Total animal feed production in Indonesia is forecast to increase this year, buoyed up strong demand for aquafeeds, while the poultry sector is struggling with oversupply in the market and the recent return of avian flu.
With most feeds in Indonesia based on corn, it will come as good news to the industry that local production is expected to be higher in the year ahead than last year, according to the USDA Foreign Agricultural Service (FAS). It estimates that marketing year (MY) 2015-16 Indonesian corn production will increase to 9.4 million metric tons (mmt). The increase from 9.0 mmt for MY 2014-15 is due to higher corn plantings and more widespread use of hybrid corn varieties. Corn imports – set by the Indonesian government – are forecast to decline slightly to 3.0 mmt, supported by strong demand from the feed industry.
According to the Indonesian Feed Producers Association (APPI), in MY 2014-15, feed production was expected to increase by 10 percent to 16.4 mmt, compared with 14.9 mmt in calendar year (CY) 2014. In addition, production of aquaculture feed in 2015 is at 1.55 mmt. Feed consumption in MY 2014-15 was 16.0 mmt, plus 1.5 mmt of aquafeed. APPI forecasts that Indonesian feed consumption will increase by 8 percent to 17.3 mmt in MY 2015-16.
Of total land-based animal feed production, the poultry industry consumes around 83 percent, followed by aquaculture (11 percent) and cattle and swine feed (6 percent). Demand for aquafeeds is forecast to increase by 13 percent this year, the result of strong global demand from shrimp.
Indonesia’s animal feed industry
There are 84 feed mills operating in Indonesia, with new facilities due to come into production and expansion at existing mills expected to add a further 1.5 mmt capacity to bring the national total to 21 mmt, according to the FAS. Local experts report that facilities run at an average of 70-80 percent capacity.
Average feed composition, according to APPI, is 50 percent corn plus soybean meal (15-20 percent), corn gluten meal (3 percent), crude palm oil (2 percent), fish meal (5 percent), rice bran (15 percent), wheat pollard (8 percent), and premix (0.6 percent). There is heavy reliance on imported feed ingredients, particularly fish meal, soybean meal, rapeseed meal, corn gluten meal and vitamin-mineral additives. Up to 95 percent of corn is home-produced, but other locally grown feed materials are low in nutrition or poor quality or both. Indonesia imported 252,000 metric tons of distiller’s dried grain soluble (DDGS) in MY 2014-15, with the U.S. easily the leading supplier.
Based on this information, FAS forecasts MY 2015-16 corn feed consumption in Indonesia at 8.6 mmt, up from the previous estimate of 8.0 mmt. MY 2016-17 consumption is expected to increase to 9.0 mmt.
Corn consumption for food is declining slowly as consumers opt instead for rice- or wheat-based foods. The figure is estimated to be 4.1 mmt in MY 2016-17.
Challenges in the Indonesian poultry meat sector
The national poultry association puts the poultry population in 2016 at 3.224 billion broilers, 150 million layers and 24.8 million breeders.
Indonesia appears to have been in a situation of oversupply in the poultry meat market for some time, which has led to a dramatic decline in prices. Allegations of a cartel among the leading poultry integrators was investigated.
FAS considers that the current economic slowdown, weak rupiah (INR)-U.S. dollar exchange rate, and depressed consumer purchasing power will put a brake on the growth of poultry meat production and commercial poultry feed consumption this year.
There have been outbreaks of highly pathogenic avian influenza (HPAI) in recent weeks in backyard chickens and commercial layer farms in Jakarta and South Sulawesi. These have led to some flock culls but, as least so far, there have been no significant impacts on production or consumption of poultry meat.
An article in Jakarta Post a month ago included a call from anti-monopoly body for Indonesia’s large poultry integrators to be restricted to a single business activity in the sector in order to reduce the risk of cartels and the control of the sector by a few dominant players.
With production estimated at 50 percent more than demand, prices have collapsed. The price of live birds from farms in March was around INR9,000 (US$0.68) per kilo, which does not cover the average production cost of INR18,000. In February, the selling price had been around INR30,000 per kilo.
According to the General Director of Livestock at the agriculture ministry, the ministry and various poultry associations had agreed to a cull of 6 million parent birds to help re-balance the market. Around half this number were culled in 2015, but then there was a halt.
The chairman of the independent poultry breeders association said his members had not been the cause of the market glut and should not have to take part further in the cull, while a director of one of the large companies denied the existence of any cartel and confirmed that his firm had carried out the cull as agreed.