Will Indonesia also open its doors to Brazilian feeders?

Will Indonesia also open its doors to Brazilian feeders?

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Brazil set to send boxed beef to Indonesia for first time: what that means to Australia

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AS Brazilian boxed beef looks set to start flowing into Indonesia for the first time ever, market watchers suspect there may be plans to open the doors to feeder imports from Brazil as well.

A quota of 25,000 metric tonnes in the next year has just been granted to Brazil as the Indonesian Government deals with red hot retail beef prices on the back of increased demand and the near absence of Indian carabeef imports.

Rabobank estimates Indonesia will import around 340,000mt of boxed beef this year, so the Brazilian quota is not a significant amount. However, South East Asia analyst Ben Santoso points out 'price matters' to Indonesia.

And while there currently are no technical protocols for the importation of feeder cattle from Brazil, should that be the next step, it will also matter to Australia.

Indonesia is by far Australia's largest live cattle market, with 658,500 head sent for the year-to-July of the total 850,000-odd exported.

Rabobank reports Australian feeder prices in Indonesia have tracked close to the five-year average for the first half of 2019 and below prices of the previous three years. Prices in early August 2019 have increased, to $A 2.75 to $3.10 a kilogram liveweight, but remain in line with the five-year average, with the lower Australian dollar helping to compensate.

Mr Santoso said the lower prices helped to boost shipments to Indonesia. Volume picked up considerably in March - up 62 per cent year-on-year - and again in May as feedlots were able to record positive margins based on local slaughter steer prices.

READ ALSO: Live cattle shipments soar

Strong domestic demand is supporting beef retail prices in Indonesia, with June 2019 prices at a record high.

"Over the past two years, the government has boosted its payments to civil servants, which had some trickle-down effect on purchasing power," Mr Santoso explained.

"Arrivals of Indian frozen carabeef have also dwindled since May. This helped to shift demand towards local cattle, including Australian steers from feedlots, for the peak demand season."

The Indian carabeef gray channels into China have been curbed since November and that has led to reduced economies of scale for India, necessitating higher prices.

Provided there are no significant jumps in import quotas from either India or Brazil, Rabonbank believes Indonesian beef prices would likely stay at current levels.

If Indonesia diversified its feeder origin to include Brazil, it could address some of its supply, price and import quota concerns, Mr Santoso said.

Lower availability from Australia in the second half of 2019 is expected.

Mr Santoso said nothing more would be known (on the Brazilian feeder import topic) until the new cabinet takes office in Indonesia in October.

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