indonesia dairy industry development

INDONESIA DAIRY INDUSTRY DEVELOPMENT

Presented by: Dr. Ir. Arief Daryanto, MEc

Director, Graduate Program of Management and Business IPB and

Senior Lecturer, Department of Economics, FEM-IPB

Seminar on Update Dairy Industry, Food Review, June 21, 2012 IPB International Convention Center, Bogor

Presentation Outline : •  Introductory Remarks

•  Current Situation of Dairy Industry in Indonesia

•  Key Drivers for Dairy Development

•  Government Policies on Dairy Development

•  Concluding Remarks

Introductory Remarks

Checkoff Program: Got Milk?

Current Situation of Dairy Cow Industry in Indonesia

Figure 1. Current Worldwide Total Milk Consumption Per Capita

Table 1. Current Worldwide Total Milk Consumption: Where is Indonesia’s Position?

No Country Milk Consumption (000 tonnes)

2007 2006 2005 2004 2003 2002 2001

1 India 80,040.90 77,105.60 73,895.62 70,842.84 68,084.87 66,360.58 66,078.34

2 United States of America 78,342.86 76,342.48 76,896.32 76,007.52 76,421.70 76,331.76 74,753.57

3 China 38,354.33 35,848.09 31,218.86 26,834.22 21,719.60 17,334.36 14,282.55

4 Pakistan 27,542.69 26,653.65 25,018.76 24,305.15 23,668.84 22,978.51 22,344.13

5 Russian Federation 24,479.72 21,700.53 24,133.60 21,204.86 21,886.36 20,587.32 21,801.20

6 Brazil 23,691.08 23,286.69 22,522.93 21,435.39 20,615.03 20,845.08 19,329.97

7 Germany 20,358.63 19,961.48 20,370.81 19,845.03 21,003.56 20,667.02 19,559.32

8 France 16,075.18 15,956.66 15,982.35 16,157.00 16,396.35 16,747.95 16,227.70

9 Italy 15,187.07 15,654.63 15,537.77 14,921.00 14,781.81 15,090.79 14,756.08

10 United Kingdom 14,760.97 14,616.26 15,053.33 14,222.96 14,546.56 13,899.23 13,543.51

... ... ... ... ... ... ... ... ...

24 Australia 4,815.57 4,842.11 4,606.02 4,200.16 4,456.44 4,630.13 4,326.37

33 Indonesia 2,578.03 2,437.26 2,124.40 2,211.56 1,771.86 1,670.10 1,590.02

51 Thailand 1,505.94 1,611.85 1,676.88 1,963.93 1,553.05 1,286.34 1,274.76

65 Viet Nam 1,025.63 929.47 949.53 776.26 784.75 592.96 893.43

66 Malaysia 979.60 1,047.02 1,146.70 1,180.24 1,057.39 1,170.06 1,181.38

Table 2. Current Worldwide Total Milk Consumption (Excluding Butter) Per Capita: Where is Indonesia’s Position?

No Country Milk Consumption (kg/capita/yr)

2007 2006 2005 2004 2003 2002 2001

1 Finland 361.19 341.19 341.11 334.89 354.64 349.97 357.82

2 Sweden 355.86 370.5 368.44 370.27 379.1 375.55 362.23

3 Netherlands 320.15 331.18 345.35 340.1 325.81 328.14 336.73

4 Switzerland 315.78 311.59 301 302.49 309.91 306.92 298.28

5 Greece 314.69 303.6 270.83 261.1 267.58 260.37 244.23

6 Montenegro 305.87 304.87

7 Denmark 295.62 265.9 296.79 215.1 198.96 206.75 247.24

8 Albania 281.17 304.9 300.5 296.93 300.14 280.43 274.38

9 Lithuania 273.87 256.47 204.61 238.42 213.2 203.56 204.83

10 Romania 266.19 259.39 248.82 246.58 229.78 221.68 203.57

... ... ... ... ... ... ... ... ...

16 United States of America 253.8 249.73 254 253.51 257.38 259.62 256.89

98 Malaysia 36.89 40.12 44.74 46.88 42.78 48.25 49.7

141 Thailand 22.48 24.24 25.43 30.1 24.1 20.18 20.24

155 Viet Nam 11.91 10.92 11.29 9.35 9.58 7.33 11.2

157 Indonesia 11.48 10.98 9.69 10.22 8.29 7.92 7.64

158 Comoros 11.15 9.79 8.99 11.81 9.27 10.79 8.55

Figure 2. Current Worldwide Total Milk Production

Table 3. Current Worldwide Total Milk Production: Where is Indonesia’s Position?

No Country

Latest Available

Milk Production

(tonnes)

Year

%

Cow milk Buffalo milk Goat milk Sheep milk Camel milk

1 India 112,114,290 2009 40.26% 56.10% 3.67% 0% 0%

2 United States of America 85,859,400 2009 100% 0% 0% 0% 0%

3 China 39,946,410 2009 88.89% 7.51% 0.68% 2.88% 0.00%

4 Pakistan 34,362,000 2009 34.88% 62.92% 2.10% 0.10% 0%

5 Russian Federation 32,561,674 2009 99.28% 0% 0.72% 0% 0%

6 Brazil 29,255,768 2009 99.51% 0% 0.49% 0% 0%

7 Germany 27,972,367 2009 99.88% 0% 0.12% 0% 0%

8 France 24,217,730 2009 96.38% 0% 2.57% 1.10% 0%

9 New Zealand 15,400,000 2009 100% 0% 0% 0% 0%

10 United Kingdom 13,236,500 2009 100% 0% 0% 0% 0%

... ... ... ... ... ... ... ... ...

18 Australia 9,388,000 2009 100% 0% 0% 0% 0%

68 Indonesia 1,277,843 2009 69.00% 0% 21.60% 9.39% 0%

75 Thailand 840,691 2009 100% 0% 0% 0% 0%

104 Viet Nam 311,398 2009 89.34% 10.66% 0% 0% 0%

135 Malaysia 51,509 2009 79.31% 20.69% 0% 0% 0%

Figure 3. Geographical Variations of Farms

Source : IFCN Dairy Research Center 2011

Figure 4. Cost of Milk Production in 2010 (Average Sized Farms)


Milk Product * 1000 t

Cons. L per capita/year

Milk price Farmers US $/litre

Farmers share of cons price

Thailand 830 20 0.47 44 Indonesia 670 10 0.37 -- Malaysia 60 34 0.58 30 Vietnam 27 11 0.43 41 Philippines 14 14 0.54 38

Table 4. Production, Consumption and Price of Milk in Some Countries

Source : IFCN,2010 Source :IFCN, 2010

Table 5. Ownwership Structure and Number of Farmers Involved in Indonesia’s Milk Production

OWNERSHIP STRUCTURE

WEST JAVA CENTRAL JAVA EAST JAVA CATTLE FARMERS CATTLE FARMERS CATTLE FARMERS

102.630 25.263 94.320 25.234 122.315 37.286

1 - 3 Head 70,47% 72.354 19.717 66.496 19.388 86.232 28.013

4 - 6 Head 23,49% 24.118 4.692 22.165 5.037 28.744 8.281

Ø 6 Ekor 6,04% 6.158 854 5.697 809 7.399 992

Source : Munawar, GKSI 2010

Table 6. Dairy Cattle Population, 2007-2011, by Province, Number of Head

Dairy Cows Number

Dairy Cows (Percent)

Milk Production (Tonnes)

Milk Production (Percent)

East Java 296.262 49,6 536.458 57,9

Central Java 149.931 25,1 100.350 10,8

West Java 139.973 23,4 268.042 29,0

Other 10.963 1,8 20.925 2,3

TOTAL 597.129 100 925.775 100

GKSI

Table 7. Dairy Cows Population and Milk Output by Main Provinces, 2011*)

Source : Statistik Peternakan 2011 *) Preliminary Figures

Table 8. Fresh Milk Production 2005 – 2011, by Province, in tonnes

Source :www.ditjetnnak.go.id

Table 9. Milk Productivity by Major Provinces, 2009

Province

Dairy Cattle

Productive of Female (percent)

Productivity / head / year (Lt)

North Sumatera 67,69 2.040,00 West Sumatera 50,00 1.920,00 South Sumatera 88,71 2.521,75 Bengkulu 50,00 1.911,00 Lampung 50,00 1.620,00 Jakarta 88,54 2.032,83 West Java 66,93 3.891,45 Central Java 57,02 2.021,62 DI Yogyakarta 68,42 3.336,63 East Java 57,33 2.953,96 South Sulawesi 58,84 2.284,80 Indonesia 60,70 3.069,36

Source : www.ditjennak.go.id Source :www.ditjetnnak.go.id

Table 10. Indonesia Dairy Imports (Jan - December), 2007 - 2010

Product Volume

Tonnes 2007 Total

Volume Tonnes

2008 Total

Volume Tonnes

2009 Total

Volume Tonnes

2010 Total

Value US$’000

2007 Total

Value US$’000

2008 Total

Value US$’000

2009 Total

Value US$’000 2010 Total

Buttermilk / BMP

14.075 6.328 10.017 12.823 43.618 24.597 17.498 31.148

Butterfat 15.686 9.655 13.273 14.642 42.974 41.663 36.547 70.900 Cheese 13.930 10.557 13.971 15.683 46.363 54.609 49.299 69.338 Milk 16.697 16.187 9.775 4.151 19.598 24.532 16.084 11.845 WMP 90.718 83.514 52.929 49.856 300.852 330.572 157.198 221.985

SMP 90.757 81.207 103.801 132.227 316.477 309.893 238.330 405.153

Whey products 53.367 42.239 65.433 72.619 99.772 78.057 74.206 114.138

Yoghurt 1.482 968 356 156 1.500 1.385 668 339 Total 296.712 250.656 269.554 302.158 871.153 865.308 589.829 924.886

Source: BPS Source : BPS

Product Aust NZ USA EU Other Total Buttermilk / BMP

690 2.839 0 6.865 2.429 12.823

Butterfat 2.306 8.779 659 2.699 199 14.642 Cheese 3.906 7.393 2.975 520 889 15.683 Milk 1.657 1.241 156 999 98 4.151 WMP 10.108 15.436 315 5.440 18.557 49.856 SMP 17.487 33.502 40.624 37.413 3.201 132.227 Whey products 4.492 858 17.974 42.526 6.769 72.619

Yoghurt 4 0 77 38 37 156 Total 40.651 70.048 62.780 96.500 32.179 302.158

Table 11. Indonesian Dairy Import (Volume) by Country, 2010, Tonnes

Source: BPS Source : Katalog BPS 8202003

Product Value US$'000 2006 2007 2008 2009 2010

Buttermilk / Butter Milk Powder (BMP)

3.811 5.538 6.397 6.078 8.596

Butter / Butteroil 125 318 1.232 2.455 5.160 Cheese 2.139 1.281 2.397 2.005 2.589 Milk 4.592 6.220 10.093 9.986 11.755

Other Milk Preparations 65.589 60.196 184.583 64.598 59.072

Skim Milk Powder 1.331 1.819 2.677 2.309 1.192 Whey & Why Powder 1.452 305 844 807 268 Whole Milk Powder - - - - - Yoghurt 223 284 828 687 320

Total 79.261 75.961 209.051 88.925 88.952

Table 12. Indonesia Dairy Exports - By Value (US$’000), 2006 - 2010

Source: Katalog BPS 8202003 Source : Katalog BPS 8202003

Figure 5. Indonesian Dairy Industry

Source : Indofood, 2010

Key Driving Forces For Dairy Development in Indonesia

•  Increased demand for dairy products è Population growth, income growth, increasing middle class, urbanization, longer life span and ageing population

•  Diversification toward high-value production - a demand-driven process in which the private sector plays a vital role

•  Food spending is shifting from grains and staples to vegetables, fruits, meat, dairy, and fish

Key Driving Forces in Dairy Industry(1)

•  Demand for ready-to-cook and ready-to-eat foods is also rising, particularly in urban areas.

•  Technology change/transfer – Improved technologies è shorter production cycle, lower feed-conversion ratio

•  Food security and improved nutrition

•  Import substitution or export (foreign exchange earnings)

Key Driving Forces in Dairy Industry (2)

Figure 6. Primary Drivers

SOURCE: FAO World Food and Agriculture to 2030/2050; FAO Expert MeeAng on How to Feed the World in 2050

~1.5 X more cereals

~2 X as much meat

•  UrbanizaAon – 70% of 2050 populaAon

•  Higher calorie consumpAon and diet shiQs – more protein, more wealth

•  “Middle Class” income & populaAon increasing substanAally

1 On a per-day basis, global food consumption is ~17 trillion Kcal in 2000, ~18 trillion Kcal in 2005, and ~28 trillion Kcal in 2050 2 From ~475 to ~892 million tons of dairy, ~1 to ~1.44 billion tons of cereals, ~227 to ~464 million tons of meat, over the period of 2000 to 2050

~2 X as much dairy

Figure 7. Per Capita Consumption of Selected Food Commodities in Developing Countries (index 1961=100)

Source :FAOSTAT

Figure 8. Per Capita Income and Dietary Energy Intake From Dairy

Source; World Dairy Situation, 2011

Figure 9. Livestock Revolution

0

20

40

60

80

100

120

140

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

Per capita income ($ P PP )

Per c

apita

meat c

onsu

mption

(kgs

)

Figure 10. Six Dynamic Markets : China, India, Indonesia, Brazil, Kenya and Pakistan

Source : Tetra Pak, 2012

Figure 11. Emerging Markets Drive Growth Global LDP Consumption is Accelerating, fuelled by growing demand in

Asis, Africa and Latin America


Table 13. IFCN Top 21 Milk Processor List


Figure 12. Low-Income Consumers are the next big opportunity for the dairy industry

They represent 38% of LDP in developing countries


ToP = Top of the Pyramid-above $8/day DiP= Deep in the pyramid-$2 to $8/day BoP= Bottom of the pyramid-below $2/day

Figure 13. DiP LDP Consumption is Expected to Grow in Developing Countries

From 70 bio/L in 2011 to almost 80 bio/L in 2014

Government Policies For Dairy Development in Indonesia

Figure 14. Key Actors and Other Stakeholders in the Value Chain

Inputs Services Collector Farmer

Producer Processor Retail Consumer Market

Government

NGO’s and interest groups

Educational institutions: universities, agricultural schools

Research and development institutions

Several Issues in Dairy Development in Indonesia (1)

•  Scarcity of forage and high price of dairy cattle feed and concentrates

•  Small farm size and scarcity of land at suitable elevation for dairy cattle farming

•  Low dairy cow productivity – with an average of about 10 liters of milk per cow per day

•  Low farm profitability due partly to low milk yields

•  Low milk quality with only 12 percent of milk production meeting the minimum standard

Source: GAIN Report, 2009

Several Issues in Dairy Development in Indonesia (2)

•  Poor farm and herd management practices

•  Lack of technology for milking and processing of fresh milk

•  Limited access to high – quality genetics

•  Limited access to finance and bank loans

•  Limited farmer education

Source: GAIN Report, 2009

Some Policy Initiatives

1.  BUSEP (Bukti Serap – Absorption Proof) scheme implemented in the period of 1982-1998. This policy is found to be not significant in increasing the productivity of Indonesian dairy products.

2.  The Blue Print The blue-print is started by portraying the existing condition of

Indonesia dairy industry by identifying its strengths and weaknesses. Six generic groups of strategies have been formulated by matching the SWOT factors. (a) Human resource and institutions development, (b) Increasing the number of population and productivity, (c) Quality and hygiene assurance, (d) Price and welfare of the farmers, (e) Increasing fresh milk consumption, and (f) Improving the infrastructures

3.  Government encouraging domestic and foreign companies to invest in dairy farming and dairy breeding to meet local demand.

4.  Government provides credit facilities with subsidised interest for small dairy farmers for purchasing dairy cows.

5.  Coordination with GKSI (Indonesian Milk Cooperation Organisation), the Ministry of health and the Ministry of Education and Culture to create milk market directly to the students è School Milk, School Children Food Supplement Program (PMTAS).

6.  Regional government initiatives to promote more milk consumption for school aged children è GERIMIS BAGUS (Gerakan Minum Susu Bagi Anak Usia Sekolah)

7.  Through P2HP (Directorate General of Agriculture Processing) and Ministry of Industry built facilities for milk processing in many milk collecting unit closed to the farmers è Cluster program.

8.  Training and education for farmers on dairy farming management, milk processing and market.

9.  Diary Board has been established, but it is still not very active è Introduction of levy?

Major Goals of Blue Print •  Self-sufficiency in milk production to increase from 25-30

percent to 50 percent in 2015 •  Expansion of dairy production in suitable areas outside

Java, especially Sumatera and Sulawesi •  Milk production per cow to increase from 8-10 kg cow/day

to 15 kg per cow/day (in 2015) •  Calving interval to be reduced to 13 months •  Milk quality to be improved from 12 percent of total milk

that meets the SNI standards to 20 percent meeting the SNI standards in 2015

•  To ensure dairy farming remains feasible from an economic point of view, the minimum milk price to be kept at a level of at least 80 percent of world market prices.

The 50% self-sufficiency?

•  The policy objectives show the interest of GoI to increase milk production, through improving efficiency of farm management and expansion of milk production, as well as to improve milk quality.

•  The goals however are ambitious given the limited time?

The 50% self-sufficiency?

•  Policy instruments include among others (a) financial support to farmer groups (subsidies of Rp 300 million per group), (b) provision of free services, like AI services and animal health services, and (c) advice to farmers (through) local governments.

•  As feed resources on the farms are limited, increasing milk production by expansion of the dairy herd may conflict with the goal to increase the milk production per cow.

Concluding Remarks

Happiness is when what you think, what you say, and what you do

are in harmony

Mahatma Gandhi (1869-1948)

THANK YOU E-mail address: [email protected]

indonesia dairy industry development

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