IO – The Indonesian livestock subsector is undergoing a tough test. The COVID-19 pandemic has really hit a subsector that has a different path from other agricultural ones. The livestock subsector relies heavily on demand or consumer purchasing power, not just the dimensions of supply or production. In the literature, the development of the livestock subsector, which is driven by many aspects of community demand or income, has been named the “Animal Husbandry Revolution”. When people’s purchasing power drops significantly, the demand for livestock products also disappears.
This article analyzes the collapsing Indonesian Animal Husbandry Revolution. The poultry industry is teetering on disaster, trying to arise and withstand such heavy pressure. The beef economy is too heavy to seize the major opportunity from the increasing retail price of meat, because of the already complicated structural problems.
Livestock Economic Performance
The performance of the agricultural sector is generally quite good, even though the Indonesian economy is experiencing a recession. Based on the official release of Statistics Indonesia (BPS) on February 5, 2021, the agricultural sector will show positive growth of 1.75 percent in 2020, far above the macroeconomic growth recorded, at minus 2.07 percent. However, the livestock sub-sector contracted or grew negatively by 0.33 percent, because the price of chicken and eggs at the farmer level was very low. The livestock sub-sector is not able to create any significant added value, as if it is outside the character of the Animal Husbandry Revolution on which it is based.
Many small-scale breeders are concerned, because the average live-bird price in 2020 was reported to be only IDR19,400/kg, which was unable to cover production costs, especially day-old chicks (DOC) and medications, whose prices have skyrocketed. Meanwhile, the retail price of fresh chicken meat is currently holding up at IDR 33,700/kg. This also reflects the unresolved disruption of the logistics system and value chain during the Pandemic.
Poultry meat production in 2020 will reach 3.48 million tons, still above the consumption figure of 3.44 million tons. The initial balance of poultry in 2021 will be a surplus of 41 thousand tons, which will affect the economic dynamics of poultry. Poultry meat is a cheap source of protein and is increasingly affordable to the middle-lower class, is no longer a luxury item, and is one of the mainstays of meeting the protein needs and competitiveness of the nation. The consumption of poultry products currently has reached 70 percent of the total consumption of animal protein. National Socio-Economic Survey (Susenas) data shows that the average consumption of poultry meat is 6.97 kg/capita/year, much higher than the average consumption of beef at 1.8 kg/capita/year.
For large ruminants, the heavy dependence on imports of cattle and meat from Australia has also made it difficult to develop the beef value chain in the domestic market. Australia was hit by a severe drought and wildfires in 2019 that left large numbers of livestock dead. In 2020, massive floods hit and killed hundreds of thousands of cattle and damaged livestock in the Northern Territory. When Australia deliberately reduces live cattle exports, due to restocking or trying to restore its domestic stock, the Indonesian beef economy is disrupted. The beef stock has decreased dramatically and the retail price of beef is creeping upward.
Beef production in 2020 reached 422 thousand tons, while consumption has exceeded 500 thousand tons, so Indonesia has to rely on imports. Live cattle imports in 2020 will be around 700 thousand heads (equivalent to 122 thousand tons of meat), plus over 100 thousand tons of frozen meat. Live cattle
imports are carried out for cows weighing 250 kilograms or less to be fattened by beef cattle companies (feedlots). As a result of restocking in Australia, importers of Indonesian cattle have to pay a price of US$ 3.9 per kilogram of feeder cattle, or the equivalent price of carcass meat of IDR 98,000/kg, which aroused tension in the market.
The retail price of domestic beef has skyrocketed from the end of 2020 to the beginning of 2021. The average retail price of beef on January 15 reached IDR 123,400/kg; in Aceh it even reached IDR 140,850/kg. The retail price per January 21, 2021, fell to IDR 122,850/kg, although in some places it was still above IDR 140,000/kg. The government must carry out mediation and coordination with beef actors or stakeholders until there is an agreed price for carcasses at IDR 94,000/kg. The price of meat as of January 29, 2021, has fallen to IDR 113,750/kg, although there is still an opportunity for price hikes ahead of Ramadan and Eid al-Fitr.
In the short term, the Government plans to open access to imports of cattle from Mexico, as one of the countries that are free from foot and mouth disease (FMD). However, bringing live cows from the East Coast of Mexico takes 45 days, because they first have to cross the Atlantic Ocean. It takes 26 days to import cattle from the West Coast of Mexico, although the potential for cattle production on the West Coast is not as large as on the East Coast. Besides, the Government also provides an import quota for State-Owned Enterprises (BUMN) for Food to import 100 thousand tons of frozen buffalo from India, to maintain the stability of domestic beef prices.
Animal Husbandry Innovations
The solution to the issue of importing live cattle import meat as outlined above may be useful to alleviate the problem for a moment, but it will not be able to solve more structural livestock economic problems. Indonesia needs innovations in the livestock subsector based on technological changes and changes in livestock development strategies that are more advanced and inclusive, because changes in the strategic environment are also moving fast.
First, restructure the poultry industry to increase governance and overall industry competitiveness. Its operations are partnerships between large industries and smallholder breeders, modern housing reform, access to funding for independent breeders and micro, small and medium enterprises (MSMEs), to improve production efficiency and value chains.
Second, increase productivity and improving the reproducibility of large ruminants. The method of the People’s Animal Husbandry Field School (SLPR) to improve the human resources of small-scale local breeders needs to be continued. They need to obtain adequate technical guidance, incentives, and economic facilitation. Adoption of artificial insemination technology, development of forage along with animal health aspects need to be encouraged.
Third, strengthen the livestock innovation ecosystem. Policy support is urgently needed to strengthen the livestock subsector, increase the allocation of research and development (R&D) funds, intensify communication of ABGC stakeholders (academics, government, business, and civil society) for the transformation from invention to innovation;
Fourth, improve the production incentive system and access to consumption. Focus can be directed to increase the competitiveness of the livestock subsector to become the host in their own country. The livestock subsector has been a contributor to the quality of Indonesia’s human resources, improved nutrition and reducing stunting of children under five, etc.