Dairy cooperatives ready for free trade

Dairy cooperatives ready for free trade

JAKARTA (JP): Indonesian dairy cooperatives, which produce
most of the country's fresh milk, are optimistic local dairy
farmers will survive when they must compete with foreign
producers in 2005.

Union of Dairy Cooperatives of Indonesia secretary general
Salim Al Bakry said yesterday dairy farmers would survive in the
free-trade era because their milk was as cheap and as good as
imported milk.

"Our farmers will survive without government protection," he
said.

Indonesia protects dairy farmers by restricting milk imports
through an import ratio that has operated since 1982 and is
reviewed every half year.

The current ratio is 1:1.7. This mean milk processors are
allowed to import the equivalent of 1.7 liters of fresh milk for
every liter of fresh milk they buy locally.

In 1995 Indonesia agreed to revoke the import ratio by 2005.
It did this at a meeting in Geneva where New Zealand, which is
Indonesia's biggest milk supplier, represented other milk
exporters.

At this meeting Indonesia and the exporters agreed to stop
subsidizing dairy farmers the same year.

Salim said Indonesian fresh milk cost Rp 700 (29 US cents) a
kilogram, while imported milk cost between Rp 550 and Rp 600 a
kilogram.

He said the Indonesian milk price rose 5 percent a year, while
the price of imported milk rose at the same rate because of the
dollar's appreciation against rupiah.

By 2005, the price of imported milk would jump more than 5
percent after government subsidies ended, he said.

The price of Indonesian fresh milk would remain stable because
local dairy farmers only received small subsidies, if any, from
the government, he said.

"European countries give a subsidy to their farmers. New
Zealand and Australia also subsidize their dairy farmers,
although they don't acknowledge it," he said.

He said New Zealand and Australia did this by providing cheap
land.

Indonesian dairy farmers got cheap cooperative credit at 14
percent a year, but this was still higher than commercial
interest rates in exporting countries, he said.

"Many of our farmers have even taken credit at commercial
rates of 18 and 23 percent," he said.

The Union of Dairy Cooperatives of Indonesia has about 80,000
members.

Salim said foreign milk producers had a comparative advantage
over Indonesian dairy farmers because their cattle grazed on
farms while Indonesian cattle were lot fed which costs more.

Dairy farming is concentrated in Java where Indonesia's milk
processors are located but there is no room for open grazing.

But Salim said Indonesia had comparative advantages over
Western countries in that it had cheaper labor.

He said Indonesia's dairy cooperatives did not fear for their
future market because domestic milk consumption was rising at an
average of 12.8 percent a year.

Ministry of Agriculture figures show domestic fresh milk
consumption for the first half of the year will reach 770,360
tons. Domestic suppliers will supply 200,000 tons of this
including 161,995 tons from dairy cooperatives. The remaining
570,360 tons will be imported.

The union estimates national fresh milk consumption will reach
about 2 million tons. Domestic suppliers will produce 579,400
tons, and 1.4 million tons will be imported. (jsk)