Key Points

Indonesian market slow in lead-up to Ramadan and Lebaran with 100,000-ton frozen import quotas confirmed for India and Brazil

Vietnam market remains slow, especially without Chinese tourists

The South-East Asian markets are still adapting to a new trading “normal”, which has been created by key impacts.

Across the entire region, the limiting factor for live export has shifted from the high prices of Australian cattle to low consumer demand for local slaughter.

This shift in consumer behaviour is a result equally of the covid pandemic, which has led to changes in the use of some fresh products, and the impact of animal diseases, which continue to disrupt normal import and feedlot operations.

Irrespective of the lowering of prices of Australian cattle, the feedlots face a significant risk due to the larger numbers needed to fill a shipment. Slow sales, disease outbreaks or further price drops would create additional challenges for feedlots.

INDONESIA
steers $5.17kg live weight (Rp10,245 = 1AUD) 

Ramadan started in Indonesia on 22 March and lasts until 21 April for Lebaran (Eid al-fitr).

Usually we see cattle prices start to increase in the lead-up to this period, but the market is remaining stable about Rp53,600 (AUD$5.17), which indicates that the live slaughter trade may remain slow.

The price of fresh beef in the market is 136,000 Rb/kg ($13.30) in wet markets and 176 Rb/kg ($16.83) in supermarkets.

The beef market is looking increasingly crowded for locally processed cattle, as prices remain relatively high and the government continues to look for ways of securing affordable beef in the festive period. Indonesia is a high consumer of processed or manufactured beef, rather than whole beef products, making it more open to substitution with cheaper alternatives, such as Indian buffalo meat (IBM).

In 2016, IBM was introduced to the Indonesian market with the intention of reducing the price of beef. At that time, the regulations limited import of IBM to state-owned enterprises and the state logistics agency Bulog was put in charge of import. From November 2022, a new regulation was put in place that created the potential for private imports of IBM. On the
25 January, Bulog received a quota for 100,000 tons for 2023, and
100,000 tons of Brazilian beef was awarded to ID Food, another Indonesian state-owned food holding company. This has essentially left no room for imports from private companies and facilitated the retention of monopoly supplies. 

What makes the story more concerning is that the distribution has been left to one company, Suri Nusantara Jaya, with all requests made to Bulog from vendors and distributors forced to go through Suri. This seems to have resulted in Bulog and Suri making what mathematically looks like significant profit from the trade, especially as from 2017-2021 the listed prices of IBM were about Rb56,000 for Bulog and Rb85,000 for Suri. What was intended as a support for the poor has resulted in profit for the powerful. 

Foot and mouth disease and lumpy skin disease continue to move through the country and there are unofficial reports of it moving between islands. LSD infections appear to remain under-reported given the anecdotal information I have from several sources on the ground, especially in Central Java and Yogyakarta, where there are many new infections of local cattle.

MLA has a project run by Ausvet that is supporting Indonesian feedlots to improve their biosecurity. Preliminary site risk assessment and consultation has found:

The inappropriate use of disinfectant is common across many feedlots, including spraying or misting disinfectant into the air or onto live animals. This is not only an expensive procedure, but also ineffective. Disinfection should only take place once a pen has been thoroughly cleaned and contains no live animals. Disinfecting the air, live animals or pens that have not been cleaned is unlikely to be effective in controlling disease.

In many feedlots, the highest biosecurity risks come from the entry of dirty trucks that then make contact with clean vehicles or animal pens. It is important that trucks are properly cleaned and disinfected before entering a property and then their contact with clean vehicles or pens containing live animals are limited.

Most of the feedlots have already experienced at least one outbreak of FMD. This can help explain why there is general hesitation of some importers to restock with Australian cattle, even as prices begin to drop.

Lack of supply of Australian feedlots will likely result in mixing of Australian and local cattle in the same facilities. We are seeing a similar story in Vietnam where low volumes of Australian cattle are resulting in more locally sourced cattle in the same facility to use the investment. Mixing Australian cattle with local breeds comes with the risk of disease because even Australian cattle vaccinated for FMD on arrival will take some time to develop immunity.

There remain some vaccine supply and distribution issues, especially related to smallholders and LSD. The LSD vaccines that are available can cause vaccine site reactions that resemble infection (Neethling response). This creates obvious concerns for the farmers vaccinating their cattle and also increases risks involved in funding or running vaccination programs as farmers could make claims following vaccine reaction, and it remains unclear who would pay the compensation in these cases.

FMD vaccination has reached 11.994 million doses administered with the majority of infections being seen in the western islands of Sumatra and Java. There has been no official reports of FMD cases further east than south-east Sulawesi.

DARWIN

A total of 19,420 cattle were shipped out of Darwin during February; 17,958 were sent to Indonesia and 1472 to the Philippines. This is up from 5526 in January and 17,821 in February 2022.

Although prices for live export cattle are starting to drop in Australia, the herd rebuild in the north is likely to continue across much of the region due to recent rains across much of the region. This has reduced the need to move cattle and, in some cases, the ability or cost to move cattle to ports is prohibitive. We are likely to continue to see a slow market from a supply side. Given the concurrent depressed demand in the key live export markets, it looks like it will be a slow start to the year for live exports.

Across the north, 280-380 kilogram feeder steers are attracting about $4.20 and $4 for steers over 450kg, although prices range considerably. Cows have dropped below $3. It is understood that there are some motivated exporters and with the sharp drop in the EYCI we may see a reflection in prices of cattle sold into the markets by next month if demand increases.