IN THE NEWS: On OCT 31, 2017
An Indonesian-based veterinary consultant has described the situation for live cattle importers and feedlotters in that country as "diabolical".
This year northern Australia has seen live cattle exports to Indonesia, Australia's number one live cattle destination, drop significantly.
High cattle prices in Australia, restrictions on prices of beef in Indonesia, and cheaper forms of protein on offer, have all contributed to the weakening demand.
Dr Ross Ainsworth said feedlots were currently struggling to make any money.
"Generally importers are in a loss-making situation and they are happy to admit that they are unable to make a profit under today's market conditions," he said.
"It costs close to $1 a kilogram to get cattle from Northern Australia into Indonesia, so if they cost $3.30 in Australia, which steers from Darwin to Indonesia have consistently made this year, they cost about $4.30 arrived here.
"Then, the feedlotting process [which] is a very efficient process [will see the cattle] put on another 150 kilograms at quite a low rate, but then [the feedlotters] have to sell that animal at $4 a kilogram, after buying it at $4.30.
"The [Indonesian] government has insisted that the feedlotters cannot put their price up.
"So unless you put on a huge amount of weight at an extremely low price you can't end up making a profit by selling it at a lower rate."
Dr Ainsworth said the risk was that some feedlots would be forced to close.
"I don't know what all of the losses are, but I am confident they are making losses and sooner or later businesses that continue to make losses are unable to be supported and must close down," he said.
"So in general terms that seems to be the logical outcome of all this from where I sit."
Indian buffalo meat halved demand for Aussie beef
Since the introduction of Indian buffalo meat in Indonesia late last year, demand for Australian beef has halved.
The Indonesian government allowed the importation of Indian buffalo meat as it looked for cheaper forms of protein.
This was despite a ruling by the nation's Constitutional Court that meat from countries prone to foot and mouth disease (FMD) could only be imported under emergency circumstances, which did not currently apply.
Dr Ross Ainsworth, who also writes the South-East Asian Beef Report, said within three to six months Indian buffalo had taken 50 per cent of the market for low-end product.
"The main figure we hear for Indian buffalo meat is $8 a kilogram, the Australian and local meat products sold fresh in the wet markets sells for about $12 a kilo," he said.
However, Dr Ainsworth remained confident Indian buffalo would not secure any more of the market share in Indonesia.
"It seems the Indian buffalo has sort of reached an equilibrium in the market and I see no reason why the Indonesian government would want to change that, so I think it will stay pretty much where it is now," he said.
In the meantime, Dr Ainsworth estimated there were currently about 170,000 head of cattle in Indonesian feedlots — about half the total carrying capacity for feedlots across the country.
But the question lurking over many feedlotters heads is where will those cattle currently on feed go?
"The owners of those cattle are pretty nervous that they may not be able to sell them when they are fat in November and December," Dr Ainsworth said.
"So all in all for the Australian export industry it is pretty grim because their customers are in a very weak position; for the importers it is more in the diabolical class because their enterprises are at serious risk of failing."