Rabobank in business

8-5-2008 | Other news

Assuming basic food prices can be kept under control, Indonesia’s growth in population and incomes are setting the stage for even greater beef demand in a key Australian market, says a Rabobank report: Indonesian Beef and Live Cattle Market.

Senior Rabobank Food & Agribusiness Research and Advisory analyst, Wendy Voss says that prospective growth in the Indonesian market will be determined by population expansion, income growth, the cost of beef and cultural trends.

Population and income growth
Between now and 2015, the Indonesian population is forecast to grow by 27 million people. However, a rise in per capita incomes cannot guarantee an increase in meat consumption in developing countries, Voss said.

Household expenses
Most households in already developed countries spend 15 percent of their budgets on food. In contrast, Indonesians spend over 53 percent of their household incomes on food, with approximately one-quarter allotted for grains, such as rice, and cooking oil, which are staples for all households in Indonesia.

High cost of beef
“Beef is not a traditional staple in the Indonesian diet. With the price of beef three times higher than chicken, it is middle and higher income earners who are the major buyers of beef in Indonesia,” said Voss.

Strategies for rising food prices
“If basic commodity prices continue to rise, this could lead to reduced beef spending,” said Voss. 

“If the Indonesian government can reduce inflation while maintaining GDP growth, this should increase discretionary spending and thus encourage increased consumption of beef, through an overall increase in meat consumption and possible ‘trading up’ from chicken to beef by consumers,” Voss said.

Australian beef opportunities
While Australia remains in prime position to supply the forecast extra demand in the Indonesian market, factors outside of the Australian cattle industry’s control could have a negative impact on Australian live cattle sales to Indonesia.

 “The threat of lifting the ban on Indian buffalo meat and Brazilian beef and live cattle would open up the market to increased competition from lower-priced products,” said Voss.