Imports that have been running for more than half a century have not been able to control prices of beef.
By
AGUSTINA PURWANTI, KOMPAS R&D
·5 minutes read
YOHANES MEGA HENDARTO
A trader prepares beef cuts since dawn at the Kramat Jati Main Market, East Jakarta (13/3/2023). The price of meat before entering the month of Ramadan is between Rp. 130,000 to Rp. 140,000 per kilogram for curd meat.
JAKARTA, KOMPAS — Importation is the instrument taken by Indonesia to meet demand and control domestic beef prices. "The government's focus is to maintain the availability and affordability of meat," said PT Berdikari (Persero) President Director Harry Warganegara on Friday (17/3/2023).
Maintaining the availability of meat cannot be ignored, because insufficient stock will cause an imbalance between supply and demand. As a result, the price as an interaction between the two indicators will increase. Because of this, the government has taken steps to fill the shortage of beef in the country.
Based on the Beef Livestock Commodities Outlook report released by the Agriculture Ministry in 2022, since 1969 Indonesia has imported beef, which at that time amounted to 2,100 tonnes of beef. During the same period, the country's beef production was 164,900 tonnes.
The latest data shows that Indonesia's beef imports in 2021 reached 276,761 tonnes, or around 12 times the amount of that half a century ago. In the same year, Indonesia was able to produce 487,802 tonnes of beef. With a total recorded national consumption of 670,799 tonnes, the combined supply from domestic production and imports has been able to meet national demand, with a surplus of around 93,000 tonnes.
If consumption calculations are used based on Susenas data from Statistics Indonesia (BPS), the surplus will be larger. With an average per capita consumption of 0.43 kilograms per year, the total beef consumption by the entire population is 117,253 tonnes. The meat surplus reaches 647,309 tonnes if domestic production is added to imports.
Scarcity is no longer detected, or it can be said that the government's aim to maintain supply availability has been achieved.
Ideally, this balanced condition will make prices relatively stable and under control. However, different conditions actually occur. Based on the observation of annual data, the price of beef is increasing, along with the increasing volume of imports.
Scarcity is no longer detected, or it can be said that the government's aim to maintain supply availability has been achieved.
Starting at Rp 2,536 per kilogram in 1983, the price of beef continued to creep up to more than Rp 100,000 per kg in 2015. Referring to the publications of the Agriculture Ministry and Bank Indonesia (BI), now the average price of beef is more than Rp 130,000 per kg. Monitoring conducted at a number of markets in Jakarta, such as Kramat Jati Main Market, Senen Main Market, Palmeriam Market and Manggarai Market shows these prices.
It is undeniable that inflation will make the price of goods continue to rise. The problem is the percentage change in the price of beef from year to year is always higher than the inflation rate. On average, inflation during 1983-2022 was 8.6 percent. Meanwhile, the average change in beef prices in the same period reached 11.5 percent.
This fact seems to negate the purpose of imports to control prices. Not only is the price under control because of the balance between supply and demand, the government is also specifically importing to reduce prices.
YOHANES MEGA HENDARTO
Frozen imported buffalo meat from India is sold in packages by traders at the Kramat Jati Central Market, East Jakarta (13/3/2023). The price of imported buffalo meat is often sold in traditional markets as imported beef at a price of Rp. 90,000 to Rp. 100,000 per kilogram.
In the Trade Minister Regulation No 46/2013 it is stated that if the price of beef is below the reference price, imports will be postponed. At that time the reference price was Rp 76,000 per kg. Imports will be carried out if the price of beef breaks the reference price. In fact, since then the price of beef has continued to increase.
An analysis of the correlation between beef imports and prices found similar results. The correlation value of 0.89 at the 99 percent level of confidence indicates that the two variables have a significant relationship. This means that an increase in beef imports will be followed by an increase in price and vice versa.
In fact, imports are carried out because it is believed that the price is cheaper than local beef. Ideally, the entry of cheaper imported meat will be able to lower domestic beef prices. Moreover, domestic meat stocks are increasingly abundant.
Asymmetry of Information
If scarcity does not occur but prices remain high, something else may be at play. Professor Tjeppy Daradjatun Sudjana, retired lead researcher at the Agriculture Ministry’s Research and Development Body (Balitbang), said there was another possibility, namely the stock game.
“If the price is high, it means there is a shortage. Or there is a lot of stock, but it is released [to the market] little by little,” he said. This is not impossible to do because beef quality is maintained even though it is stored for six months in a refrigerator.
The former director general of livestock for the 2007-2010 period added that information asymmetry could also have an impact on high prices. Even though the price of imported beef is cheaper, it does not necessarily reduce the price. The practice of mixing meat is still widespread in the market. For example, Indian buffalo meat, whose import price can be half of the local price, is sold equally as the price of beef.
Thus, consumers pay more for unsuitable meat quality. Ironically, this price injustice often targets the lower middle class because similar practices are more common in traditional markets.
The upper middle-class consumers actually get a more honest price. This is because they shop more often at modern markets, which include price tags according to the type of meat.
Instead of benefiting from higher prices, local breeders are actually losing money. They are unable to compete with imported meat which is now flooding the market. If they stop producing, imported meat will flow more rapidly into the country. Beef self-sufficiency remains an illusion and price stability is increasingly uncertain. Amidst the trend of an increasing demand for meat ahead of Idul Fitri, price uncertainty will continue to put pressure on consumers.
