SE Asia Report: Importers of Australian cattle make the most of positive trading conditions

127th Version: July 2024

Key factors:

• Australian exporter feeder costs fueling larger commerce volumes
• New participant joins Aus export commerce to Indo
• Governments within the area look to dairy cattle manufacturing as an answer to meals safety and diet wants
• Animal illness stays a big burden on protein provide

Word: We have now stopped reporting our China value indicator this month as we’re now not in a position to supply dependable information.

Regional Traits and Overview

The hole between Australian feeder cattle value and the Indonesian/Vietnam value is sustaining a wholesome unfold. Cattle export volumes replicate this engaging pricing differential with month-to-month cattle exports at their highest levels since 2020-21. I anticipate to see importers proceed to make the most of this helpful value as a lot as they will whereas it lasts, particularly given the forecast replace in Australian cattle costs going into 2025 and past. Sadly for our buying and selling companions they solely have a lot feedlot, abattoir and shopper capability and these limitations will be irritating as they know that good value circumstances don’t final lengthy within the Australian export context.

Saudi Arabia has accepted the import of cattle, goats and sheep from Thailand although it’s not clear if there are any industrial pursuits behind the bid to open up this new stay animal commerce route. The prospect of cattle exports from Thailand to Saudi is an fascinating thought experiment, provided that it’s a a lot shorter crusing route than Australia, however the problem of aggregating sufficient export prepared cattle in Thailand to fill a ship is unlikely to be one thing that native operators have the capability to do within the brief time period. Even for the properly established commerce of cattle between Thailand and Vietnam it’s a fixed problem for importers to supply massive volumes of cattle on the value and specification they want.

Picture: Cattle transport in Sumba, Indonesia. The cattle are quiet and there may be clearly numerous belief by the house owners.

I’m in Sumba as I write this text. It’s an Indonesian island South East of Bali and it’s at all times fascinating to see the totally different livestock transport used within the area. In Sumba the native vehicles within the photograph are used for transporting individuals, livestock, and each sort of fine you’ll be able to consider. The multi use autos are a extra environment friendly strategy to mobilise assets as they often solely transport livestock within the night.

There are dangers with flooring, lengthy transport occasions on poor roads with out water, biosecurity, and lack of loading and unloading ramps.

Whereas there aren’t any enforced laws on the motion of the animals, as a result of every part is finished in decrease volumes there may be extra time and a focus positioned on ensuring the livestock are safe and secure, as there is no such thing as a profit in injuring animals through the course of.

Indonesia: Slaughter Steers AUD $4.62 / kg stay weight (IDR 10,940 = 1 AUD)

Buying and selling circumstances very aggressive

 Some Indonesian feedlots are reportedly near capability after a busy few months as importers have made up for the availability hole created by delayed import allow issuing initially of the yr and to make the most of engaging pricing. With some exporters committing to multi-voyage charters of vessels they will discover themselves in a scenario the place they should promote cattle to maintain that vessel utilised and prices environment friendly. When a number of exporters are doing this it shortly creates a really aggressive market and places downwards strain on the promote value. My contacts report CIF costs within the $2.60-$2.80 USD ($3.83 – $4.13 AUD) for varied traces of cattle delivered to Jakarta or Lampung, a number of the lowest costs seen by our Indonesian prospects for a number of years.

Costs

The meat value tendencies from June to July 2024 have proven notable fluctuations over the previous two months. Initially, there was a normal improve in the direction of the tip of June, adopted by a slight decline firstly of July. This fluctuation will be attributed to cultural elements, as demand sometimes rises through the Eid Al-Adha season. If shoppers don’t get hold of beef via Qurban rituals, they typically flip to buying it, influencing market dynamics.

In July, carcass costs noticed a slight drop to between $8.96 and $9.14 AUD (98,000 to 100,000 IDR) per kg. In distinction, throughout June, common beef costs ranged from $12.34 to $12.43 AUD (135,000 to 136,000 IDR) per kg. Coming into July, costs moderated barely to $12.16 to $12.34 AUD (133,000 to 135,000 IDR) per kg.

The fluctuation in costs may additionally be linked to the depreciation of the Indonesian Rupiah, which now stands at Rp 16,400 per USD. This forex devaluation has raised issues amongst feedlot operators relating to its potential affect on home beef shares and costs. Didiek Purwanto, Chairman of the Indonesian Beef Cattle Enterprise Affiliation (Gapuspindo), famous that the trade charge’s depreciation exceeded earlier predictions primarily based on the 2024 state funds’s macroeconomic assumptions (Rp 15,000 per USD). Consequently, many importers are actually searching for pricing denominated in AUD from Australian exporters to mitigate dangers related to forex fluctuations.

A brand new participant available in the market

 The discuss of the city within the Indonesian import market is that AAM Funding Group (AAM) has entered the fray of the Indonesian cattle market, reportedly beneath an association with PT Indo Prima Beef to import and market its personal cattle into Indonesia, with AAM cattle already in-country and transferring via the availability chain. This direct involvement of one among Northern Australia’s greatest profile cattle producers, headed by Garry Edwards (additionally chair of Cattle Australia) has added a brand new dynamic to the market. AAM has picked up a number of employees with export expertise each on the Australia facet and domestically in Indonesia which places them in good stead for coping with the complexities of the market. AAM seems to be utilizing the providers of established stay exporters to move its cattle to Indonesia. A number of of my contacts reported that the injection of a brand new provider into the market is unsurprisingly rocking the cart, with many observers eagerly watching to see how the brand new child on the block goes in what’s a really mature and at occasions cut-throat market.

Qurban

The financial potential of the Qurban market in Indonesia is substantial, as highlighted by the Institute for Demographic and Poverty Research (IDEAS), which reported gross sales amounting to $2.8 billion AUD (IDR 28.2 trillion) in June 2024, involving 2.16 million individuals. This market demand centered predominantly on 1.21 million goats and sheep, with cattle and buffalo accounting for 587,000 animals. Regardless of a restoration in middle-class incomes, there was a famous decline in goat and sheep sacrifices attributed to financial challenges, a sentiment echoed by business contacts dealing with difficult buying and selling circumstances through the pageant interval.

The acquisition of sacrificial animals represents a big monetary dedication for Indonesian households taking part in Qurban. To boost the method in 2024, authorities initiatives included certifying halal slaughterers and enhancing livestock transportation logistics. These efforts intention to streamline operations and guarantee compliance with halal requirements, essential for the spiritual observance.

The Qurban market presents substantial financial alternatives and it displays broader financial tendencies and governmental efforts geared toward enhancing effectivity and adherence to spiritual practices.

Free Lunch Program

Beneath the management of Minister Andi Amran Sulaiman, the Ministry of Agriculture is actively selling the enlargement of meat and dairy manufacturing in Indonesia, focusing notably on livestock comparable to cattle, goats, and sheep. The minister has articulated key priorities together with regulatory simplification, guaranteeing entry to high quality seeds and breeds, facilitating land availability, offering monetary incentives, enhancing logistical infrastructure, and providing complete enterprise help. These efforts are geared in the direction of establishing an built-in system that promotes environment friendly, sustainable, and environmentally-friendly agricultural practices.

In a big growth, the Ministry has initiated collaborations with outstanding personal sector entities, comparable to Royal FrieslandCampina NV, a number one Dutch dairy producer. Collectively, they’re launching a pilot program for the free lunch initiative (MBG). Beginning in August, PT Frisian Flag Indonesia, a subsidiary of FrieslandCampina, will implement a six-month trial at 10 faculties in Cikarang, close to Jakarta. This pilot program, albeit modest in scale initially, represents a foundational step in the direction of probably offering free lunches to over 80 million faculty youngsters nationwide sooner or later.

Vietnam: Slaughter Steers AUD $4.63 / kg stay weight (VND 17,149 = 1AUD)

Costs

A quieter month for cattle exports to Vietnam, possible the results of transport house being allotted to Indonesia which noticed volumes of more than 20% above the five-year-average for June. Australian cattle costs in-country are remaining pretty constant, with important flows of cattle additionally coming in from Thailand and Myanmar.

Ailments proceed to current repeat challenges

Animal illnesses have quickly unfold amongst cattle and poultry in a number of areas of Vietnam, with widespread animal smuggling recognized as a main trigger, in response to the Ministry of Agriculture and Rural Improvement. This yr, Vietnam has recorded 660 outbreaks of African swine fever, a considerable improve from the 208 outbreaks throughout the identical interval final yr. Consequently, roughly 22,000 pigs have been culled, reflecting a 94 p.c year-on-year rise. The elevated pork costs as a result of these outbreaks are pushing shopper value indexes up. Quite a few provinces are grappling with the swift transmission of African swine fever, chicken flu, and hand, foot, and mouth illness, resulting in elevated inspections and management measures by native authorities.

Impetus Animal Welfare wraps up its AVEG challenge

The Impetus AVEG challenge was undertaken to boost financial engagement between Australia and Vietnam by specializing in enhancing animal welfare and growing the cattle abattoir sector. This initiative concerned complete website assessments to determine infrastructure and coaching wants. The ensuing Funding Insights Report gives an in-depth evaluation of potential funding alternatives, noting important variations within the scale of operations and highlighting key areas for enchancment. As an example, the report reveals that the majority abattoirs course of fewer than two head of Australian cattle each day, emphasising the necessity for higher processing capabilities and fashionable tools. The report additionally identifies quite a lot of abattoirs with excessive investability potential for focused growth efforts. For these enthusiastic about studying the report, please contact me straight at michael@impetusanimalwelfare.org.

Native abattoir programs in Vietnam

Philippines: Slaughter Steers AUD $3.56 / kg liveweight (P. 39.51 = 1AUD)

Costs

The Philippines Peso has continued to weaken which is conserving imported staples like rice and oil costly. That is additionally making native cattle comparatively cheaper in comparison with Australian cattle. In moist markets and supermarkets alike, beef knuckle has been between P. 580/kg($14.68 AUD) and P. 630/kg($15.95), respectively. Native cattle costs in Mindanao are nonetheless pegged between P. 130-145/kg($3.29-$3.67 AUD) liveweight, and the new carcass meat value is roughly P. 260/kg($6.58 AUD).

Stay pork costs are round P. 185.00 to P. 195.00 per kilo ($4.68-$4.94 AUD), and pork carcass goes for P. 260.00 per kilo ($6.58 AUD). In supermarkets, non-branded broiler rooster is priced at P. 175.00 per kilo ($4.43 AUD), whereas the Magnolia model is priced at P. 227.00 per kilo ($5.75 AUD).

Dairy manufacturing a nationwide focus

The Nationwide Dairy Authority (NDA) within the Philippines has introduced plans to import 5,000 cattle to spice up native milk manufacturing to 80 million litres by 2028. In 2023, the Philippines produced 22.87 million litres of milk, up from 21.93 million litres in 2022, however nonetheless imports 99% of its annual milk requirement of three.3 million metric tonnes. Danilo Fausto, president of the Dairy Confederation of the Philippines, emphasised the necessity for a $84 million AUD (P2.5 billion) funds to help native manufacturing and enhance dairy genetics via synthetic insemination with the Philippines authorities presently allocating about $14 million AUD (P420 million) to date.

Beef producers in Philippines proceed to put money into new infrastructure in June 2024

Australia: Feeder Steers Darwin $3.00, Townsville $2.60

Feeder steers out of the North have been dipping in to the excessive $2 AUD vary during the last month  regardless of excessive volumes and loads of shopping for by exporters. Second grade feeder export steers and bulls have been quoted as little as $2.20 in Queensland with Brahman feeder heifers right down to $2.10. One of these pricing may pique the curiosity of secondary markets like Malaysia, Philippines and Brunei which have to date been pretty gradual in 2024.

2024 Yr to January figures for cattle sea freight throughout Asia by state

Supply: DAFF website

Yr 2024 to January for cattle sea freight comparability throughout Asian markets

Supply: DAFF website