Beef Quota in Indonesia

Quota on Imported Beef: A problematic solution to achieve beef self-sufficiency in Indonesia[pic 1]

It was in 2010 when the Government of Indonesia (GoI) proclaimed to achieve meat self-sufficiency in 2014. Thus, GoI has begun to impose the quota on beef (both beef and cattle) importation to control the supply of imported meat to fill just enough gap of demand which cannot be met by domestic supply. This policy was implemented due to concern from local farmers that they cannot compete with imported meat, both from price and quality when importation reached its peaked in 2009. However, the policy tends to create more problem than a solution.  First, the self-sufficiency of meat did not achieve its intended goal in 2014, while the price of meat fluctuated uncontrollably due to lack of supply in the market and second, the government failed to provide affordable high protein food for the whole society. In this regard, this essay will argue that GoI should review its quota policy and put intention on more important goals, to achieve healthier population for the next generation.

The demand for meat and poultry products in Indonesia tends to increase every year, along with, steady growth of the economy and the rise of middle-level society.  The Indonesian National Bureau of Statistic (BPS) notes that meat consumption has increased from 1,525 kg per capita per year in 2000 to 2,6 kg per capita per year in 2015 (BPS, 2016).  It may be small compares to other countries, but it will require around 3.843.787 cows to produce 653.982 tons of meat to feed more than 200 million of total population (Ningsih, 2015).  However, the national supply cannot meet the high demand, since most of the breeding business mainly done by small-scale farmers. Moreover, the grassland in eastern Indonesia continues to decrease due to settlement

(Bappenas, 2016).  

Table 1. Beef Consumption and Deficit 2008-2015 (in thousand tons)

[pic 2]

Source: Ministry of Agriculture 2015

As illustrated in the Table 1 above, meat consumption rate increases every year with an average of 8,11%, while local supply could only meet 70% on average of the demand.  To fill the gap, GoI imports beef (meat and cattle), mostly from Australia and New Zealand.  As shown in graph 1 below, the volume of import continues to rise (except in 1998 when Indonesia was hit by Asian Financial Crisis) until reached its peak in 2008 and 2009.  The excessive imports have led to oversupply, so the price went down. As a consequence, traders refused to buy cattle from farmers which resulted in the price of cattle at the farm level decreases. In 2009, the conditions even more severe because the number of imported cattle rose again, which causing the price to crash. Many trades went bankrupt, and farmers began reluctantly to keep their cattle. As situation start to deteriorate, in 2010 GoI announced to achieve beef self-sufficiency on 2014 and implemented quota on beef imports, which caused the sharp decline of imports in the following year.  After 2010, the scarcity of meat continues and the prices rose significantly beginning from 1998 crisis until recently as shown in graph 2.

Graph. 1 Volume of Beef Import 1991-2012 [pic 3]

Source: Bappenas 2016

Graph 2. The progress of beef prices 1983-2015[pic 4]

Source: Bappenas & Ministry of Agriculture 2016

With the implementation of import restriction and to protect local farmers, the price beef in Indonesia is much higher than the price in the international market as shown in Table 2. The high margin rates also suggest that meat market in Indonesia being oligopolistic since there are more than 30 large companies suspected of cartel practices and face hefty fine (Idris, 2016).  This condition combined with the rise of fuel price and the celebration of two biggest religious festivals in Indonesia (Ramadan/Eid Fitr and Christmas) just keep adding more and more factors which at some point, meat become a luxury food that only small population can afford. Meanwhile, beef sufficiency program could not be achieved due to multi-dimensional challenges that seem to be the main culprit in Indonesia development program, namely, lack of soft and hard infrastructure, lack of quality of human resources and weak execution and enforcement.

Table 2.  Comparison of the price of beef between Indonesia and the world

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Source: Bappenas 2016

To conclude, what is happening with beef price fluctuation in Indonesia could be illustrated in 2 curves as shown below.  Curve 1 illustrates before the import restriction in 2010.  Since the price of world market was lower, the domestic price plummeted to Q1, and the local farmers can only supply on Q1, while demand increase to Q2.  Consumer get the greater surplus in the area of A and local farmers is the loser with the smaller area of B.  Although the producer getting a smaller surplus, its represents the amount of local producer who can produce efficiently and can compete with world prices.