INDONESIA
Slaughter steers $4.10kg live weight (Rp9750 = $1AUD)

Demand is firm although prices are stable with the indicator rate remaining at Rp40,000 per kg. Higher rates are available for good cattle in some locations but it appears that in general lot feeders have been happy to sell increasing volumes at similar rates to June.

I am advised that small quantities of Indian buffalo beef have arrived but volumes are still not enough to support the previous level of demand. Traders report that alternative supplies of low price Aussie and NZ frozen products are also in short supply. This might be due to a sudden surge in demand but also perhaps because better prices are available in other markets. The result is that a significant volume of fresh beef from the slaughter of imported cattle is once again being purchased by the low-end food service sector that had previously switched to cheaper Indian product.

The important question is when will large quantities of Indian beef be available once again? While nobody in government has explained the reason for the sudden decline in imports, I still suspect that this is a result of reduced access associated with FMD free (with vaccination) areas of India limiting volumes available for import. Whatever the case, lot feeders will be happy to fill the gap in demand and are importing much larger numbers of feeders than anyone would have predicted (especially me) in order to 1. Take advantage of the continuing moderate feeder prices in northern Australia 2. Make the most of the weakening AUD$. 3. Stock up for the expected decline in supplies later in the year 4. Increase their inventories to produce the additional slaughter cattle that are now filling the Indian beef gap and 5. Make sure they have plenty of cattle on hand to cover their supply needs while they negotiate the process of loss of licence due to the failure to reach the 1 breeder to 5 feeder target and establish a new company to start importing once again.

The August Muslim festival of Qurban, where male cattle, sheep and goats are slaughtered and the meat donated to the poor, means that local cattle normally available for domestic fresh beef were diverted to this special event, producing a shortage in supply of local fresh beef, which will probably become another bonus supply opportunity for local lot feeders as long as Indian beef isn’t available to fill the gap.

Earlier forecasts that northern Australian feeder cattle supplies would dry up by July have proved to be incorrect with another massive month for Indonesian imports of approximately 52,000 head. Wellard sent the MV Ocean Drover from Townsville to Indonesia with 18,000 head loaded for discharge at Jakarta (about 12,000) and Lampung (about 6000).

Another milestone was passed with the announcement of the closure of the remaining business activities of PT Elders Indonesia. After selling their feedlot and abattoir assets last year, they continued to operate their meat importing and distribution business, but the decision to close this final chapter was recently communicated to customers and staff with final closure due in a few months. The live cattle and beef business are a difficult sector to operate in anywhere in the world – just ask the Australian producers with their massive drought. But Indonesia presents an even greater degree of difficulty as a result of  the government policy of importing Indian beef. Unfortunately, the two broad (and admirable) policies of the government to (a) reduce the cost of beef to domestic consumers and (b) encourage the expansion of the domestic cattle herd to increase local beef production are in total conflict. It is not possible to encourage local beef producers to expand their activities when their business case is crushed by cheap Indian imports. The Indonesian government is in a no-win position as it must make the unenviable choice between low-cost protein for the majority of their vast population or high beef prices that are essential to retain and encourage local beef production.

VIETNAM
Slaughter steers $4.56kg (VND16,000 to $1AUD)

Prices remain firm in Vietnam with the weakening AUD making imported cattle a little more attractive. The indicator rate remains at Dong73,000 per kg live weight for slaughter steers. Prices for beef in the wet and supermarkets have not changed significantly, while chicken prices have increased quite a lot. This may indicate a move to chicken as a result of the African swine fever (ASF) problems which continue to devastate the national pig herd.

Vietnam continues its vital role as Australia’s second largest market for live export cattle. The market is split into about 80 percent slaughter weights and 20 percent feeder types. Recent improvements in feeding systems will ensure that feeders will gradually become a much more important part of the trade as efficient lot feeders can achieve substantially higher margins by feeding cattle rather than simply importing fat cattle for a trading margin.

Also in the local press were stories concerning the Australian Ministry of Agriculture announcing serious violations of Australia’s ESCAS requirements. All Australian cattle must remain within an approved supply chain until slaughtered in approved facilities. The case mentioned in the press noted that more than 1500 cattle and 99 buffalo had left their supply chain and were unable to be traced, a serious breach of the regulations.

CHINA
Slaughter cattle $5.45kg  (RMB 4.77 = AUD$)

Slaughter cattle prices in yuan have remained stable with the weak AUD accounting for the rise in the A$ price above. The main market feature of note is the continuing rise in pork prices. The reported price in Shanghai rose from Y24 in June to Y26.8 in July, 11.7 percent. The recent USDA GAIN report on China forecasts that “by the end of 2019, the total swine inventory will be down 13 percent to 374 million head. Pork production will decrease by 5 percent to 51.4 million tons with the reduced supply only slightly offset by weakened demand. To cover the domestic supply gap, China will increase pork imports by 33 percent to 2 million tons.”

China, for the first time in history, has become Australia’s largest export beef market by volume, surging past traditional big-hitting customers Japan and the United States in trade conducted during July, as reported by Beef Central.

PHILIPPINES
Slaughter cattle $4.85kg (Peso 35.5 to AUD$1)

Prices remain steady with the slight rise above in A$ price due to the weak Aussie $. The meteoric rise in the local price of slaughter cattle that I have been reporting has failed to translate into an increase in live cattle imports. Given the huge rise of about AUD$2 per kg I had begun to suspect that my information may be incorrect so I checked with an old friend who was a significant importer when the Philippines was our major live cattle customer and he confirmed that the prices I have been reporting are indeed correct. He also advised that despite the dramatic rise in prices he was still not attracted to recommencing importation. TQ

WORDS: ROSS AINSWORTH IN JAKARTA

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Ross Ainsworth’s blog seabeefreport.com aims to inform the reader about the beef industry in South-East Asia with particular reference to the live export trade from Australia. Beef consumers in Asia will, in due course, be the biggest single customer group for Australia. Therefore, it’s essential that the Australian industry has a good understanding of this market maximise its potential. Finding information in foreign countries is a difficult process for individuals in Australia to achieve. Ross’s experience gives him insights that Australian producers and other industry stake holders can’t easily obtain.
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