Filling Indonesia's supply gap

However, that’s a supply gap and trading opportunity Australian cattle producers can ably fill, he believes.

Mr Joyce spoke to Fairfax Media about his diplomatic mission to Indonesia last week where agricultural trade was keenly discussed with local government officials.

Beef and live cattle exports formed a key plank in those talks but Australian wheat was also explored with WA bulk handling and grain marketing giant CBH one of several industry representatives joining the minister’s delegation.

Australia exported $1.259 billion worth of wheat to the Indonesian market last year.

Mr Joyce said Indonesian customers had no complaints about the quality of Australian wheat product being exported to their market.

That contrasts to a similar government delegation in 2012 where customer feedback indicated the final delivered product was failing to match standards promised in original wheat contracts - a by-product of removing the AWB single desk exporter in 2008.

“CBH is doing a great job over there,” Mr Joyce said of the WA co-op which owns flour mills in Indonesia and other south-east Asian countries.

“As people move from eating rice in their diets to higher forms of carbohydrates like bread the demand for wheat will go up.

“I’m not hearing anything about Australian wheat in Indonesia, which is a good sign and shows that the supply is going well.”

On the main topic of Australian beef and live cattle exports to Indonesia, Mr Joyce provided back of the envelope numbers which he said told a “rough” but accurate story about the difficulties with achieving self-sufficiency.

“The rising tide lifts all ships,” he said.

“If beef consumption goes up because the price is cheap all farmers get a benefit.

“There’s a huge upside in the Indonesian market.

“You can’t talk against the government’s (self-sufficiency) policy because that’s the government’s policy.

“But what you can say is, as they move towards that self-sufficiency target, there will still be a large gap in supply and I believe someone has to supply it and they have said ‘well that’s Australia’.

“To be frank and brutally honest, I can’t see Indonesia bridging that gap.

“Why?

“They consume about two to three kilograms of beef each year per person and Australia by comparison consumes about 28kg per person per year.

“So there’s a lot of upside in beef consumption and as people make their way towards middle class there’s a direct correlation between beef consumption and the standard of living.

“A good country to compare Indonesia to in the short term is Malaysia, next door, where they consume 5kg of beef per person, per year.

“We know Indonesia can’t supply that 3kg per year per person right now so almost doubling supply to 5kg per person per year means Australia has an incredibly strong future.”

Mr Joyce said to supply that potential increased beef consumption of 5kg per person per year would mean 50 people consuming one beast per year in Indonesia, on a yield of 250kg.

“If there are 250 million people in Indonesia that means they have to be turning off 5 million head of cattle per year to supply their own domestic needs,” he said.

“On a very rough rule of thumb, it means they’d need about 15 million head of cattle because about a third of what you hold is what you turn off.

“If you need 10 acres of land to run a beast to support that production it means Indonesia will also need 150 million acres of land and I can’t see that’s happening.

“Maybe parts of my numbers are wrong but the overall rough dynamic is correct.

“These numbers themselves would say you’d need to be looking around to see where your beef supply will come from to keep the price of food down.

“And no matter where you go, the answer to the food equation is Australia.

“Indonesia say they may try and import cattle from elsewhere and they certainly can get buffalo meat out of India cheaper - but there’s a reason why buffalo meat is cheaper from India; because it has foot and mouth disease.”