For Indonesia, Australia has become a reliable source of large volumes of disease-free livestock that thrive in a similar tropical environment. Among the greatest challenges currently confronting the industry are: price and supply issues, largely due to prolonged drought and devastating floods, especially in northern Australia; a lack of dialogue at the government-to-government level; and the slowness of the industry to tell its side of the story, including of the importance of the live export trade, especially to northern Australia, and the work that has been done to improve animal welfare.
Key Points
- For Indonesia, Australia has become a reliable source of large volumes of disease-free livestock that thrive in a similar tropical environment. The breed sent to Indonesia is bred for the South-East Asian market’s climate, consumer tastes and adaptability.
- The four biggest challenges currently confronting the industry are:
Price and supply issues, largely due to prolonged drought and devastating floods, especially in northern Australia;
Low investor confidence due to public sentiment, commercial difficulties and unpredictable government policies;
A lack of dialogue at the government-to-government level;
The slowness of the industry to tell its side of the story, including of the importance of the live export trade, especially to northern Australia, and the work that has been done to improve animal welfare.
- Live cattle and boxed beef should be viewed as being complementary because they often appeal to different consumers in the same market. By establishing themselves as reliable suppliers of both products, Australian producers can further strengthen their relationships with importing countries.
Introduction
FDI is pleased to discuss some of the key challenges and opportunities facing the Australia-Indonesia cattle trade with John Cunnington, the Business Development Manager at Perth-based Halleen Australasian Livestock Traders, a livestock export company established in 1983 that primarily deals in the export of cattle from northern Australia to South-East Asia. In addition to his role at Halleen, John is also the Chair of the WA Livestock Exporters’ Association and Director of the Australian Livestock Exporters’ Council and The Livestock Collective.
Commentary
FDI: How important are live cattle exports from Australia to Indonesia and to the Australian pastoral industry and economy in general?
JC: The live cattle trade from Australia to Indonesia has operated since the 1970s. In that time, Indonesia has become Australia’s largest live cattle market. This relationship has underpinned the development of how modern northern Australian cattle stations develop their herds and their value. For Indonesia, Australia has become a reliable source of large volumes of livestock that are disease-free and which thrive in a similar tropical environment. The breed selected to be sent into Indonesia is bred for the South-East Asian market’s climate, consumer tastes and adaptability.
Due to Indonesia’s location and its OIE[1]-recognised status as being Foot and Mouth Disease-free, its access to live cattle and, to an extent, boxed beef, is limited.
With the two countries heavily reliant on each other, deep relationships between commercial parties have been built creating essentially a paddock-to-plate supply chain from producers in Australia through to consumers in Indonesia. Northern Australia has efficient production systems in place for breeding cattle and Indonesia has become a “feedlot-ing” nation, primarily utilising by-products from local production.
FDI: What are the major challenges facing live cattle exports to Indonesia and what needs to be done to alleviate those challenges?
JC: There are four factors that need to be considered. They are:
- Price/Supply – Due to prolonged drought and devastating floods, especially in northern Australia, the Australian cattle herd is at its lowest in 25 years, driving record prices for cattle. The cattle herd will take several years to recover. Cattle are usually sold at about 18 months of age for live export to Indonesia. This increase in price, due to low supply, has not only eroded any margins for both importers/feedlotters and exporters, but it is driving the Indonesian Government and businesses to seek alternative supply options to ensure that they can have a secure supply of affordable beef.
- Investor confidence – Due to several factors, including public sentiment, commercial difficulties and unpredictable government policies (both domestically and abroad), that are associated with the live export industry, there is a hesitation to invest on a continual basis in the supply chain.
- Government-to-Government (G2G) communication – There is a lack of real dialogue to prove to Indonesian importers that we are a supportive and secure source of cattle and a good neighbour. Australia should emphasise to the Indonesian importers that we are a secure feed source not only for red meat, but also for grains, dairy and other agricultural produce. Indonesia should be able to perceive northern Australia as the primary source of cattle with which to feed the nation.
- Public sentiment – With increased levels of scrutiny of the trade, especially around animal welfare, a loud activist voice is swaying public confidence in the live export trade. The industry has been slow to tell its side of the story, of the importance of the trade, especially to northern Australia, the work that has been done to improve animal welfare globally and the important service that it provides in supplying nutritious red meat, a vital protein source, to importing nations.
FDI: Food preparation and consumption are embedded in the culture of a society. Could you describe the differences between Australian and Indonesian consumption customs?
JC: There are three aspects to that, which are:
- The definition of “fresh”. Australia defines fresh meat as meat that hasn’t been frozen. Many Indonesians, on the other hand, regard fresh as “hot”, i.e., that which has been processed within hours and never refrigerated.
- Annual beef consumption in Indonesia is about 2.2kg/per capita compared to Australia’s 19.7kg/per capita. The method of consumption is also different, with most consumed as beef (bakso) balls or rendang, compared to Australians, who prefer steak.
- Cattle in Indonesia are generally processed late at night and into the early hours of the morning and taken straight to the wet markets for sale. The largest consumers of the beef from Australian-bred cattle are local street vendors (primarily for bakso balls), and padang restaurants, which buy the meat in the morning and utilise it that day. A combination of cultural preference for hot meat and limited infrastructure for street vendors/small local restaurants is better suited to locally-processed animals, rather than imported boxed beef.
Live cattle and boxed beef should not be seen as conflicting trades; rather, they should be viewed as being complementary. They often appeal to different consumers in a market and are used for different purposes. By establishing ourselves as reliable suppliers for both products, we can strengthen our relationships with importing countries.
FDI: Australia’s relationship with Indonesia has been complex and, at times, not the friendliest. How would you describe the relations between the beef producer and consumer?
JC: The Australian red meat community and the corresponding Indonesian industry have built long-term and deep ties as we have been on this journey together, building the supply chain that exists today. There have been challenges and successes along the way, but both sides are resilient and continue to operate. We have been through challenges such as the Asian Financial Crisis, the 2011 snap ban on live exports to Indonesia and the current record pricing.
FDI: In your view, what needs to be done to improve and promote a sustainable industry in the future?
JC: Taking into account the challenges outlined above, the following are ideal next steps:
- Improving G2G communication and the confidence that there is mutual reliance. Food security is a major issue internationally. Any notion to suspend the trade of food threatens a country’s ability to feed its people. At the same time, from an Australian perspective, we have a rapidly-developing country of 275 million people on our doorstep. It is the same distance for a Perth person to fly to Jakarta as it is to Canberra. Indonesia is a country that needs to ensure secure food sources and an ever-expanding amount of disposable income. Australia needs to make Indonesia a major market for its products and prioritise building the relationship between our two countries.
- The industry must continue to work to restore the Australian public’s confidence in the live export supply chain. This is a sustainable and vital trade to Australian producers and our importing partners, which brings export dollars to the Australian economy. By exporting livestock, we also are able to actively improve animal welfare globally.
- Utilising the current high prices to pour money back into infrastructure to expand the carrying capacity of currently under-utilised land. As Indonesia and other South-East Asian countries continue to have more disposable income, their hunger for Australian beef will only increase. We need to utilise this time to expand our ability to service that demand and ensure that those countries need not look to alternative countries for sourcing their cattle imports.
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About the Interviewee: John Cunnington is the Business Development Manager at Halleen Australasian Livestock Traders, based in Western Australia. Halleen is a livestock export company established in 1983 that primarily deals in the export of cattle from northern Australia to South-East Asia. Additionally, John is the Chair of the WA Livestock Exporters’ Association and Director of the Australian Livestock Exporters’ Council and The Livestock Collective.
Brought up in Perth, John has worked right through the live export supply chain, including in Australia, on board the vessels delivering livestock all over the world, and in importing countries. With Halleen’s supply focus primarily on Asia, John has extensively travelled through the regional areas of South-East Asia.
John has a B. Com. (Econ and Finance) and M. International Business.
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[1] The World Organisation for Animal Health (until 2003, l’Office International des Épizooties).
