Indonesia's beef self-sufficiency: Take a leaf from palm oil industry

Indonesia's beef self-sufficiency: Take a leaf from palm oil industry
Beef Rendang at Seribu Sari Restaurant.

FORMER Australian cattle station manager Michael Sheehy has some singular advice for the Indonesian government if it wants to achieve self-sufficiency in beef: Follow the model of the booming palm oil industry and put cattle raising in corporate hands.

As with most of Indonesia's agriculture, the livestock industry is largely confined to low- technology operations - backyard feedlots that mean a higher cost of production and higher prices for consumers as a result.

The Indonesian government has used tariffs and quotas to protect local farmers from international competition. This is a short-term measure which, judging by the current beef price which once reached more than 100,000 rupiah (S$11) per kilogram, is clearly not working and does nothing to encourage greater productivity.

Indeed, Jakarta's recent decision to scrap quotas for live cattle imports is a belated admission that self-sufficiency at this point is nothing more than an illusion and that a new approach is needed if it is ever to be achieved.

Breeding programmes have failed miserably. In fact, as part of the backlash against Canberra's brief suspension of the cattle trade in 2011, the government even rejected thousands of imported breeders because they didn't have pedigree certificates.

Mr Sheehy is now the chief operating officer of Jakarta-based Natural Resources Indonesia. His exhaustively researched ideas fit well with those of President Susilo Bambang Yudhoyono, who recently called on Australian beef producers to invest in cattle ranches in Indonesia.

The Indonesian Cabinet recently approved a plan to buy 1.5 million ha of northern Australian grazing land. But that size of property will sustain only about 10,000 cattle, a mere drop in the bucket given the country's ever-growing appetite for beef.

Mr Sheehy says the challenge and opportunity in Indonesia is to create a large-scale corporate model, where local businessmen must be ready to invest in land and to take a speculative punt on a new enterprise, with Australian and Singaporean partners.

Mr Sheehy's model anticipates a ranch of about 50,000ha, valued at no more than US$25 million (S$31 million), and a matching number of cattle, with ownership in a Singapore-based holding company relative to the value of either the land or the cattle.

Land title and security will be huge issues. But Mr Sheehy maintains that the potential is there, particularly in isolated regions where there are millions of hectares of cut-over forest land that has never been developed for agriculture or livestock.

The Australian joint-venture partner or partners would provide the herd, initially made up of two to three-year-old breeders and weighing about 300kg.

The stock is readily available. In May, Queensland farmers offered to donate 100,000 cattle to cover the beef shortfall in Indonesia and to alleviate the grazing pressure on drought-stricken stations in Australia.

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