High hopes for Indonesia red meat trade

Alliance Group leaders are confident access to beef markets in Indonesia will open up after a successful trade trip.

Chairman of the meat processor and exporter, Murray Taggart, has returned from a three-day trade trip with New Zealand officials, including Prime Minister John Key, to the Southeast Asian country with high hopes for the future of red meat exports.

Indonesia was previously Alliance Group’s third largest export market for beef, but product restrictions introduced in 2010/11 significantly dropped sales and continue to hamper business into the market.

Taggart said big progress appeared to have been made in negotiations for access to the market.

However, he did not see Indonesia returning to its previous export numbers in the short-term if trade restrictions were lifted, with exports to growing China growing in the years since.

‘‘Back then China wasn’t such a big beef market.’’

Restrictions on beef imports were originally imposed by the Indonesian Government because it wanted to become self-sufficient in producing beef for its population.

However, Taggart said Indonesia would never be able to produce enough beef to keep up with demand because of its population of 260.5 million.

New Zealand joined 14 other countries in taking action against Indonesia through the World Trade Organisation over its beef import restrictions and quotas.

Officials estimate that the trade barriers have cost the New Zealand’s beef sector between $500 million and $1 billion since 2011.

Since restrictions were put in place the demand for beef throughout the developing world had grown, Taggart said.

The difficulty of access to the Indonesian market had led to Alliance tending to allocate its beef products to countries where access was guaranteed, he said.

Access to the Indonesian market had been inconsistent, one month there would be access and the next there would not, he said.

‘‘We much prefer to spread our markets ... rather than having all our eggs in one basket.’’

However, if market access opened up into the Southeast Asia country, Taggart was confident the co-operative would be in a position to supply meat to increased demand.

Alliance Group has two plants approved for exports to Indonesia: Mataura for beef and Levin for beef and lamb.

Between 2000 to this year the cooperative exported mostly beef, offal, meat bone meal and a small quantity of lamb into the Indonesian market.

The opportunities to expand beef exports in Indonesia were threefold for Taggart, via traditional lower value beef, a rapidly growing high-end retail market and a chunk of the population becoming more affluent.

‘‘There’s a portion of the population that can afford to buy higher-end products.’’

If markets were to open up, Alliance would face competition from rival beef-producing nations.

Australia and the United States had previously been competition for beef exports into Indonesia, but if restrictions were to be lifted Taggart predicted Brazil would also be a competing supplier.

As well as other beef-producing nations, Indian buffalo meat was about to enter the market and was a less expensive option for protein, he said.

‘‘It’s not as if we get the place to ourselves, there are other competing protein sources.’’

The lamb market had traditionally been small in Indonesia.

While most of the country was Muslim, with high lamb consuming followers, living in a tropical climate there was not a significant domestic sheep flocking, meaning lamb was not the natural choice for a protein source, Taggart said.

Lamb uptake in Indonesia had been a slow burner, with most exports limited to small volumes of lamb racks for the food service sector, he said.

However, as more of the population became wealthier more people would be able to afford lamb, he said.

Alliance was working on growing the market through its long relationships with importers, he said.

‘‘It does take time for the population to adjust to eating sheepmeat.’’