109th Edition: Jan 2023
- Ross Ainsworth has retired (again) to enjoy life from the beach in Bali
- Competition in Indonesia intensifies with 11 more plants approved for Brazil
- Vietnam has engaged in a serious ant-graft crackdown with anecdotally high spending over Tet
After more than 9 years of writing this report Dr Ross Ainsworth has re-entered retirement. He will continue to write the occasional article but has made a commitment to enjoy the Balinese beaches. Over the last 9 years Ross has provided many insights to the industry, most notably in 2015 when he predicted that prices would reach over $4 liveweight when they were only at $2.70. I would like to sincerely thank Ross on behalf of those reading these articles and I will do my best to meet his standards but also bring some of my own energy and interest into the report. Feedback is always welcome and well received.
With a 3 month break in reports and a northern wet season slowing down trade there is a bit to catch up on. For those investing in beef and cattle (including beyond live export) in Southern Asia please contact me, I would love to tell your story email@example.com .
Indonesia : Steers AUD $5.18 / kg live weight (Rp10,560 = 1AUD)
Slaughter cattle prices into abattoirs have risen slightly over the last two months to 53,400 Rb (AUD $5.18) per kg live weight in local currency terms. This hasn’t been enough to change the outlook in the market and the general feeling in the market is still very subdued at the current price. The previously reported ample supply of frozen Indian buffalo meat (IBM) is still available at around 105,000 Rb/kg ($10) with relative beef prices at 136,000 Rb/kg ($13) in wet markets and 176 Rb/kg ($16.83) in supermarkets. The differences in price from Ross’s article in Nov are likely due to the change in sources and not due to changes in the market itself.
Concerning for Australia is the increase in beef export plant registrations from Brazil. 11 new meat processing plants have been approved for export including Marfrig Global Foods and Minerva who are the second and third largest processors in Brazil respectively. Meat exports from Brazil have been open since 2020 and while they have only taken 3% of the market to date, I expect the new approvals will likely signal greater stability in availability and price of Brazilian meat and a real threat for direct competition with much of the Australian frozen product and live cattle entering the market. Brazil have been very actively pushing into the region including repeated bilateral trade delegations in many Southeast Asian countries beyond Indonesia. The potential threat has been reiterated by President Jokowi who has requested an immediate increase in meat imports to meet domestic needs. While Indonesia will always look to limit the impact on their domestic production, any government interference creates instability in a country while commercial companies adjust to product availability and cost.
Update to the FMD and LSD situation. There is currently a new wave of FMD infections going through East and Central Java where there is a larger cattle industry. As of writing there has been over 11.8mil doses of the vaccine administered, note that is not the total number of animals vaccinated. The high rate of vaccination in East Java is contributing to fewer new infections and despite the current wave the disease outbreak is relatively under control.
For Australian cattle in Indonesian feedlots there are various training and support programs ongoing. Ausvet are running a program jointly funded by MLA and the Australian Government. You can read more here about their education and support programs. Of the 113 active feedlots in Indonesia in 2022, many have already had some form of outbreak in their feedlot. From what I have seen in the remainder of Asia, the responsibility for protecting Australian livestock in feedlots will fall on the feedlots themselves. We have seen in other countries that those with good biosecurity and consistent vaccination programs with a buffer zone around their feedlot have few future outbreaks. As with all farming operations the conditions and practices, and therefore risk, in each feedlot and supply chain in Indonesia will differ significantly.
Data on infections and vaccination rates for FMD in Indonesia is freely available through the government site https://crisiscenterpmk.ditjenpkh.pertanian.go.id/?l=en
LSD on the other hand is not under control as reports indicate that it continues to spread through Central Java. Despite LSD landing in Indonesia 2 months before FMD, FMD took the local and international stage with more gusto and so the reaction to LSD has been slower. As has the vaccination programs, with reports of distributors having trouble getting vaccine into the country.
LSD mostly impacts weak, pregnant cattle, and dairy cattle productivity. You can see a recent photo of cattle with infection below. It causes fever and lumps on the skin which are itchy resulting in further weight loss and potentially death. The further economic impact of LSD infection is that the hides and underlying tissue is damaged. Abattoirs are less likely to take LSD infected animals as they have little salable meat (they are skinny anyway) and the damaged hides have no value. For the weakest animals this results in emergency slaughter and disposal. All other infected cattle are generally held onto, which costs money in feed, and increases the viral load in the environment. Despite being spread by a flying insect, movement of infected livestock continues to be a major route for the rapid spread of the virus in the country. There are currently no reported cases of LSD in Bali but it is a “when not if” situation now that monsoon season is in full swing and the prevailing winds are blowing west to east.
Cattle in Central Java infected by LSD. Photo taken from video.
The KM Camara Nusantara 2 has made its maiden voyage in Indonesia, it has the ability to ship 550 head of cattle between islands in Indonesia and is part of wider plans to connect production areas with consumer markets. One maiden voyage does not guarantee the continued commercial operation of these programs in Asia so we will continue to monitor its progress. But as we have already established, FMD and LSD have been moving throughout Asia mainly because of livestock movement activities. So there is now a new threat that may speed up the movement of especially LSD to the far eastern islands of Indonesia and into Timour Leste.
Picture of KM Camara Nusantara 2 that transports livestock to various parts of Indonesia. (ANTARA/HO-Transportation Ministry/rst)
The key ports (starred points) for the vessels designed to be part of a wider “sea highway program” to link consumer and production centres. Darwin can be seen on the bottom right of the map.
Vietnam : Steers AUD $5.04 (16,619 VND = 1AUD$)
The end of January marked the lunar new year called “Tet” in Vietnam. Unlike the similar festivals in China, Vietnam now enters the Year of the Cat so don’t make the same mistake I did and send rabbit emojis to all your clients or friends. Similar to China, Tet is marked by long holidays, increased consumption, lots of gatherings with family and friends, and many people travel back to rural villages. The Vietnamese are excited to embrace a new year free of lockdowns and restrictions and it is reported that spending increased over this Tet holiday with anecdotal reports that daily slaughter numbers more than doubled in most key abattoirs. Climbing inflation and the rising costs of consumer goods remain top of mind for most Vietnamese consumers who still have plenty of concerns going into 2023.
Old quarter Hanoi, Vietnam. Life has returned to normal in Vietnam with people getting ready for the Tet celebrations.
From a cattle market perspective the price into abattoirs is sitting at 82,000 VND (AUD $5.04) and 85,000 VND (AUD $5.22) for Australian bulls and steers respectively which is similar to the price previously reported by Ross in November. Landed slaughter steer prices are about CIF AUD – $4.76-$5.04 (USD 3.4-3.6).
The price of knuckle wholesale is currently 200,000 VND/kg in traditional markets and 286,000 VND/kg in modern retail. With similar imported frozen products, the wholesale price is 170,000 VND/kg. So while there is still a significant volume market for locally processed products (in Vietnamese abattoirs) it is likely customers will continue to shift to imported secondary cuts as they are cheaper. The lack of competitiveness of Australian cattle due to price impacted trade volumes in 2022 and even with the current price corrections there is still limited demand for imported Australian cattle at the current prices. That said there remain niche opportunities for Australian cattle with strategic investments in value adding and higher quality beef to meet the needs of specific clients if investment comes with it. The lack of infrastructure and regulated production quality systems will continue to be the barrier to capturing these opportunities.
Outside the Australian trade of note is the Vietnamese crackdown on the use of Salbutamol in animal feeds. Salbutamol is a beta 2 agonist and improves lean meat yield, but can be toxic to humans in high doses and is illegal to use in Asia. Despite this it is commonly used throughout Asia as abattoirs prefer lean meat and so it is an important sales tool for Thai, Laos and Cambodian cattle moving into Vietnam. Regular testing of meat and animal feed is now taking place by the Vietnamese government. This crackdown has then exposed the corruption at border checkpoints between Laos and Vietnam and seems so now it is part of the wider anti-corruption crackdown. The Laos Vietnam border remains closed to movement of cattle and as a consequence there is currently a low availability of regional cattle in the market. Thai bulls are usually the main competition for Australian cattle and are currently being sold at 85,000 VND and Steers for 75,000 VND.
Politically, Vietnam is undergoing an anti-graft crackdown and purge. The President and two Deputy Prime Ministers have resigned in the last two months and hundreds of businessmen have been implicated in several scandals from COVID-19 to large property developers and it is likely that many more people will be implicated. The long term impact of the crackdown will likely be positive however there has already been some short term disruptions including freezing of bank lending and a halt to government related projects while everyone is in damage control and risk management. However the Vietnamese saying “When hitting the mouse, protect the vase (Danh chuot giu binh)” rings true. The Vietnamese have been clear that for international trade there will be minimal disruption. However if your clients are associated with the Vietnamese government or have large investments in property developments then it is probably wise to watch things closely.
Rain has hit the north and expectedly slowed down exports with prices in Darwin at $4.40 for 280-380kg feeder steers, $4.10 for heifers, $4.20 for medium steers, $4.00 for heavy steers over 450kg and cows are $3.00.
We have seen two shipments out the Darwin in January to Indonesia totally 5,500 head. This included some top end buffalo to get 2023 off the blocks.
The wet season in Australia’s North generally spans from November to April and it is difficult to get cattle to the market during this time. We have seen the impact of that in the Kimberly this year with massive rains and destruction of transport routes across the region.
The CSIRO has done some modelling on the weather and after three years of consecutive above average rainfall with consecutive La Niña years, it will be worth watching the weather predictions over the next 12 months with a potential El Niño and much drier conditions by the end of 2023. Even if this eventuates it is unlikely to impact prices or availability in the north. It is too early to see what the impact will be on cattle numbers from the recent flooding events in the Katherine region.
For those wanting a more comprehensive breakdown of cattle predictions for 2023+ MLA has just released their 2023 cattle industry projections.
CY2022 – Trade to South East Asia Cattle (Buffalo only)
|Total||Indonesia||Vietnam||All other SEA|
|Darwin 2022||236,558||210,702 (7,314)||8,993||16,863 (3,462)|
2022 CY Figures for live export trade to Southern Asia (credit: DAFF)
China : AUD $7.84 / kg live weight (RMB 4.69 = 1AUD$)
Chinese New Year (CNY) is now over after many fireworks. The easing of conditions before CNY will mean that there are plenty of people travelling home to the countryside to visit family in small villages where old people are not well vaccinated. The world will be watching to see the impact of China reopening for travel and trade.
For Southern Asia, the impact of China opening is that the land borders between Vietnam and Laos and China have been opened with no testing requirements. This is expected to boost trade in the region that has been limited by border closures.
For the cattle industry it is not clear the impact of this on official and unofficial trade but it is my expectation that the unofficial trade will still be limited for some time. There is limited talk from Laos about the official cattle trade route, although I expect those conversations to increase in the coming months.
On Jan 8 thousands of Chinese citizens queued up at land borders to enter China for the first time in 3 years.
China prices for beef prices have had minimal change in Shanghai and Beijing in Jan to 96-102 RMB in wet markets and 128-132 RMB in supermarkets. We have also been able to get beef wholesale prices at a local market in Shanghai of 94.0 RMB. Live cattle prices have risen to 36.8 RMB/kg liveweight (AUD 7.84) mostly on the back of changing currency conversion rates.
Philippines : Slaughter Cattle AUD $3.47 / kg (Peso 37.5 to 1AUD$)
There has been no change in the price of slaughter cattle since November P.130/kg with the only AUD change due to exchange rates.
No change in other prices in Philippines to report with knuckle prices in Mindanao wet market at P.560.00/kilo and supermarket P.600.00/kilo.
ASF and now avian influenza remains a problem across the country. Chicken prices have increased significantly since last report to P.198.00 – P.213.00 / kg for non branded and Magnolia brand respectively.
Thailand : Slaughter cattle AUD $4.10 (Tb 23.13 to AUD1$)
Thailand prices for cattle and beef have remained stable over the period although the opening of trade with China remains a prospect for movement of both cattle and beef. Thailand does not share a border with China and so either uses a river system to transport local cattle via barges (technically the Myanmar and Laos border) or into Laos with trucks and across the north western border crossings.
As Ross noted in his November report, several influential traders were arrested last year for smuggling cattle across the border during COVID closures. It is not clear if these unofficial border crossings will resume and to what extent.
The other impact for Thailand is the crackdown on use of Salbutamol in the livestock entering into Vietnam. The Thai cattle, especially in Eastern Thailand, are looking for alternative markets to sell cattle that would have normally entered Vietnam. Laos and the trade into China may be the beneficiaries.
Singapore – Paperless trade begins
We don’t get to report much on Singapore in this report given that when it comes to livestock they only have about 90 dairy cows, a goat dairy farm, a daily pig deliver from an Indonesian island and some Australian imported sheep for Korban each year.
On the 31 Jan 2023, Australia and Singapore committed to paperless trading with the use of electronic export certification (eCert). This new process should mean faster export documentation and easier access to Singapore’s markets for Australian meat exporters and the ability for Australian companies wanting to leverage from distribution and re-export out of Singapore. The transition to paperless trading is part of the comprehensive framework established through the Digital Economy Agreement.
There will be a period of adjustment and refinement with both electronic and paper documents accepted for the time being. It is anticipated that by about April there will be clearer timeframes for the transition to complete paperless trade.
DAFF and AMIC are working with the Singaporean counterparts to make sure that the transition is as seamless for business as possible. The DAFF media release can be found here.
One thought on “SE Asia Report: Indonesian beef market under further pressure / Lunar New Year celebrations”
Congratulations on your retirement Ross. Hope it is easy and lasts a long time.