a comprehensive picture of the performance of the northern beef industry by region, herd size and market.
• This report incorporates the concept of economic sustainability; clear definitions are provided and used to assess industry performance.
• On the basis of these definitions, the data indicates that the majority of northern beef businesses are not economically sustainable at present. This is not a recent phenomenon, with recent average business performance, before financing, similar to longer term averages.
• Economic sustainability takes a longer term view; in the short term many beef businesses are struggling to survive with cash deficits accumulating.
• Whilst profits before financing are largely unchanged (on average over the 12 year period analysed), after financing, performance is deteriorating due to increased debt with no increase in profit.
• Income has decreased over the period analysed, mostly a function of declining beef prices rather than a decline in productivity (kg beef/AE). Costs have reduced as income has reduced, through belt tightening, and improved labour efficiency, resulting in little change in profits.
• Profitability of the top performers has declined over the longer term, suggesting that industry profitability is decreasing.
• Excluding land value changes, return on assets has averaged less than 1% across the industry over the last 3 and 12 years.
• Comparison of profitability is made between businesses that supply different markets, namely live export, slaughter and store. When the effect of scale is excluded, producers primarily supplying the slaughter market recorded the highest profit per adult equivalent, due primarily to better productivity.
• Both total numbers of cattle in the north and stocking rates have risen, what these stocking rates are relative to carrying capacity is unknown. The extent to which environmental capital is substituting for financial capital is also unknown.
• There is considerable variation in performance between beef businesses within the industry. The Top 25% performers (across all regions, herd sizes and markets) consistently outperform the average and have businesses more likely to be economically sustainable over the long term. This indicates that there are successful business models for producing beef in northern Australia.
• The superior performance of Top 25% producers can be attributed to:
o Higher income through better herd productivity.
o Lower operating expenses, largely through better labour efficiency.
• There is no evidence that superior long term performance can be attributed to a higher average beef price received, more rainfall or better quality land.
• Operating scale (number of adult equivalents under management) has a significant influence on business performance. Operating scale, along with labour efficiency, can explain most of the differences in overhead expenses per AE between businesses.
• Lack of operating scale is a major impediment for smaller beef businesses (less than 3,000 adult equivalents), but the benefits of additional scale for larger businesses are limited with herd profits decreasing as herd sizes become very large. There appears to be an optimal operating scale range, either side of which different factors can erode performance.
• It is paramount that smaller producers understand the implications of operating scale on their viability and how best to address to it. There is mounting financial pressure for smaller producers to make structural changes to their business.
• Efficient use of labour is a key finding amongst producers in the Top 25%. Labour costs and achieving a highly efficient use of on-farm labour is a challenge that the industry must understand and work towards.
• There is no evidence of expense increases over the period analysed, this is not to say that some input costs have not increased in real terms, but any increases have been absorbed and the overall cost structure of businesses has not increased.
• Differences in income explain more of the differences in profit between average and Top 25% performers than expenses. Nearly all differences in income per AE between herds are attributable to productivity differences.
• Nearly all productivity differences between herds can be attributed to the better performers achieving:
o Higher reproductive rates
o Lower mortality rates
o Heavier sale weights
• The findings of this report now make it possible to construct a very clear roadmap for economic sustainability for a northern beef business, embracing both location and target market. This roadmap provides clear guidelines on factors critical to income (productivity) and expenses (scale & labour efficiency).
• This analysis is consistent with other recent and more targeted studies of herd productivity (reproduction and mortality). This analysis also finds wide variation between businesses in these measures of herd productivity and report that improvements in herd productivity have a big influence on overall business performance.
• There is wide variation across the industry in what it costs to produce a kilogram of beef (cost of production) and this analysis shows that there is significant scope for improvement for a lot of producers. There is far less variation in beef price received and much less scope for individual producers to improve beef price received. Therefore it could be said that it is the high cost of production that is the main cause of low profits for the majority of northern beef producers.

Researcher name:

Bush AgriBusiness Pty Ltd, Holmes & Co.   

Indonesia Likely to Modify Live Cattle Import Rules

Several different sets of discussions, both in Australia and Indonesia, seem to be heralding a major change in attitude from Indonesia over beef imports to the country.

Last week in Brisbane was a very important meeting between Indonesian officials at a high level, and Australian participants in the live cattle trade to the country - the term of note is free and frank discussions - to try and develop some improvements and sensible co-operation in improving beef food supplies in Indonesia.  There is a monumental need to get the beef price down to around 75000 Rp per kg.  It has been well over 100000!  Indonesia also pretty well admitted that self sufficiency in 2014 for beef supplies was not achievable.  Then the ANZ Agribusiness area examined [ commissioned by the Indonesian Government] what self sufficiency might mean to Indonesia - for example was meeting 70% of demand a more reasonable goal, and a more achievable one?  This document is not yet publicly available, although there has been some media comment around.

Today saw announcements coming from Indonesia about a possible 60000 head increase in live cattle imports, and a potential change in how imports might be adjusted - with the critical issue being market beef prices.  If they rise, then that triggers more imports; if it falls below the nominated figure [ nominally around 76000Rp /kg] then trade reduces or stops.

All of the changes seem to signal a positive note for the live cattle trade into Indonesia, as well as some increase in boxed beef from Australia.

There is sure to be more, and clarification from Indonesia is certainly needed to ensure local pastoralists are able to begin some planning about how to be part of the increased live cattle trade.

More is here - http://www.abc.net.au/news/2013-08-29/indonesia-live-cattle-changes/4921398
and here - http://www.abc.net.au/news/2013-08-29/female-cattle-exports/4919486

and here - http://adf.farmonline.com.au/news/state/general/elections/indoz-meeting-held-in-brisbane/2669324.aspx?storypage=0

http://www.abc.net.au/news/2013-08-23/dist-indon-beef/4907554

and here too - Original Jakarta Post article: http://www.thejakartapost.com/news/2013/08/28/govt-issue-new-rules-meat-imports.html [ update on 29/8/13]

There certainly has been major discussions.  Lets see how it transforms into better co-operation between Australian and Indonesian interests in this important cattle trade business. 

It can be a win-win for both countries and their respective business areas.  And hopefully quite quickly, as we do need each other!



 

Indonesia to Run Out of Cattle ??

Indonesia is still struggling with policy settings to address the demand for beef, now that the live cattle trade with north Australia has been truncated.

The import restrictions which they have imposed have certainly been a cause of the big spike in beef prices in major cities.  Australia is not without some blame, over the instant curtailment of the trade on animal welfare grounds too.

Both countries have a range of groups to deal with in developing new policy parameters.

But there are some worrying news snippets coming out of Indonesia and recently reported on by Tempo magazine.

See - http://en.tempo.co/read/news/2013/08/14/055504422/No-More-Cattle-in-4-Years-Minister-Says

and http://en.tempo.co/read/news/2013/08/15/056504579/Beef-Prices-Remain-High-in-East-Java

and
http://en.tempo.co/read/news/2013/08/14/080504478/Breakthrough-in-the-Procurement-of-National-Beef

all from this week.  There are some others as well.

Which ever way one appraises the situation, Indonesia needs more beef and they are not in a position to produce what they need, not anytime soon, and that was the understood situation by many in the cattle industry in north Australia anyway.  When a minister announces that a country will run out of cattle in 4 years though - it is serious!

Both countries have election complications, but the Australian side is probably far less complicated than Indonesia where beef prices are likely to be a significant issue unless moderated before the 2014 Presidential elections.  And Indonesian political machinations are notoriously complex and often somewhat twisted!

There seem to be some broad easing of restrictions on live cattle exports to Indonesia announced recently, but the factors around the cattle numbers to be sent are relatively short term.  If a longer term perspective was announced for a year or several, then a bit of planning and some logic might allow better scheduling of animal movements, and local fattening in feed lots in Indonesia prior to slaughter.

Beef is in demand - with China now increasing [mostly] boxed beef imports, but some live cattle will go as well.

Could Indonesia be squeezed over prices such as they could not afford to buy cattle?  Possibly not immediately but could it happen...........maybe, if demand continues to surge from other countries in Asia.


 

Indonesian Cattle Herd Declines - NOT Increases

At the middle of the dispute over importing cattle and beef into Indonesia is the tenet that the herd was increasing and would be sufficient to meet domestic demand by 2014.

While many had views this was possibly not correct there has now emerged more recent 2013 herd statistics that seem to clearly show a rather large decline over a few years of several million head.  There are also reports that breeder cows are also being slaughtered in considerable numbers.  Hardly the path way to a bigger cattle herd.

The data has been leaked from new official statistics of a 20% drop in herd numbers since 2011, although many had believed the previous data to be rather inflated.  Whatever......it hardly indicates that Indonesia will be sufficient in beef production any time soon.

Sources in the Australian cattle export industry said they had always suspected the 2011 figures were grossly inflated to help justify the import quota system which has caused beef prices to skyrocket in Indonesia.

Indonesia's Tempo magazine published the leaked figures in this month's edition and reported that in many regions breeding heifers were being slaughtered for meat.

Agriculture Minister Suswono claimed last month that Indonesia was on target to reach its self-sufficiency target in 2014. "We hope it will be achieved next year," he said.

It is too soon to even speculate about increases in live cattle numbers going to Indonesia, especially as there are already some considerable increases still to be worked through over the next month or so.  It will be import numbers for early 2014 that will be critical, and it might be they will improve.

RUMOUR - Indonesia to Remove Live Cattle Import Quota

Strong rumours are doing the rounds that Indonesia may completely remove live cattle import quotas from Australia.

More when there is more!

--------------------------------------------------------------------

RI to end beef, live cattle import quotas

Linda Yulisman, The Jakarta Post | Headlines | Sat, July 20 2013, 10:25 AM

Indonesia will remove import quotas for beef and live cattle to stabilize domestic prices and curb inflation, a trade official says.

The government would set a parity or “normal” price for beef as a benchmark to assess the necessity for imports, Trade Minister Gita Wirjawan said on Friday in Jakarta.

Meat and live imports will be allowed only when domestic beef prices rise by more than 15 percent from the parity price, a move that will still support the local livestock industry, according to Gita.

“The price mechanism as a trigger to import or not to import is very important. But we should first determine the parity price, which should match our aspiration to curb inflation and maintain price stability,” Gita told reporters at his office.

The ministry was working on the policy framework, which would be ready in the next two months, he added.

Indonesia, the world’s fourth most populous nation, has seen demand for beef surging rapidly, outpacing the capacity of its domestic livestock industry to meet demand.

To support its target of attaining self-sufficiency in beef by 2014, the government curbed imports and reduced its import quota for live cattle by more than 30 percent last year and another 30 percent this year.

In addition, it cut the beef import quota by almost 60 percent last year and by 6 percent this year.

It has set an overall live cattle import allocation of 267,000 head for this year, with a beef import quota of 32,000 tons, 20 percent of which are prime cuts.

The planned measure will follow on the heels of recent changes in the import arrangements for horticultural products as Indonesia grapples with mounting pressure from trade partners who regard its import procedures as troublesome.

In January, the US lodged a complaint with the World Trade Organization (WTO) as it considered Indonesia’s trade measures “restrictive” and Indonesia’s “complex web of import licensing requirements” unfairly limited US exports.

The US has advanced to the Dispute Settlement Body of the world trade governing body, which has already set a panel to resolve the issue.

In the meeting of the WTO’s Council for Trade in Goods last week, the US reiterated its concerns about “a complex web of opaque trade restrictions in Indonesia affecting agriculture” in addition to energy and consumer goods.

However, Gita refuted speculation that the elimination of the beef and live cattle import quotas was mainly to comply with demands from trade partners, saying that the reform was necessary to reduce domestic prices. “What we’re doing is to improve efficiency and licensing transparency to help address the problems at the WTO,” he said.

For the rest of this year, the government would permit the unlimited importation of live cattle for “as long as possible” to attain price stability, Gita said. Earlier on Friday, Australia said Indonesia was boosting live cattle imports from that country by 25,000 head over the next three months, Reuters reported.

The move was aimed at maintaining domestic beef prices at between Rp 75,000 (US$7.40) and Rp 76,000 per kilogram, Gita said. That would be 20 percent lower than the national average price of Rp 93,000 per kilogram.

The Live Cattle Trade - Farcical or Fabulous?

Over the past two years this business is best seen as farcical.  When Australia was unable to send live cattle - by Australian government decree - and then Indonesia did not want them.

Recently it was announced at meetings between Prime Minister Rudd and Indonesian President Yudhoyono, the development of a A$60 million proposal to assist with development of the Indonesian beef industry with implications for additional animals going into the live export trade, sourced from northern Australia.

That latter part implies an easing of Indonesian restrictions on animal numbers moving in the supply chain.

Yes, the Indonesian authorities recently allowed a "bring forward" of some numbers of animals from the latter part of the year, enabling some animals to be shipped prior to Ramadan, although it seems no significant change in overall numbers is occurring, as yet.  These recently shipped animals are unlikely to be ready for slaughter for some time, and probably well after the end of Ramadan.  The Idul Fitri period after Ramadan is when demand for beef is very high, and logically more animals should have been shipped earlier if there was to be much influence on the already high beef prices around Jakarta for this high demand period.  More boxed beef may be imported too. 

And there have been noises in the media that Indonesia will likely purchase cattle properties in northern Australia to assist them with live cattle numbers.  Remember though, that any local producer is probably going to be subject to local Australian regulations too, and will the Indonesian owned cattle producer /exporter be exempt from Indonesian import restrictions and regulations?

typical cattle being fed in holding areas prior to live export

Really..........where is all this going?  Nowhere?  There has been strong links developed between industry groups in both north Australia and Indonesia, probably even strengthened over the past two years.  They recognise their interdependence............and the red tape that is in the way of increased live cattle trade development, in any form.

This process is too slow, and there is little information flowing publicly from both governments.

The live cattle trade was fabulous, with obvious commercial and social benefits to both countries previously .........and is now farcical!

Live Cattle Export to Indonesia - Moving Again

Indonesian authorities have moved forward by just two weeks the quota for live export cattle from Australia for the 3rd quarter of 2013.

A boat of around 8000 head left Darwin this week, for Indonesia.  More shipments are planned in the near future.

But exporters are reputed to be cautious.  It seems that so far no increase in numbers has occurred but rather a bringing forward of the permits for the next quarter.  Which is helpful, but not a game changing event.

Most of the players it seems are likely to go quiet, and allow the issue to play out slowly.  And that is on both sides.

Australian exporters certainly would like the numbers to go up - considerably, but there are some political issues at play here on the Indonesian side and "quietly, quietly" seems to be the catchcry right now.  Both sides seem to know it is a valuable trade and offers benefits for both sides, but it is a bit tricky to balance various competing, often political, interests.

Could this situation change soon?  Some think it might, but do not hold your breath seems to be the message.

Indonesia To Allow More Boxed Beef and Live Cattle

Well, yes, they have made the announcement, with some restrictions.

Boxed beef must be flown in to Jakarta, Bali or Medan - not shipped, but it appears that there will be no restrictions on the amounts of higher quality beef cuts that can be brought in this way.  No mention of other beef cuts though.  And the third quarter live cattle numbers have been brought forward to the month of June. 

This might seem a good start, but industry players are being very cautious.

Some say the issues with boxed beef involve organisation and access to the volumes needed [which I mentioned yesterday], and right now, a lack of clarity about the operation of the process.  This latter issue may well improve over the next few weeks.

The live cattle trade will be harder to organise and supply, as mobilising the required vessels and cattle will be much more difficult.  It also seems to ignore the fact that once shipped and after arrival in Indonesia, the animals will need to grow to a reasonable size before slaughter. Peak demand period is for post Ramadan Idul Fitri holidays, with day 1 on 8 August, and the Public Holiday on Friday the 9th.  National Day is 17 August.  It will be difficult to get animals shipped and grown before then. 

In reality, 30 -45 days growth in feedlots in Indonesia is a realistic consideration.  Some will remain longer, obviously, but the beef gap is now, and will be ongoing until numbers build up again, if that is possible.  Will they remove the current live weight maximum of 350kg or even increase it a little?

Nothing has been indicated by Indonesian authorities so far about ongoing live cattle exports in the latter part of the year.

Yes, there is some cautious optimism, but this is but a very small step forward.

More information is expected over the next few days and weeks.

Some news articles are around as well - see http://www.abc.net.au/news/2013-05-28/indonesia-to-increase-live-cattle-imports/4716384 and here

http://www.queenslandcountrylife.com.au/news/agriculture/livestock/cattle-beef/indonesia-increases-australian-beef-imports/2659173.aspx?storypage=0 

Both articles are very short of any detail.
 

More Live Cattle or More Boxed Beef for Indonesia - Confusion??

The more things change, the more they remain the same in the ongoing beef availability saga in Indonesia.

While some speak about a 35% gap between supply and demand [ as reported in the Jakarta Post over the weekend] many official positions are saying is is much less, maybe 10%.

However you adjust the data to suit the needs of various players, the nitty gtitty is that beef prices are up a massive 50- 60% over the past year, pretty well since live cattle imports from Australia were heavily restricted by Indonesian authorities from 2012.

There have been media leaks that there will be an increase in live cattle imports, but the reality is that this cannot allow adequate time for the animals to grow to a respectable market size and weight in the period up to Idul Fitri the post Ramadan holiday period - even if they were shipped now.  Shipping will not happen that quickly, even thouh adequate supply is believed to be available.  It takes time to organise the logistics of the exercise.

cattle loading on the wharf

More likely is that extra boxed beef import licences will be issued.  Maybe with live cattle to come as well.  But the boxed beef will allow quick supply if available from either Australia, or elsewhere.

Indonesians buyers might find this a bit tough as well, given the major increases seen in boxed beef supply to China over the past 5 months from Australia. 

Indonesia - do not expect cheap beef as an easy way out of the suppy and cost dilema that is emerging rapidly in the country.

As far as is known, there are no decisions YET.  There is in-fighting between Trade and Agriculture ministeries in Indonesia over the issue, and hopefully a face saving solution will appear soon.

As a suggestion - check out the Jakarta Post online, in English.  It is possible the news may be there first! - www.thejakartapost.com is the web site.

A decsion has to happen soon or there might be a lot more rabble rousing in Jakarta, especially, over beef prices.  It has happened already in 2012 and 2013.

Strong Rumours Indonesia to Increase Live Cattle Imports From Australia

The Director General of Foreign Trade in Indonesia, Bachrul Chairi, has told the ABC that Indonesia will allow more Australian cattle into the country.

 

Nothing has been officially announced, but a decision to increase import permits for the second quarter is expected soon, as reported by Matt Brann of the ABC Country Hour in Darwin.

The price of beef in Indonesia has soared beyond $10 a kilogram, an astromical price in Indonesia and which is far beyond the means of the average consumer.  That high price has seemingly forced the government's hand, with Trade Minister Gita Wirjawan admitting Indonesia needed to be "open-minded" when it came to its beef supply.

"We will basically open up (trade with) the types of beef that can't be substituted or produced by the Indonesian beef producers," he said.

Local NT livestock producers are hopeful this will occur very soon, in time to move cattle into the country to be fattened and ready for slaughter by Ramadan.  No one is saying much at either end, but it seems that reading between the lines the two industry players in Australia and in Indonesia have been doing a lot of quiet diplomancy, well below the radar, over several months.

There have been a number of visits to Indonesia by local industry people from the NT in the past few months, keeping channels open.  But the real issue, has probably been local meat prices.  And maybe, although no one is probably really stressing this - a realisation that Indonesia cannot yet really provide all the beef required in the country, and that importing live cattle from north Australia is a real win-win for all of the industry players while allowing a much needed price respite and some political quodos for the Indonesian government in reopening the trade.

While the fat lady is not singing, she may well be warming up quietly in the wings about to hit centre stage again.

If it is true, it will be a very big deal for the northern cattle industry that has really been in the doldrums since the cessation of the trade 2 years ago.  Complacency would be a disaster though - so hopefully sensibility on both sides can bring a quiet improvement to the trade for the benefit of all concerned.  And keep it off the media.

Indonesia to Revise Beef Imports Up - Rumours or Fact?

It has been around the media for a day or so now but the concept as discussed in the media does have some advocates and could be a way forward politically for Indonesia and allow some "face keeping".

That last point is an important issue in Indonesia.

Politically the issue of beef prices is a thorny one, as they have risen considerably, some say astronomically, with major impact on less well off Indonesians, especially those around Jakarta.

The scenario seems to run along lines that the Agriculture minister will be sacked as part of a ministerial reshuffle, with his demise associated with some shady deals concerning possible bribery over beef import quotas.  As part of this adjustment, new import quotas for the second half of 2013 will be developed and would likely be larger to meet surging demand for beef and hopefully reduce local prices.  This might have a flow on to Presidential politics in indonesia, with an election due in 2014. [SBY cannot run though].

The NT could quickly move to supply appropriate animals, as it is believed around 600,000 animals are available locally that are suitable for live export.  However, Australian players in the industry are being extremely coy over the entire issue - and justifiably so.

The new slaughter arrangements are mostly in place, so humane slaughter is possible, meeting most of the issues raised about the initial dramas over live export of cattle to Indonesia.

There is more on the topic here: http://www.queenslandcountrylife.com.au/news/agriculture/cattle/beef/indo-may-lift-cattle-quotas/2654453.aspx?storypage=0

and here:
http://www.thejakartapost.com/news/2013/04/16/suswono-may-be-fired.html

but I expect this story will develop over the next few days or weeks.

No one locally is yet cracking a beer or three.........but the deal has all the hallmarks of a workable scenario for various reasons, not least of which is the ability for Indonesia to save face over the deal.

Agriculture in Australia needs to get Tough - or Does It?

http://www.queenslandcountrylife.com.au/news/agriculture/agribusiness/general-news/ag-needs-to-get-tough/2650082.aspx?storypage=0

This will get you to the original as published in the online edition of Qld Country Life, which was however copied from the AFR [ which is paywalled].

The headline was Ag needs to Get Tough""

11 Mar, 2013 09:03 AM

ALAN MITCHELL

BY 2020, Ken Henry says, Asia's middle class will have more than trebled in size to 1.7 billion people. By 2030 it will have almost doubled again, and it will account for 60 per cent of global middle class consumption. With that growth will come an increase in demand for the kind of food we produce and eat.

Martin Parkinson, Henry's successor as Treasury secretary, says the next positive shock wave from Asia will be felt by Australian agriculture.  "We're likely to see a significant increase in demand, particularly from China, for high-end agricultural products like fruit, dairy, high-grade meat and seafood," he says.  This will be a huge opportunity for farmers, investors and the economy.  But to fully capitalise on a boom you have to be able to meet the demand, and ABARES says we will need a change in agricultural production to do it.

First, it says, we have to reverse the slowdown in farm productivity, which for broadacre farming has been negative for the past decade. We also need to better target consumer needs in fast-growing markets, especially Asia.

Reviving productivity growth will be harder than it looks. Productivity has been negative temporarily because of droughts, but there has also been a more permanent slowdown.

Broadacre and dairy productivity was boosted by the major reforms of the 1980s and 1990s, including the dismantling of statutory marketing and price support schemes, labour market reforms and the phasing out of tariffs on imported agricultural products.  There were also big improvements in technology, including larger, more efficient sowing and harvesting machines, and greater automation and mechanisation of dairy production.  These advances, in turn, led to industry consolidation and an increase in average farm sizes.

But it seems the big gains from these changes have been largely realised, and an acceleration of productivity growth will require new drivers.  So where do we find them?

The opposition's Andrew Robb would suggest the northern food bowl. However, that is not on ABARES's to-do list, possibly because the idea has already been expertly examined and rejected.

The Northern Australia Land and Water Taskforce reported in 2009 that "contrary to popular belief, water resources in the north are neither unlimited, nor wasted. Equally, the potential for northern Australia to become a 'food bowl' is not supported by evidence."  Robb, who is heading a federal Coalition taskforce to reassess the merits of the food bowl proposal, insists that there is "a patchwork of opportunities right across the north" that, with "sensible water catchment", could double Australia's agricultural production.

With rising global food prices, there are almost certainly development opportunities in the north that would justify their environmental and other social costs. But an election-year Coalition task force is not the mechanism to find them.

What the federal opposition should promise is a Productivity Commission inquiry to re-evaluate the issue.

In the absence of Robb's economic miracle, ABARES warns productivity growth will have to come from on-farm innovation and advances in plant and animal genetics, and technologies that enable better farm management and increase energy and water efficiency.

State moratoriums on the commercial release of genetically modified crops have limited private sector investment, and ABARES makes a plea for transparent and evidence-based decision-making by the states.

Genetically modified food crops are being adopted overseas, including in the United States, Canada, China, Argentina and Brazil, and have the potential to transform agricultural productivity in Australia. Unfortunately, there seems to be no task force of federal politicians ready to take on that battle.

ABARES also argues that reduced government spending on agricultural research and development since the 1970s has contributed to the slowdown in farm productivity growth. That decline in funding should be reversed.

But there is more than the politicians can, and should, do.

There is scope for further gains from farm rationalisation. The Productivity Commission states the 20 per cent of most-efficient broadacre farms accounted for nearly two-thirds of total production in 2005. The remaining 80 per cent of farms produced only 36 per cent of output.

Drought should naturally force the rationalisation of the farm sector into larger, geographically diversified enterprises. However, governments have allowed drought relief to preserve economically inefficient operators.

Another useful agent of change should be foreign investment. And given the need for the agricultural sector to target consumers in Asia, corporate investors from China should be particularly useful.  That is not how some farmers see it, of course. But when all the emotive nonsense about Chinese investment is stripped away, their real concern seems to be that Chinese investment will excessively bid up the price of farm land and reduce the opportunity for the next generation of Australian farmers to carry on the family farms.

There might be some truth in that, but it is in Australia's interests for small farms to be replaced by larger corporate producers.

If agriculture is the next big thing, Australia cannot afford to protect undersized, under-capitalised, overgrazed family farms from the economic pressures of the global food market.

If anything, the federal government should increase the pressure on unprofitable farmers to get off the land, and it should demand that the states do the same. For example, grazing leases on Crown land should be put on a proper, arm's-length commercial basis, and producers who cannot manage their leases at a profit should be pushed out, just as a retail centre owner expels unsuccessful retailers.

In the case of the Crown leases in Queensland's Upper Burdekin, the benefits of such a policy would extend beyond agriculture to tourism.

According to the Productivity Commission, most of the sediments, nitrogen and phosphorous that wash into Great Barrier Reef lagoon come from cattle grazing, and a big part of the problem is overstocking by graziers who are fundamentally unviable or who have succumbed to the moral hazard of drought relief. "

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Reader comments were vehement that this was a load of codswallop.  But some issues do require a more detailed examination.

Yes, Australian agriculture needs capital, but most think that should not be a selling off of the farm to sovereign entitities without any real need to be accountable for the product and the offshoring of the profits, and job replacement with foreign staff.

Many are also wary of large corporate operators with remote control, and they have not always been that successful, while some larger locally owned properties are.  There is also a place for smaller operators with specialised production [ and who can grow or encourage others into an industry], and truly, that might be a very profitable area with a number of classic operations noted - quinoa production in Tasmania as well as chia in the Ord River area.  There will be others.  One concept does not fit all!

As regards crown leases - well, it could be a pandora's box if enterprise change is envisaged as it can open these to land claim.  And that coud be a protracted event, and overall unproductive in the meantime.

The decline in agricultural R and D is a key issue, and there are a few tiny signs there may be some glimmer of change with recent large investments in several key centres in NSW and SA.  But there is little happening in the north, and with live cattle exports screwed, this will take some time to reverse.  Almost no public entity is increasing investment in this sort of r and D in the north of Australaia.

Export of chilled and frozen beef to some markets will increase, but it is unlikely Australia will improve beef sales - live or processed - to Indonesia anytime soon [ think 5 years plus], and that alone is impacting monumentally on pastoral production properties and their value.  There is a role for GM but refer back to the R and D equation........little has been done, and to also raise the performance and quality of varieties, including adapted vegetable crops to warmer regions will take time.

Look at agricultural productivity growth in Brazil - and that has resulted from investing in R and D.  May be we need to plagarise some of this for use in north Australia.  Climatically there are quite a few regions with similarities.

 

Indonesian Live Cattle trade - A Bubbling Cauldron

 

A few weeks back the article below appeared in the paper edition of the English language newspaper in Jakarta, The Jakarta Post.  Today it was part of the Queensland Country Life electronic newsletter

Comment has been significant, to both.

It is seen by many sectors as a reasonable comment on the situation.  Almost irrepairable damage has been done to the Australian live export trade, as well as significant damage to the lot feed operations which have been so sucessful around west Java, using often waste or residual horticultural materials.

The damage to the cattle trade is having major ramifications for property prices and financial difficulties including bank foreclosures on cattle stations in the north of Australia.  Awful outcomes.  And yet there seems to be blissful disregard in Australian government areas, pandering as they were to the radical fringes of the animal activists in Australia.  Bad practices there may have been, but is it us as holier than thou outsiders that have a right to dictate another countries slaughter practices using a blunt instrument, rather than more considered methods that did seem to be achieving change?.

Read the original article, now a few weeks old.
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Indonesian people victims of war on Australia’s live-cattle export trade

Ross Taylor, Perth, Western Australia | Opinion | Thu, February 28 2013, 11:35 AM

Paper Edition | Page: 6

One of Australia’s most respected and insightful Buddhist leaders, Abbot Ajhan Brahm, once said that the problem with seeking revenge is that you become a “victim of your own war”, in that you can often suffer as much “damage” as the person to whom you are directing your revenge.

It was good advice and something we all, at sometime, have been guilty of intentionally forgetting.

It is also advice that is ironic given that Ajhan Brahm is highly admired and respected in Indonesia, where he holds many seminars and retreats, at a time when Indonesia’s agricultural officials are seeking and carrying-out revenge on Australia’s cattle industry for our appalling handling of the live-cattle export crisis in 2011.

As the Indonesian government recently announced further reductions in the quota for live-cattle from Australia, the cattle industry in Australia continues to slip further into despair with numerous stations now up for sale.

David Farley, managing director of Australian Agricultural Company (AAC) said recently that the reduction in quotas by Indonesia would result in even greater bankruptcies and job losses for an industry already in serious trouble following our government’s impulsive decision to ban the export of live cattle to Indonesia.

The impact of these latest cuts will be dramatic. Prior to the cattle ban being imposed last year, Australia exported in excess of 520,000 head-of-cattle to Indonesia annually. This year the revised annual quota will be reduced to just 230,000.

Notwithstanding the appalling treatment of these animals, Indonesia had every right to feel aggrieved over the handling of this issue. Beef makes up a very important part of the Indonesian diet, and to have the Australian agriculture minister announce a total ban on the export of live-cattle to Indonesia without any consultation with our near neighbor sent shock waves through the entire supply chain and left Indonesian officials and ministers embarrassed and seething.

It also played into the hands of “special interest groups” within Indonesia who have, for many years, looked for a valid reason to kick Australian suppliers out of the lucrative Indonesian meat market.
As a result, Indonesia announced that it intended to become “self sufficient” in live-cattle that can be used for slaughter. This maybe a noble objective but it is also not achievable, and nor is it sensible.

Indonesia has some of the finest horticulture land in the world; rich soils with plenty of rainfall along with warm and humid conditions that allows its people to grow a huge variety of crops and effectively become Asia’s food bowl.

It does not make any sense to turn over pristine food growing land for the purpose of breeding cattle. Those in the cattle industry have known for years that, as the outgoing Western Australia trade director, Martin Newbery said last month, “Australians are the best cattle breeders and Indonesians, the best cattle feeders.” He is right.

For this reason, to have cattle bred in Australia, where we have the land, infrastructure and expertise, then export them to Indonesia where they are placed in feedlots and “bulked-up” not only makes sense, it is almost the prefect supply chain structure whereby all parties win.

The Australian live-cattle trade should be booming on the back of Indonesia’s strong economy and population growth, with the industry being used as a model for the development of other major agricultural partnerships between Australia and Indonesia.

Instead, we now have a relationship that is untrustworthy and fractured, where Indonesia seeks to “payback” Australia for what it did to a trusted friend, whilst simultaneously harming its own supply network and inflicting shortages and increased prices on its own community.

The price of beef at the “wet markets” within Indonesia has effectively doubled since the quota reductions in Australian beef as Indonesia struggles to meet demand from its internal supplies and the black market is booming.

So why does Indonesia now want to reduce the quota of Australian cattle even further?

The answer is complicated but includes Indonesia’s desire to be self-sufficient in beef supply and thus ensure Australia can never again hold Indonesia to ransom by cutting-off a major food supply source without warning.

But there are other more darker reasons behind Indonesia’s actions, including self-interest groups seeking to make enormous profits from such a ban, the rise of nationalism and a distrust in some quarters of Australia’s agenda in developing the much lauded Comprehensive Economic Partnership Agreement (CEPA) that will provide both countries opportunities to develop far greater business and trade opportunities.

What is even more disturbing however, is that Australia’s agriculture minister, Joe Ludwig, seems helpless in addressing this progression into mutual economic self-harm at a time when Indonesia-Australia government relations are said to be at an all time high.

Here in Indonesia, President Susilo Bambang Yudhoyono (SBY) is nearing the end of his term. This is unfortunate timing for both countries as SBY has a deep and warm respect for Australia, but internally, many Indonesians view SBY as a president who has already “run his race” and perhaps what we are now seeing is a small taste of things to come as Indonesia heads towards electing a new president in 2014.

There exists significant opportunities for our two countries to work together to build extensive and mutually beneficial partnerships as we move into “The Asian Century”.

The live-cattle export industry should have been an example of how we can develop these partnerships, yet sadly this industry has become an example of what can go terribly wrong when international diplomacy is conducted “on the run” by a minister who had little understanding of Indonesia or the extent of the long term opportunities that would be lost as a consequence his impulsive decisions.

Meanwhile, Indonesia continues to remind Australia about what it did and to seek revenge for the shabby treatment from its neighbor; even if this means higher prices and shortages for its own people.

This is one trade outcome where everyone loses. [ my italics and bold]

The writer is chairman of the Western Australia-based Indonesia Institute (Inc) and a former national vice president of the Australia-Indonesia Business Council.

Indonesian Meat Market Rumblings - Diverse Views Abound

Recent interviews with senior agricultural economists in Indonesia seem to caste doubts on the ability of local production to meet demands within the next five years.

This is in contrast to some official government views that indicate all is well - or if beef is short -" to eat rabbit".

Indications are already being discussed that Australia's live cattle imports to Indonesia will be reduced again this year and next year.

Most observers seem to be aware that beef prices have risen very substantially in and around Jakarta, and that is causing a lot of angst to consumers.  Eating rabbit rendang just does not just seem right, with the traditional beef rendang seemingly on the outer, due to costs.

More on this issue here, based on interviews in Indonesia.

http://www.abc.net.au/am/content/2013/s3695806.htm

The Indonesian government might not like this type of reporting but I think we are now approaching a time when the gloves are really coming off, and local issues will be even more apparent in Indonesia.

There is a willing supplier [Australia], willing buyers, now with better slaughter procedures, but Indonesian official thinking does not now, nor did not then, like how Australia went about the whole issue of cattle export to Indonesia.

Australia will suffer, is suffering, and there does not seem any light ahead.  With Northern Territory cattle producers suffering most, and with dramatic falls in cash flows and NT property prices.  Even a new abattoir now planned to open late in 2013 near Darwin, will not fix this problem.

Livestock Shipping within Indonesia to be Boosted

While Indonesia does not want to continue the live cattle trade between Australia and Indonesia, and is promoting self sufficiency there is currently a big black hole in the internal cattle transport within Indonesia, as well as some doubts that they can actually produce enough animals, even in the long term, to meet demand.

It will have to be by ship, between the eastern islands and west Java, and today in Darwin the Indonesian transport mnister who was here to see how Australia transports livestock, announced that new ships and ports were being built to handle the cattle.

Several large vessels able to carry 1500 head each plus port facilities at Sumba in NTT [ Nusa Timor Tenggara] and near Lampung in west Java, are planned.  Realistically, they are 18 - 24 months away, maybe longer.

Who knows how much the beef demand will increase during this time?

It was an absolute essential option if animals were to be moved from production areas in NTT [ mainly Sumba] to west Java where the demand is growing.  Also relevant is the issue of flooding around Jakarta, with the capital also possibly being moved elsewhere, which could also influence the live cattle trade centres.

It will be interesting to see how this develops, and how good will be the handling, transport and slaughter procedures.

cartoon copyright news ltd

Bribery and Corruption Rampant in Indonesian Beef Trade

Late last week this story hit the local headlines in Australia, with the detaining of Indonesian nationals in Jakarta apparently attempting to bribe Indonesian government officials over the beef quotas recently established.

It seems it has been around frozen beef quotas, not live cattle but, if you have done business in the country it is known that corruption and bribery have been relatively common.  Sure, attempts are made to eliminate bribery, but more recently, these anti-corruption practices  are starting to reach into relatively high places.

The ABC and the Sydney Morning Herald have run articles on the topic, and, being away overseas, I missed them.

See below is the SMH article -
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AN INDONESIAN company with deep links to the Australian beef industry has been caught red-handed offering bribes to an Indonesian politician, apparently to circumvent the country's strict quota on beef imports.

A number of Australian exporters use the company, Indoguna Utama, to ship beef to Indonesia, and one company, Mulwarra Export in Sydney, is part-owned by Indoguna's founder, Elizabeth Liman.

Two directors of Indoguna, Juardi Effendi and Arya Abdi Effendi, were arrested by Indonesia's Corruption Eradication Commission at a city hotel on Wednesday with 1 billion rupiah ($101,000) in cash in the car boot.

They are alleged to have been on their way to deliver a bribe to Lutfi Hasan Ishaaq, the president of the Islamic political party PKS.

Indonesia's agriculture minister, Suswono, represents the party in President Susilo Bambang Yudhoyono's government.

Anti-corruption officers sealed the office of the head of Mr Suswono's department, the director-general of livestock and animal health, as part of the investigation.

Mr Suswono imposed strict beef import quotas in the wake of Australia's short-lived ban on live cattle exports in 2011, on the pretext that Indonesia wanted to become self-sufficient in beef.

The quota, applying to live cattle as well as boxed beef, gutted the export trade with Australia and has resulted in shortages of beef in Indonesia, soaring prices and the inclusion of pork in traditional beef meatballs.

The commission's deputy chairman, Bambang Widjojanto, said the bribe was an attempt by Indoguna Utama to get access to a larger import allowance.

The arrests raise the question whether the quota - 32,000 tonnes of boxed beef this year - has become simply a bribe-raising exercise for PKS, which is part of Indonesia's governing coalition, with two cabinet ministers, including the communications minister.

Indoguna Utama lists five Australian exporters as ''partners'', including Andrews Meat in the Barossa Valley, Jack's Creek Wagyu Beef in Queensland, and Western Meat Packers Group in Western Australia. Mulwarra Export's owner, Greg Darwell, told Fairfax Media on Thursday that Elizabeth Liman was a passive minority investor in the company. He said he knew nothing about the bribery allegations, and they surprised him. ''I personally, in the 16 years that I've been owner and runner of Mulwarra, have not directly seen any corruption,'' he said.  His company's exports to Indonesia had dropped by 20 per cent under the quota but, he said, it had picked up markets elsewhere, and was growing.

Another Australian exporter, who spoke on condition of anonymity, said it was ''common knowledge'' bribes were ''part of the trade up there, on a daily basis, quota or no quota''.  ''They're going to desperate measures to get beef into the country,'' the exporter said.

A spokesman for the Corruption Eradication Commission, Johan Budi, said its investigation would not extend to any Australian companies, and he did not yet know if the agriculture minister would be questioned.


Read more: http://www.smh.com.au/national/beef-importer-with-australian-links-caught-in-quota-bribe-case-20130131-2dnh6.html#ixzz2JuFyh6JN

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This is fairly serious stuff, but the implications are even more sinister with overtones that the beef quota might have been manipulated downwards in broad terms, to elicit bribes from importers, to get around the system.  That might be described as fairly serious organised high level corruption.

Most market analysts believe that Indonesia cannot produce enough beef themselves to meet market demand - by a long way, and for quite a period of time yet.  Even if production went up domestically [ rather than by feeding imported animals] sheer logistics would be inadequate to move animals from eastern areas where beef production is increasing, to the volume demand markets of west Java.

It is a sensitive issue, and local beef prices in Indonesia have risen substantially since curbs were placed on importing both live cattle and frozen beef - with particularly greater rises in low quality meat cuts, those used and favoured by many Indonesians.

This story has quite some way to go yet, I am sure.