Aussie cattle exporters watch RI

Aussie cattle exporters watch RI

MELBOURNE (Reuters): Australia's live cattle exporters are closely watching Indonesian politics as turmoil surrounding the future of President Abdurrahman Wahid dampens hopes for a surge in trade this year.

Exports to Indonesia have been recovering steadily since the Asia crisis-inspired slump in 1997, and had been expected to increase this year on the 297,000 heads of cattle sold in 2000.

However, growing political tensions have pushed the rupiah to near three-year lows against the U.S. dollar in recent months to its current level around 11,000, driving up the price for importers and cutting export margins.

Indonesia's top legislative assembly will hold an impeachment hearing against Wahid during a special session from Aug. 1 over his erratic 20-month rule and two financial scandals.

"Everyone expected really big things this year in 2001 and it certainly started OK," said Northern Territory Livestock Exporters Association chief executive Patrick Underwood.

"But there have been a couple of things that have slowed the trade down, one of them being the political situation in Indonesia," he said.

Another factor has been a dive in exports to the Philippines where there has been a slump in beef consumption due to publicity about international problems with BSE (mad cow disease) and foot and mouth disease (FMD). Currency weakness and strong cattle prices are also constraining exports.

Australia's live cattle export trade took off in the 1990s as booming Southeast Asian economies in the early part of the decade helped fuel consumer beef demand.

Indonesia alone promised to become a market bonanza, importing more than 400,000 cattle in 1997 before the Asia crisis struck, slashing imports the next year to just 40,000.

At its peak in 1997, Australia was exporting 948,000 live cattle, with Indonesia and the Philippines the major destinations.

Exports recovered by 2000 to 895,762, worth A$480 million (US$245 million), and the industry was hoping to come close to the one million mark in 2001, the Australian Livestock Export Corp said.

However the latest available figures for January to April show exports running about 30,000 behind last year.

The good news comes from Egypt and the Middle East where mad cow disease and FMD worries have shored-up exports, due to concerns about European cattle.

Darwin-based South East Asian Foods (SEAF) said it had been able to maintain shipments by cutting costs at Indonesian feedlots, offsetting the weak rupiah and high Australian cattle prices.

SEAF merged this year with Jakarta-based Santosa Agrindo, which has Indonesian feedlots, an abattoir and processing plants for its own brands, providing vertical integration benefits.

"There is no margin left in slaughter animals sold straight off the boat," SEAF live export manager Bernie Brosnan said.

The live cattle trade has transformed the Northern Territory cattle industry, with Darwin just five sailing days from Jakarta, providing a new market for producers sometimes beyond the reach of Australia's southern and eastern markets.

Producers have focused on breeding Brahman cattle, which are tick resistant and better suited to tropical conditions, compared to the European breeds which dominate most of Australia's herds.

Exports from Darwin to Indonesia reached 69,379 head for the first half of 2001, compared to 66,415 head a year ago, reflecting a flattening of demand.

But Underwood forecast Indonesian imports of live cattle could still rise sharply if the economic and political situation allowed the rupiah to strengthen.

"Indonesia showed in 1997 that it can take enormous amounts of cattle. When the dust settles Indonesia is quite capable of taking five, six, seven hundred thousand cattle from Australia," he said.

"If the rupiah dropped below 10,000 there would be boats roaring out of the harbor."