28 January 2012

3 minute read

Last year, Indonesia announced that they would cut Australian cattle permits, from 520,000 head in 2011 to 283,000 head in 2012, in a bid to increase the country's self-sufficiency.

Indonesia will now revise their import permits based on the domestic price of beef in Indonesia. If domestic prices rise sharply there is capacity for their trade ministry to adjust import permits to allow more cattle and beef to enter their market from countries like Australia.

Disappointingly for the industry, only 60,000 permits were issued for the first quarter 2012.

Although quite a drastic drop in permits, the situation is made worse by the knowledge that in previous years around 60 per cent of total Australian cattle were exported to Indonesia.

2011, however, was an exception.

2011 exports

In April 2011, undercover footage of Indonesian slaughter houses caused a public outcry. The government suspended live exports at the end of May, and in early June suspended all live exports after pressure was applied from the public and animal welfare groups.

Although live cattle exports resumed to Indonesia in July 2011, the first shipment didn't leave until 11 August 2011.

Later on in the year, the favourable season across almost all of northern Australia pushed weights above the requirements for Indonesia.

These weren't the only things that contributed to poor year for Australian cattle exporters.

In many instances, shipments to more price sensitive markets in South East Asia and the Middle East were constrained by the higher prices for Australian cattle, along with supply constraints.

In 2011, exports to the Middle East and Africa (including Turkey), came in below initial expectations, estimated at 134,000 head – some 40% below the previous year. Exports to most of the major markets in the region were somewhat volatile, with the political upheaval and higher Australian cattle prices impacting shipments to Egypt.

Exports to China at 43,000 head decreased 25 per cent –predominately dairy cattle. Russia continued to be interested in Australian genetics and feeder cattle, primarily out of southern Australia, with exports for 2011 estimated to total 30,500 head, with one very large shipment in November of 14,208 head.

With the temporary suspension, heavy cattle and falls in other markets it is expected that live cattle exports will be down 22 per cent in 2011.

Outlook for 2012

Rising beef prices and cattle shortages don't provide a rosy outlook for 2012 live cattle exports. On top of this, the feedlot industry has been focusing on expansion, which means more cattle might remain to be finished in the country.

As mentioned earlier in this article, Indonesia have reduced the import permits for Australian cattle. There are already reports this week (end of January) that Indonesia permits for the first quarter of 2012 have been used up - leaving many producers out of action until April.

With this in mind, MLA predicts that live cattle exports will fall by 31 per cent of Indonesia in 2012, and be almost 500,000 head less than the record year in 2009.

It is expected that total live cattle exports will fall by 16 per cent, taking into account the factors mentioned above.

MLA expects to see live cattle exports to the Middle East and some Asian countries improve moderately.

Beyond 2012, Australia’s live cattle trade will be framed by the access to import permits to Indonesia, season conditions, the feasibility of exports to price sensitive markets and competition from slaughter markets for suitable young cattle.

January 2012