Indonesia has the largest population in Southeast Asia with 253 million people, and a growth rate of 1.3% between 2010 and 2014. The proportion of the urban population has increased from 30% in 1990 to 54% in 2014 (World Bank Database). The 1997 Asian Financial Crisis bought about an economic shock and heavy depreciation of the Rupiah. Amongst other effects, beef and cattle imports crashed, while farmers capitalised on high prices by selling cattle. Since 2000, Indonesia has enjoyed economic stability and average GDP growth of 5.6% (but has declined over the last year). The GNI per capita in 2013 was $3,650, making it a low to middle income country (UNDP). Poverty levels have decreased to 16% (at $1.25 per day) but almost 50% of the population live on $2 per day, with increasing levels of inequality. Economic growth is largely confined to Java and Bali (and extraction in Sumatra and Kalimantan). The share of agriculture in GDP has remained steady at around 14% since 2005, of which livestock makes up 1.8%. With the exception of fisheries, livestock has grown faster than other agricultural sectors (including plantations). Without a growing manufacturing base, job creation in Indonesia has largely been in the informal agriculture and service sectors (Henstridge et al., 2013). Nearly 4.2 million farmers raise livestock in Indonesia, 1.98 million of which are in East Java (DGLAHS, 2011).

Thus, sustained economic growth and urbanisation in Indonesia has had several effects. Demand for beef has increased (see Section 9). However, unlike China, economic growth has not provided large scale opportunities for farmers for work migration or manufacturing, especially in outlying provinces, but also in many parts of rural Java and Sumatra.² Thus, opportunity costs of labour for most farmers engaged in cattle production are low, which impacts on incentives for cattle production and downstream activities.

² Deblitz et al. (2011) show that when opportunity costs of labour, land and capital are taken into account, producers in NTT and NTB are more profitable (and therefore competitive) than producers in Sulawesi. Rutherford et al. (2004) produce similar findings in the cases of Sumbawa (less developed, more extensive systems) compared to Lombok (more developed, more intensive systems).

Production indicators for the Indonesian cattle and beef industry (Figure 1) are drawn from the Director General of Livestock and Animal Health Services (DGLAHS) which collects cattle production data on an annual basis from reports submitted by local government offices responsible for livestock services. Statistics reported by DGLAHS are equivalent to those reported in FAOStat for cattle production and cattle meat production.

Figure 1. Production trends and policies in the Indonesian beef industry, 2001-2013.

Source: Directorate General of Livestock and Animal Health services (various years)

The data suggest that cattle numbers increased by an average of 5.3% per year in the 1980s, but slowed to 0.4% in the 1990s, partly because of the Asian Financial Crisis. With economic recovery in the 2000s, beef consumption increased and cattle numbers grew at 2.3%. These rates are widely thought to be below potential as cattle productivity is low and can be increased by smallholders adopting simple production and management practices. There is also thought to be potential to more fully utilise plantation residues (e.g. in Sumatra), crops residues (e.g. in Java) and pastures in provinces like Nusa Tenggara Barat (NTB) and Nusa Tenggara Timur (NTT). There is also widespread concern about the slaughter of productive females especially in periods of rising cattle prices.

In developing industry policy, Indonesian policy-makers were working off data from the last agricultural census of 2003. In 2011 the Ministry of Agriculture and the Central Statistics Agency conducted the national bovine census, called the Data Collection of Beef Cattle, Dairy Cattle and Water Buffalo (PSPK) which found that the national herd had already reached 14.8 million head, well above the figure used in annual reporting (12.6 million head). Based on these numbers, projections for 2013 and 2014 were increased to 16 and 16.8 million head. However a broader agricultural census was conducted in 2013, which found the number was dramatically lower at 12.6 million head in 2013 (see Figure 1).

Slaughter statistics used in this section are derived from the DGLAHS, which are higher than those of FAO or Indonesian Central Statics Agency (BPS). DGLAHS slaughter figures derive from reports from staff of slaughterhouses and from Dinas officials who check slaughter based on interaction with village leaders, consumption patterns and fee and tax collection. However, they are not able to report on all local-level slaughter activity and uncertified slaughterers. Statistics collected in NTT and NTB and through several studies (e.g. in Mataram City, Hermansyah and Mastur, 2008) suggested that around 25% of all cattle are slaughtered in uncertified plants (but this can be as high as 41% in some places). While not discernible in Figure 7.11, slaughter numbers fluctuate significantly year to year. They increased at an average rate of 4.3% per year in the 1980s, 3.3% in the 1990s, 1.7% in the 2000s and 6% between 2011 and 2013.

Long term cattle meat production has increased broadly in line with slaughter numbers (1.4% in the 1980s, 2.9% in the 1990s, 2.4% in the 2000s and 5% between 2011 and 2013).

As discussed in more detail in Section 11, Indonesia imports large quantities of cattle and beef. Imports of live cattle reached a peak of 781,000 head in 2009 to constitute 6% of the Indonesian cattle herd (at heavier weights) and 38% of slaughter numbers. Live cattle imports dropped dramatically to just 305,000 in 2012 due to import restrictions. Beef imports also decreased over these years from 68,000 to 545,000 tonnes. Facing escalating prices and political pressures, government increased the quota allocation of live cattle sharply in 2014 to reach 730,000 head from Australia alone.

Table 1. Key industry indicators

Source: Directorate General of Livestock and Animal Health services (various years) and UNComtrade

Table 1 provides a summary of cattle and beef indicators in 2013 and annual compounded growth since 2001. The incorporation of additional data – on imported cattle and uncertified slaughter – leads to an alternative estimate of slaughter rate of 19% in 2013. However, using lower cattle numbers recorded in agricultural census, the turnoff rate would be much higher at 25%. Average carcass weights for domestic cattle have increased little over the period.