Strengthening village-based Brahman cattle production systems in Indonesia:

A Pilot Project undertaken under the IA-CEPA facility

Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) Economic Cooperation Activities - Beef Pilot Project

1. On 2 November 2010 the Indonesian President and the Australian Prime Minister announced the launch of the negotiation of the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) covering economic cooperation, trade and investment issues. Following the entry into force of the Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA), the negotiation of IA-CEPA will afford Indonesia and Australia a timely opportunity to further build a higher-level and mutually beneficial partnership.

2. Economic cooperation will form a key pillar of the IA-CEPA negotiations - building the Australia-Indonesia partnership, and enhancing Indonesia’s capacity to engage comprehensively in the negotiations, and to implement and benefit from IA-CEPA once the negotiations have concluded.

3. In this context, a key strategic aim of economic cooperation will be to both further develop existing bilateral trade and investment linkages and to help nurture more internationally competitive Indonesian industries that can, in turn, attract further investment, including foreign investment. Economic cooperation activities could include technical cooperation (e.g. regulatory capacity building, best practice management and governance practices and standards) or other activities to address factors influencing investment flows (e.g. facilitation and regulatory measures) and trade flows (e.g. facilitation measures and trade barriers).

4. To support the negotiations, the Australian Government has established a technical assistance and economic cooperation facility to fund activities to be jointly agreed between Australia and Indonesia. These activities include pilot projects, information sharing, technical assistance and support for capacity building and policy research. Activities under the facility will be aligned to the Australian Government’s aid for trade policies and Indonesia’s national development plan, including that official development assistance be aimed at sustainable development and poverty alleviation.

5. Attention is currently being given to identifying possible pilot projects to support the development of competitive industries. Such pilot projects will be undertaken during the course of the IA-CEPA negotiations where mutually agreed. Pilot projects will be subject to review, including in the context of considering further technical assistance and economic cooperation.

Agriculture

6. Agricultural cooperation is an important part of the Indonesia-Australia bilateral relationship. Through technical assistance and capacity building initiatives, this cooperation aims to increase agricultural productivity in key sectors and improve food security. On the Australian side, cooperative activities are undertaken by Australian government agencies, particularly the Australian Agency for International Development (AusAID), the Australian Centre for International Agricultural Research (ACIAR), the Department of Agriculture, Fisheries and Forestry (DAFF) and state and territory agencies, and industry. On the Indonesian side, collaboration in agricultural research is coordinated through the Indonesian Agency of Agricultural Research and Development. Implementation is through partnerships between national and provincial research and development agencies, universities and the private sector.

7. Following discussions on enhancing cooperation in the beef sector between Indonesian and Australian agriculture and trade ministers in recent years and deliberations at the Australia-Indonesia Working Group on Agriculture, Food and Forestry Cooperation, beef has been identified as a key sector for economic cooperation under the IA-CEPA. Attention has focused on selecting a pilot project which would add value to the significant agricultural cooperation already underway.

Beef Sector

8. Australia has a long history of supporting the development of the Indonesian beef sector. With ACIAR support over the past decade, Indonesian and Australian researchers have developed an Integrated Village Management System (IVMS) with more than 2,000 farmers in Nusa Tenggara Barat to show that productivity of Bali cattle systems can be doubled with simple management improvements. Other research with farmers in Nusa Tenggara Timur has demonstrated that simple management changes can reduce calf mortality from over 30% to less than 2%. These outcomes have demonstrated that it is possible to at least double the outputs and incomes of smallholder beef producers in eastern Indonesia.

9. It is not just the smallholder beef sector that has received Australian support. In recent years, a close relationship has developed between northern Australian cattle producers and the Indonesian livestock industry (with trade of over AUD 300 million in 2010). Since the beginning of this feeder trade and development of the Indonesian feedlot sector in the early 1990s, there has been substantial technical transfer from the Australian industry. Meat and Livestock Australia (representing livestock producers) and LiveCorp (representing livestock exporters), work together to deliver in-market programs in Indonesia through the Live Export Program. This technical support focused on improving the performance of Australian cattle in Indonesia, including assistance to breeding programs conducted in feedlots.

Beef Pilot Project

10. Extensive consultations initiated in 2010 – involving Indonesian and Australian government, industry and research agency representatives – have resulted in agreement on a beef pilot project to improve Indonesia’s cattle breeding performance. The attached pilot project, Strengthening village-based Brahman cattle production systems in Indonesia, is the first project under the IA-CEPA technical assistance and economic cooperation facility and responds to the high priority the Indonesian Government accords to strengthening Indonesia’s domestic smallholder beef sector. It is based on the expectation that applying the principles of the IVMS to Brahman cattle in feedlot outgrower breeding systems will result in similar improvements in productivity as already demonstrated in Bali cattle systems.

Brahman cattle have been selected for the project because of their faster growth rate and higher feed conversion compared with local Indonesian breeds, and because of their potential to provide smallholders with opportunities for sale through both local marketing chains and as feeder cattle to commercial feedlots.

11. The pilot project provides the opportunity to engage with smallholders, Indonesian livestock institutions and agricultural scientists, and to provide training and skills development that will enhance the ability of smallholder farmers to improve the productivity and husbandry of the local herd by increasing calf output and the number of young Brahman cattle being fattened in village production systems in East Java and Sumatra

12. The project seeks to transfer knowledge and develop skills that will lead to long term sustainable growth in the local industry. This project will bring Australian and Indonesian producers, researchers and government officials closer together in the promotion of increased domestic cattle production and ultimately increased beef supply for the Indonesian market. The relationship with Australian industry will also enhance Indonesia’s food security, which will become increasingly important as the Indonesian economy continues to grow and the demand for beef is expected to increase significantly. As that occurs, Australia, as a close neighbour with longstanding natural supply relationships, will look to continue to be an important partner with Indonesia as its growing beef demand is met through both an increase in local production and continued supplies of imported cattle and beef.

13. The three year pilot project, which will be led by ACIAR, has broad-based private and public sector stakeholder support in both Indonesia and Australia. It was launched in April 2011 and is being jointly funded by Meat and Livestock Australia/Livecorp and the Australian Government (DAFF and the IA-CEPA technical assistance and economic cooperation facility), with substantial in-kind contributions from key Indonesian institutions: the Indonesian Centre for Animal Research and Development (ICATAD), the Indonesian Feedlotters Association (GAPPSI), the Beef Cattle Research Institute (BCRI) and the Assessment Institute for Agricultural Technologies of South Sumatra.

Acknowledgment

This pilot project aims to improve Brahman cow-calf and fattening systems in Indonesian villages using approaches that have been proven for smallholder Bali cattle production systems in eastern Indonesia.

Improving the productivity of smallholder beef cattle production is a high priority for the Indonesian government both to strengthen rural livelihoods and to increase the supply of domestically produced beef, given increasing domestic demand for beef. Increasing the numbers of calves being produced and fattened in traditional systems is one promising approach to increasing domestic beef production. A second approach is to create new market opportunities for smallholder beef producers.

The Indonesian government has been trialling Brahman cattle in village production systems as, compared to local Indonesian breeds (such as Bali cattle), they have faster growth rates if given high quality diets. They provide smallholders with access to a potential new market opportunity: selling young Brahman cattle to commercial feedlots. These Brahman cattle production trials have had mixed success. The main problems are that Brahman cows in village systems have very low fertility, mortality of calves in villages is high, and growth of young cattle is low. These problems result from a combination of inadequate nutrition and poor mating and weaning management.

Australian Centre for International Agricultural Research

AusAID

Department of Agriculture, Fisheries and Forestry

Over the past decade, Indonesian R&D agencies, working with the University of Queensland and the Australian Centre for International Agricultural Research (ACIAR), have developed an approach for improving the management of Bali cow-calf systems in Indonesian villages. This Integrated Village Management Scheme (IVMS) is based on simple principles of early weaning (5-6 months compared to 12 months), controlled natural mating for five months, and strategic supplementation of the pregnant cow. In Nusa Tenggara Barat, the IVMS has been able to double the productivity of Bali cattle systems (see Box 1).

If the principles of IVMS are applied to Brahman cattle in villages, there is a high likelihood of similar improvements in productivity with the potential that smallholders could become profitable suppliers of young Brahman cattle to feedlots.

The Project

This three year pilot project will determine the viability of village-based Brahman cow-calf and fattening systems in Indonesia by:

1. Developing a productive Brahman cow-calf system at village sites in East Java and Sumatra.

2. Identifying options for growth and fattening of Brahman calves in villages.

3. Conducting socio-economic analysis of village-based Brahman cow-calf and fattening systems.

4. Disseminating recommendations on how to make village-based Brahman cow-calf and fattening into viable small enterprises.

Partners

The project, to be led by ACIAR, has broad-based private and public sector stakeholder support in both Indonesia and Australia. It is being jointly funded by Meat and Livestock Australia/LiveCorp and the Australian Government.

A partnership of research agencies will implement the project, led by the Indonesian Centre for Animal Research and Development (ICATAD) and the University of Queensland. Other key partners in Indonesia are the Indonesian Feedlotters Association (GAPPSI), the Beef Cattle Research Institute (BCRI) and the Assessment Institute for Agricultural Technologies of South Sumatra.

Box 1: Improving the management of Bali cow-calf systems: impact of the Integrated Village Management Scheme (IVMS)

lmost 2,000 farmers in 36 villages in Lombok have demonstrated higher frequency of calving, earlier weaning and faster calf growth rates. This has reduced the time needed to produce cattle for market, from 18-24 months to just 12 months.

In addition, those villages adopting the research have reported far lower calf mortality rates (3% compared with more than 10% outside the IVMS). In other parts of eastern Indonesia calf mortality rates are as high as 40%.

Expected outcomes

Outcomes are expected to be similar to those demonstrated for Bali cattle systems in Lombok using the IVMS (see Box 1). In addition, as the IVMS becomes established and shows improvements in cow performance - including accelerated weaning rates resulting in earlier sale weight, and reduced calf mortality - incomes are expected to rise, with more villagers transitioning from being managers of other people’s cattle to being producers of their own cattle (see Box 2). The potential long term benefits are substantial (See Box 3).

Box 2: Livelihoods based on productive cattle enterprises

Like most farmers in central Lombok, those in Kelebuh village typically raised cattle as a savings bank and sold them in times of need. Improving productivity through better husbandry was not a priority. Average household incomes were very low; in the range of AUD 200-400 per year.

ACIAR-led research identified how farmers like those in Kelebuh could apply simple changes in cattle management to make the transition from being incidental raisers of cattle to productive smallholder cattle enterprises.

Working with almost 2,000 farmers, the researchers first identified the opportunities and constraints in their cattle systems, including the cultural dynamics and resource pressures, to develop viable strategies to raise more cattle.

The simple husbandry, weaning and nutritional changes made by these farmers brought substantial benefits. At Kelebuh’s communal barn, the number of calves born doubled, with these calves fattened to market weight in half the time previously taken.

Typically a farmer was able to sell at least one extra animal per year, worth around AUD 200-300. For many of these smallholder farmers, selling one extra animal a year had the potential to double their annual income.

These management improvements, and the demonstrated success in villages like Kelebuh are now being used by provincial authorities to expand the outcomes more widely.

Box 3: Collaborative research - a sound investment

A key part of the IVMS is improved cattle nutrition using a range of new forage varieties. An independent economic assessment of six ACIAR-led projects in eastern Indonesia on the role of forages in increasing cattle productivity in crop-livestock systems demonstrates the returns possible from such research. Given a best case adoption scenario, returns of AUD 1,300 million are possible over the next three decades. More than 90% of these benefits would flow to smallholder producers, with the remainder to consumers. The results also reveal that policy support from the Indonesian Government is important to the possible scale of returns. Without this support the total benefits are estimated at AUD 1,000 million.