February 18, 2015 / 7:55 AM / in 4 years

After Japan poultry deal, Indonesia sets sights on more Asian buyers

* Japan ended Indonesia imports about 10 yrs ago on bird-flu worry

* Restart could be seen as seal of approval for Indonesia chicken

* Indonesia wants to break into regional poultry markets

By Michael Taylor

JAKARTA, Feb 18 (Reuters) - Indonesian poultry suppliers are weeks away from making their first exports of processed chicken to Japan in a decade, an endorsement of quality that will boost the Southeast Asian nation’s push into a regional market dominated by Thailand.

That is good news for global commodities giant Cargill Inc and Indonesian food group, PT Indofood Sukses Makmur Tbk, which have announced plans to invest several hundred million dollars in Indonesia’s poultry sector, aiming to tap a chunk of Asia’s export potential, as well as strong domestic growth.

Japan cut off Indonesian imports around 10 years ago over avian-flu concerns, but agreed to a resumption after a visit by trade delegates to updated facilities on Java island last summer, said Nurlaila Nur Muhamad, director of agriculture and forestry product exports at Indonesia’s trade ministry.

“The first Japan poultry shipment is now imminent,” she told Reuters. “We have a chance at exporting to other countries, not only Japan ... The first choice is Asia.”

Hit by scares over chicken meat safety in 2014, Japan was open to further diversifying its poultry supplies beyond China and Thailand, signing an agreement with Indonesia in late August that is expected to be worth up to $200 million a year. Japan’s total annual poultry imports were worth 150 billion yen ($1.3 billion) in 2014.

In 2003, before the ban on shipments, Indonesian cargoes accounted for less than 1 percent of the total value of Japan’s poultry imports.

As Japanese buyers are known for their strict quality controls, industry sources said the move could be seen a seal of approval for Indonesian chicken, stoking its potential to penetrate other Asian markets. The country’s poultry exports are currently negligible.

Japanese government officials confirmed that Indonesian shipments had been given the green light, but were unsure when they would begin. They also noted that fresh meat was not included.

Any boost to overseas demand for Indonesian goods would be welcomed by the new government of President Joko Widodo, after Southeast Asia’s largest economy got off to a weak start to the year with overall exports in January falling more sharply than expected.


Currently worth more than $4 billion annually, Indonesia’s domestic poultry sector also has plenty of potential to grow as the world’s biggest Muslim population eats more meat as the economy expands. Annual per capita consumption currently stands at just 7 kg, way behind neighbours Malaysia at 39 kg and Brunei at 48 kg.

“The main reason why Indonesian poultry is very attractive is simply because it’s the largest Muslim country - everybody eats chicken here and they don’t eat pork,” said Henry Wibowo, a Citigroup analyst in Indonesia.

Indonesians are seen eating more chickens this year than in 2014, according to analysts, with inflationary pressures easing after a decision to remove price controls allowed fuel prices to fall.

That will help boost chicken sales at local companies like PT Japfa Comfeed Indonesia, PT Malindo Feedmill Tbk and PT Charoen Pokphand Indonesia Tbk.


But industry specialists note it will take time for the country to emerge as a regional powerhouse akin to Thailand, which has benefitted from 30 years of joint government-private collaboration.

At home, the industry will have to develop consumer tastes for end-products like nuggets and sausages, which offer higher margins than the whole birds currently favoured at wet markets, analysts said.

The industry will also need to lower costs, push for high sanitary standards and allow inspections acceptable to international buyers.

“It is not going to be so easy,” said Joachim Otte, a livestock policy officer at the U.N.’s Food and Agriculture Organisation in Bangkok.

“They have so much domestic demand that needs to be satisfied which is much easier. You might take the international market as an additional benefit or bonus.” (Additional rpeorting by Dennys Kapa in Jakarta and Yuka Obayashi in Tokyo; Editing by Gavin Maguire and Joseph Radford)

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