6. FEED MILLING INDUSTRIES IN INDONESIA - Budi Tangendjaja (Research Institute for Animal Production)

Budi Tangendjaja
Research Institute for Animal Production, PO Box 221, Bogor 16002, Indonesia

In line with the rapid growth of the poultry industry, the feed industry has also been growing very quickly. Feed generally is considered to be the major input for poultry production and may account for 65 to 85 per cent of the total production cost. Since poultry feed is composed of several raw materials, the cost and supply of raw material either produced locally or imported affects the feed industry.

This chapter provides information on the feed milling industry, including its structure, government support, and its raw material supply. As well, limitation of the industry and its future prospect will be discussed. With data being limited and difficult to collect, the information presented is the best available from either industry or from other sources.

SIZE AND STRUCTURE OF THE FEED MILLING INDUSTRY

Information on the level of production of commercial feed for 1995 to 1997 is presented in Table 6.1. The data for 1997 are subject to revision because of the drastic changes related to the economic crisis since the end of July 1997. Prior to then, feed production had been increasing at a rate of more than 10 per cent since 1995. This increase is much the same as the increase in poultry production because most feed is used by the poultry industry.

Table 6.1. Production of commercial feed in Indonesia

Feed Producer	1995	1996	1997	Capacity
				1997	Share
	(t)	(t)	(t)	(t)	(%)
Charoen Pokphand	1496878	1608674	1553000	2670000	28.10
Japfa Comfeed	1016117	1019346	1029000	1622000	17.07
Anwar Sierad	193232	202618	287500	1200000	11.58
Wonokoyo	130000	312000	192500	824000	8.67
Cheil Samsung	-	65728	150000	750000	7.89
Cargill	170705	183089	213350	600000	6.32
Gold Coin	118025	154695	232600	311040	3.27
Subur Ripah	-	79463	72850	302400	3.18
Sinta	97800	185000	170000	187200	1.97
Centra Profeed	81600	85600	100000	180000	1.89
Others	263571	680646	1051370	854000	9.86
Total	3561928	4491259	5051670	9500000	100.00

The data in Table 6.1 relates to the period 1995 to 1997. In 1988, Indonesia produced 1,401,176 tonnes of feed; in 1989 production was 1,511,203 tonnes and in 1990, it was 1,880,336 tonnes In the five year period 1990 to 1995, production of feed increased almost 100 per cent.

In the two years up until 1998, several new feed mill plants were established and this increased the capacity of the feed industry. Table 6.1 indicates that Indonesia has the capacity to produce 9.5 million tonnes per year of feed in 1997. This production is distributed to 25 feed mill companies. These companies operate more than 25 mills because many have three to six plants located in several places in Indonesia. The production of the feed industry utilises around 50 per cent of capacity. The industry has a high capacity because feed industries over anticipated the growth of the poultry industry. Indonesia has a relatively low consumption of poultry meat and eggs compared to other ASEAN countries, and demand is expected to grow as incomes rise. One other possible reason for the excess capacity is the tendency of companies to expand their feed mills to go for bigger capacity and possibly more efficient feed mills. Companies setting up new feed mills often establish them in a different province. For example, when a company has a feed mill in West Java, it is likely to expand into East Java, or vice versa.

On the basis of the feed mill capacity shown in Table 6.1, feed mills can be divided into three broad groups:

• large feed millers with a production of more than one million tonnes per year. Charoen Pokphand and Japfa Comfeed are the companies in this category;
• medium size feed mills with a production of more than 100000 tonnes per year. This group is made up of eight companies, including Anwar Sierad, Cargills and Cintre;
• the small feed mills with a production of less than 100000 tonnes per year.

All large feed mills are integrated with the poultry industry - each operates a grand parent stock farm, a parent stock farm, a commercial poultry operation, and a poultry processing plant. Trading companies are also a part of some companies. While some medium size feed mills are not as fully integrated as the large companies, many have parent stock farms for broilers.

Although most protein feed sources for the feed mills are imported, the feed mills do not control the shipping. Many small vessels (these have a capacity of 5000 to 15,000 tonnes) are able to carry oilseed meal from India, China or Argentine without any major problem. The advantage that large feed mills possess with regard to shipping is that they can import the raw material themselves in large sized vessels such as Panama class. vessels To reduce transport cost, for example, US soybean meal is imported by the two largest feed mills using large ships. The large feed mills gain not only through lower transport cost but also through their strong bargaining power in buying materials, including premix and drugs.

Despite there already being many feed mills in Indonesia and quite intense market competition, the interest of investors in this industry still remains high. The Coordinating Board for Investment (BKPM) reports that in the first nine months of 1997, 15 new investments in the feed milling business were reviewed and given permanent license for expansion or for a new project. However, the economic crisis, especially in January and February 1998, resulted in a dramatic drop of feed production and some feed mills even stopped production.

The percentage of feed consumed by animal species is shown in Table 6.2. Poultry feed production for both broilers and layers is the major focus of the industry, and represents 85 per cent of production. The quantities produced for broilers and layers are about the same. It is expected that the industry will continue to focus mainly on poultry. Aquaculture takes more than nine per cent of the feed produced. Generally shrimp feed is not produced in the plants used to produce poultry feed. Very little feed is produced for ruminant animals. Feed for layers is partly manufactured as a concentrated ration. This is later mixed with corn and rice bran by farmers. In terms of type of feed product, almost all broiler feeds are produced in pellet form, while layer feeds are in mash form. Some starter feed is also provided in pellet form, reflecting a belief in the benefit of pelleting of feed for chickens.

Table 6.2. Percentage of feed produced for different animal species, 1997

Animal type	Feed production	Share
	(t)	(%)
Broiler	2153770	42.6
Layer	2123650	42.0
Swine	183540	3.6
Aquaculture	466950	9.3
Cattle	36250	0.7
Others	87510	1.8
Total	5051670	100.0

Feed milling plants are concentrated in three major areas - namely the neighbourhoods of Jakarta, Surabaya and Medan. Jakarta is the major area due to the number of consumers of poultry products and the closeness to the port used to import the raw materials. Before the economic crisis, almost one million birds were consumed by Jakarta people every day. The imported raw material arrives in the Jakarta port Tanjung Priok. Many new feed mills were established in Serang (to the west of Jakarta) because a new port for handling corn was built in this area (Cigading). Corn from Lampung also comes through Merak Port which is very close to Serang. Surabaya and Medan have also become major feed industry areas because of port facilities, the large number of consumers of poultry products and their closeness to the local raw material supply, particularly corn and rice bran.

Raw material supply plays an important role in the feed mill operation. The prices of raw materials are affected by season. However, there is very little use made of contracts in the purchase of corn or rice bran from local sources. Instead, the price follows the current market price. The low price of corn during the harvest season (normally this the wet season) motivated some feed mills to set up corn drier facilities with silos to cope with the price increase during the off season. The other important ingredient, rice bran, is difficult to store, as it is not stable when stored for long periods.

A typical poultry feed formula is presented in Table 6.3. As reported earlier, the major imported raw materials are protein sources. Almost 30 per cent of feed raw materials is imported, namely soybean meal, groundnut meal, rape seed meal, meat bone meal, corn gluten meal, fishmeal etc. Procurement is done at the world market price.

Table 6.3. Typical poultry feed formula used by feed mills

Ingredient	Broiler share	Layer share	Average share
	(%)	(%)	(%)
Corn	50-60	40-50	50
Soybean meal	15-25	10-20	18
Rice bran	0-10	10-30	15
Wheat pollard	-	0-10	5
Animal by product meal	0-5	0-5	3
Rapeseed meal	0-5	0-3	3
Fat/oil	0-3	-	1
Others/oil seed meal	5	5	5

GOVERNMENT REGULATIONS

During the five year period up until mid 1998, the Indonesian feed industry grew by around 12 per cent annually. As noted earlier, this is mostly because of the increase in poultry production. Therefore, any change in government policy for the poultry industry will affect also the feed industry. With regard to investment policy, Presidential Decree No. 23/1991 put a restriction on investment in the feed industry. The industry is still open to new investments by both local (PMDN) and foreign investors (PMA). However, there are some requirements for foreign investors set out by the Coordinating Board for Investment (BKPM). One such requirement is that foreign investors must be in a joint venture with Indonesians. The Indonesian share has to be at least 20 per cent at the initiation of the project, rising to 51 per cent after 15 years. Foreign investment located in a border zone (such as in Batam Island) and exporting 100 per cent of its production is only required to share five per cent with the Indonesian partner. However, a foreign investment that exports at least 65 per cent of its production and which is not in the border zone is required to set aside 20 per cent of its share to the Indonesian partners within 10 years and 51 per cent after 15 years of commercial operation. It is also required that foreign investment must exceed US$ 1,000,000 except for those that can meet the following conditions:

• labour intensive with at least 50 workers;
• at least 65 per cent of production is for export and the project is located in the eastern islands of Indonesia. These include West Nusa Tenggara, East Nusa Tenggara, East Timor, South Sulawesi, Southeast Sulawesi, Central Sulawesi, North Kalimantan, Central Kalimantan, Bengkulu and Jambi. PMAs of this type may start with an investment of at least US$ 250,000. Co-operatives or small enterprises are given priority to become the Indonesian partners

The local feed mills are not required to sell or export the products from the feedmill. They can sell the output locally if they follow the quality and safety regulation. Unlike dairy farmers who obtain feed from the co-operatives, feed mills are not required to sell their products to co-operatives. The feed mills are permitted to appoint a number of distributors, retailer agents in an area so long as the following rules are satisfied:

• the appointment must be in writing with a copy sent to the Directorate General for Livestock Services (DGLS);
• the distributor/agent must have a trading license from the Minister of Industries and Trade;
• feed mills remain responsible for feed quality and distributors or agents are prohibited to replace the original packing of feed;
• animal feed can not be sold in the same area as chicken or eggs;
• distributors/agents must comply with, and commit themselves to, the regulation for the control of animal feed.

Earlier it was stated the cost of feed is very much affected by the cost of raw material. The National Logistic Organisation (BULOG) at one time did procure feed ingredients. However, in 1989, BULOG waived its monopoly right in the procurement of corn, fish meal and soybean meal. In May 1995, the government issued a new deregulation policy to improve business efficiency, to strengthen economic resilience and to increase competitiveness. The import duty and surcharge on animal feed were reduced and for some feeds abolished. Import duties of feed ingredients were reduced to a range of zero to five per cent. The major ingredients for poultry feed such as corn, soybean meal, fishmeal, groundnut meal and bone meal have zero import duty.

Most poultry feeds are processed with modern equipment that is imported. Equipment suppliers may come from Europe, the USA or Taiwan. Several of the newly set up feed mills were built as turn key projects, while other feed mills are only partly supplied for machinery. There is no preferential treatment given to this industry. Investors can apply to the Coordinating Board for Investment (BKPM) with the master list of the equipment to be imported. They are exempt from import duties as long as they comply with the conditions set out by the government. As already stated, major feed mills are located close to the production farm and the breeding farm. Although incentives are provided to build feed mills in certain areas, such as those given to foreign investment, very few feed mills have been built recently in the eastern parts of Indonesia. All new projects of feed mills owned by foreign companies are located in Java except for one in West Kalimantan.

Deregulation has been enforced in Indonesia and there is a great interest from industries to accept it. It is expected that better efficiency for improving the business climate may accelerate the growth of the feed industry. Since most of the industry is directed to meet local demand, there is very little opportunity to export poultry feed. Thus, although Indonesia has accepted the GATT agreement, it is generally thought that it would not have major implications for the feed industry. The only possible impact is if poultry farms numbers decreased and local production of poultry were to be replaced by imports of poultry product. When the cost of production of poultry meat in the USA or Brazil is much less than that in Indonesia, it is possible that imports of poultry meat will become competitive and feed production will be affected. However, considering the local production of corn, the relatively low price of rice bran and consumer preference for hot carcasses of chicken, the effect of GATT on Indonesia is likely to be minor.

INGREDIENTS

Since almost 90 per cent of feed produced by the feed mill industry is for poultry, the typical feed ingredient used will be similar to that required by poultry farms. There are two distinct formulas for broilers and layers. As shown in Table 6.3, on average corn and soybean meal constitute almost 70 per cent of the total ration. Although the Directorate General for Livestock Services gave a typical formula of poultry feed, it has never been followed by feed mills due to the rapid development of nutrition and feed availability.

Unconventional feedstuffs are sometimes used by feed mills. These include cassava chip, palm kernel meal or coconut meal. However, those ingredients are not commonly fed to chickens due to their price and low nutritive value. A large proportion are exported or used locally as ruminant feed.

While corn is one of the main ingredients for poultry feed, its use is not restricted to feed. Corn is put to the following uses: 61.5 per cent is for human food, 29.5 per cent is for feed, 5 per cent is used as seed, 3.5 per cent is export and 0.5 per cent is lost (CIC, 1996). Corn is used in poultry rations as a source of energy. Although corn is not the only grain used for this purpose, the availability of other grains such as sorghum is very limited and available only in certain parts of Java during the dry season. With regard to corn production - presented in Table 6.4 - before 1990, Indonesia was self sufficient. However, as already noted, in the last 10 years the demand for corn for feeding poultry increased significantly as the poultry industry grew. This resulted in the importing of corn to meet local demand. In 1990, the volume of corn required by the feed industries reached 1.3 million tonnes and in 1996 it was estimated to reach 3.5 million tonnes. In 1998, it is estimated that 4.1 million tonnes of corn is needed for the feed industry. In the beginning of 1990, corn was imported from China and Thailand. However, in recent years corn imports have been predominantly from the USA because of insufficient supply from China. The rate of increase up to 1994 was more than 12 per cent and at that time the trend in imports was expected to continue into the future. Before 1988, the National Logistic Organisation (BULOG) was the only agency authorised to procure corn or other basic ingredients such as soybean meal and fishmeal. At present the private sector is allowed to import corn. The corn used for poultry is yellow corn and only small quantities of white corn are available. Although nutritionally white and yellow corn are not different, white corn is sold at a slightly lower price.

Table 6.4. Production and imports of corn and rice bran, 1990 to 1997

Year	Corn				Rice bran
	Production	Growth	Import	Growth	Production	Growth
	(kt)	(%)	(kt)	(%)	(kt)	(%)
1990	6734.0	-	9.0	-	3162.5	-
1991	6256.0	-7.1	323.3	3472	3128.2	-1.09
1992	7995.5	27.8	55.9	-83	3376.8	7.9
1993	6459.7	-19.2	494.5	785	3372.7	-0.1
1994	6868.9	6.3	1118.3	126	3264.9	-3.2
1995	8223.0	19.7	969.1	-13.4	-	-
1996	7953.6	-3.3	616.9	-36.4	-	-
1997	9261.0	16.4	478.0	-22.5	-	-

Most of the corn imported is US Grade No. 2, and this is normally used for animal feed. With regard to quality, considerations in the purchase of corn are moisture content and the proportion of broken or damaged kernels and contamination by foreign material. The presence of mycotoxin has been put forward as an additional criteria. Although the moisture content of corn has been limited to a maximum of 16 to 17 per cent, many feed mills are still willing to receive corn with a high moisture content if there is a price adjustment. Many feed mills are equipped with either an on-site corn drier or a special buyer that dries corn in the production area. Corn drier facilities may be very necessary as much of the corn is harvested in the rainy season. Poor handling methods of corn can result in increased incidence of mycotoxin contamination. Results of a survey by a research institute showed that almost all corn produced locally was contaminated by aflatoxin to varying degrees.

The Indonesian government has stated that the country will have to reach self-sufficiency in corn and it also has to try to reduce corn imports. There are several options to increase corn production. The first two are to increase the corn area or to switch to hybrid corn. Increasing the area planted is perhaps more difficult due to competition with rice production. Alternatively, planting hybrid corn is more realistic but the adoption rate has been slow. In the last two to three years, the government launched a hybrid corn program with a target of 500,000 hectares of corn. The program covers Java, Lampung, South Sulawesi and North Sumatra. Currently, there are three hybrid corn producers in Indonesia - the Charoen Phokphand group, Cargill and Pioneer.

Table 6.5. Imports of soybean meal and soybean, 1990 to 1997

Year	Soybean Meal		Soybean
	(kt)	(% change)	(kt)	(% change)
1990 - 1991	5.2	-	526.3	-
1991 - 1992	193.3	3581	631.0	19.9
1992 - 1993	170.6	-11.7	687.6	8.9
1993 - 1994	361.1	111.6	700.2	1.8
1994 - 1995	498.6	38.1	628.2	-10.3
1995 - 1996	894.0	79.3	-	-
1996 - 1997	1,085.0	21.4	-	-

The second major ingredient for poultry feed is soybean meal. This material is all imported, coming from India, Argentine, Brazil, China and the USA. Although Indonesia grows more than 1.5 million tonnes of soybean per year, this production is not sufficient to meet the demand for processed products such as tempeh, tofu and soya sauce. In 1990, Indonesia established a soy bean crushing plant located in Jakarta but it was closed down in 1996.

Imports of soybean meal increased steadily in the first part of the 1990s, resulting in more than one million tonnes of soybean meal being imported in 1996-97. Between 1990 and 1994, imports increased at a rate of 9.4 per cent per year, almost a similar rate of increase as recorded for the poultry industry. A dramatic increase of more than 100 per cent happened from 1994 to 1997. The main supplier was India, followed by South America. The USA supplied 56,000 tonnes in 1996-1997 but none in 1997-1998. In contrast with whole soybeans, imports of US soybean meal are limited due to its higher price and the fact it cannot be shipped in small quantities. Only large feed mills can import soybean meal from USA using Panama class vessels. Before 1996, with the local crusher still operating, the government applied a tariff on imported soybean meal and set a local content requirement. The tariff was lifted but the government then added a 10 per cent tax. Now, the tax has also been lifted and feed mills can import directly for their own use without paying a tax.

Soybean meal is regarded as the best protein source for poultry. If properly processed, its digestibility for chickens is relatively high compared to other plant protein sources. Most feed mills have used soybean meal in their formula, although other alternative oilseed meal sources such as groundnut meal from India are available. Rape seed meal imported from India or China is also used in small quantities - the maximum is three per cent - due to possible toxicity and low digestibility.

The quality of soybean meal coming to Indonesia also varies not only in its protein content but also in other quality parameters such as KOH solubility and urease activity which indicates the adequacy of processing. Indian soybean meal contains hulls that increase the fibre content in the feed.

Besides corn and soybean meal, rice bran is also a major ingredient of poultry rations. The use of rice bran in broiler feed may account for up to 10 per cent of the ingredients while for layer feed this percentage can be up to 30 per cent. Rice bran is produced by many small rice mills throughout Indonesia especially in the rice producing areas. It is estimated that more than 3.5 million tonnes of rice bran is produced per year. Rice bran is viewed as a relatively cheap feed ingredient for poultry within ASEAN countries. Rice bran, however, cannot be stored for long periods due to its instability during storage. Hydrolytic rancidity of the oil in rice bran and insect contamination are the main problems. The quality of rice bran varies depending on the contamination of rice hulls. Observation in the field indicated that the hull inclusion may vary from close to zero to up to 50 per cent in rice bran. Since rice hull has no nutritive value as a poultry feed, feed mills need to check the amount of hull before accepting it for poultry feed. Other contaminants that have also been detected in the field includes cassava waste, soil, limestone and sawdust. The price of rice bran fluctuates more than any other local ingredient, and it can vary by more than 100 per cent depending on the season.

Indonesia also produces wheat pollard/bran as by product of wheat milling. Estimates are that 30 per cent of imported wheat (2.5 million tonnes) is produced as a by-product. The quality of wheat pollard/bran is more consistent than rice bran because it is produced by a few large wheat mills. The use of wheat pollard in poultry feed is limited, and most wheat pollard is sent to dairy co-operatives for dairy cows.

Cassava chips or pellets are available in certain parts of Indonesia. Once cassava pellets were exported to Europe under a quota system. Recently, the quota system has been closed and cassava chips have become available for use as a poultry feed. If used in broiler rations, the addition of oil is sometimes needed. The type of oil available in Indonesia is crude palm oil and fish oil, the later being seasonal and produced from sardine type fish.

To provide a balanced diet for poultry, several minor ingredients and feed additives are needed. Dicalcium phosphate is mostly used as phosphate source. This material is imported from Belgium, the USA or China. The local phosphate source is limited, with bone meal sometimes used. Most calcium comes from locally available limestone or oyster shells. The situation is similar for salt. All other feed additives including vitamins, trace elements, coccidiostat, growth promotants, choline chloride, antioxidants, preservative or nutritional supplements such as enzyme, are imported.

The choice of the ingredients used in formulating the feed ratio is influenced by price, availability and services provided by the supplier. Most feed mills use computer programs to formulate the diet, with linear programming being used for single mix or multimix mixtures. In linear programming, the nutritive value and price are the constraints that need to be considered. The prices of imported ingredients depend upon developments in the world market, while local ingredient prices are affected by the season. Traders, both international and local, are well informed regarding world market prices and the information is available to the feed mills. Some feed mills may import certain ingredient directly without using outside traders. They open up a letter of credit, at sight or later, depending upon the relationship between purchaser and supplier. Some feed mills, particularly the smaller size feed mills, obtain ingredients through local traders using local currency. The price is normally the landed cost of ingredients plus value added tax income tax or import duty, as well as a margin for the trader.

On average about 82 to 85 per cent of the selling price is the cost of raw materials, and to this is added the cost of processing, any losses, the cost of packaging and so on. During the economic crisis of 1997, the feed mill association increased the selling price of feed several times to take account of the fluctuation in the exchange rate between the Indonesian rupiah and the US dollar. Most of the feed mills lost money during this period.

The change in the price of feed both for layers and broilers through the years is shown in Table 6.6. As this table shows, prices rose steadily over the last few years due to the increase in price of local ingredient and the depreciation of the rupiah to the dollar.

Table 6.6. Average price of feed in Indonesia

Year	Layer		Broiler
	Starter	Layer
	(Rp./kg)	(Rp./kg)	(Rp./kg)
1990	573	492	589
1991	602	541	623
1992	606	520	660
1993	600	540	707
1994	694	624	688
1995	716	641	794
1996	798	760	913

FUTURE PROSPECTS AND PROBLEMS FOR FEED MILLING INDUSTRY

Between 1990 and 1994, broiler consumption rose 15.5 per cent and this accounted for 56 per cent of chicken meat consumption. Besides broilers, people also consume village chickens (kampung chicken) which is normally raised in backyard systems. The local chicken is multi-purpose, being used for meat or for egg production. Although its contribution to protein has become less in percentage terms and although it has poor efficiency in converting feed to protein, the village chicken is raised extensively due to low input costs. Chapter 1 describes the native chicken production system.

Based on income and population, Capricorn Indonesia Consult, Inc. (1996) predicted that chicken meat and egg consumption will increase steadily over the next few years (Table 6.7). Based on this prediction, it is possible to make forecasts of feed requirement. This is because 85 to 90 per cent of the feed is produced for broiler and commercial egg production. With almost equal production of feed for broilers and layers, feed requirements will increase at a rate of 8.3 per cent per year. The prospects of the feed industry remain good and the opportunity for investment will continue to expand. Many firms in the feed industry continue to expand their scale of production and also the extent to which their operations are vertically integrated. New feed mills in West Java have already been built by local investor such as PT Wonokoyo or PT Kerta Mulya, and by foreign companies such as PT Cheil Jedang from Korea and PT Cargill from USA. The expansion has occurred in the Jakarta area, in Surabaya (PT Anwar Sierad and PT Arta Citra Terpadu), and in Lampung (PT Anwar Sierad and PT Centra Profeed).

Table 6.7. Estimate of total consumption of chicken meat and egg in Indonesia 1995-2000

Year	Broilers (t)	Village chickens (t)	Commercial eggs (t)	Village chicken eggs (t)
1995	548746	261679	376896	97642
1996	606929	275697	398669	99171
1997	672644	287988	420906	102709
1998	744101	298458	447687	104256
1999	823537	311160	475038	107869
2000	909095	321971	505053	111532
Average growth (%)	10.62	4.29	6.01	2.69

Vertical integration has been started by firms with their own broiler farms and processing plants. At least two slaughterhouses for broiler have been completed recently. They are owned by PT Charoen Pokphand and PT Wonokoyo. It seems that a few large feed mills and their integrated companies are likely to dominate the industry. The small feed mills with production less than 50,000 tonnes per year will disappear unless they utilise feed from their own farms.

The economic crisis in Indonesia has resulted in a severe set back to the poultry industry and the feed mill industry. The US dollar exchange rate rose from Rp. 2,400 in July 1997 to Rp. 9,000 in February 1998. This caused an increase in the prices of imported products such as soybean meal, meat bone meal, rape seed meal, synthetic amino acids (lysine, methionine), vitamins, minerals and drugs. However, the final price of feed is not three times higher and did not follow the US dollar exchange rate due to relatively low prices of corn and rice bran. The increase in feed price forced farmers to increase the price of eggs and broilers. The egg price rose from Rp. 2,000 per kg to Rp. 4,500 per kg at the end of February 1998. With the economic crisis, the population of poultry, both broilers and layers, has drastically fallen. Many have claimed that the total broiler population decreased from 15 million birds per week to only five million birds while the layer population decreased to less than 40 per cent of its pre-crisis level. Since most feed is produced for poultry, the feed producing industry has been badly affected. It is difficult to get accurate data but the 1998 production was at most only 40 per cent of production in 1997 (5,000,000 tonnes). Several feed mills have closed down while the surviving feed mills have reduced their production. As well, several feed mills in West Jakarta that have recently been built, have not yet operated. Also, new contracts to build feed mills have been cancelled.

It is not possible to predict when the situation will recover, since poultry farms are operating at 40 per cent capacity, and broiler and egg supplies have declined due to the lower purchasing power of the average household. Production from feed mills will not recover in one or two years because of the situation in the poultry industry.

CONCLUDING COMMENTS

The following points can be made on the basis of the information in this chapter.

• The feed industry grew at the rate of more than 12 per cent per year in the first part of 1990. Production is dominated by commercial chicken feed for broilers and layers. This accounted for 85 per cent of the total feed production. The industry remains dominated by large and medium size feed mills. Large mills have a capacity of more than one million tonnes per year while medium mills have a capacity of more than 200000 tones per year.
• About 30 per cent of the raw material for poultry feed is imported and most imports are either plant protein or animal protein. If the promotion of hybrid corn leads to its being accepted by farmers, Indonesia could become self sufficient in corn. However, Indonesia is still importing corn to meet the demand of the feed industry. The price of feed will increase in years to come due to the depreciation of the rupiah, and this will inflate the price of imported raw material.
• The government provides an environment conducive for investment in the feed industry and new investors, local and foreign, are still interested. Although a co-operative system is encouraged, there is no obligation to sell products to the co-operatives.
• While the future prospect of the feed milling industry is uncertain and new plants have recently been established, the economic crisis has resulted in a dramatic draw back of the industry. If production drops to between 30 and 40 per cent of the pre crisis level, the future of the feed milling industry is becoming questionable.

REFERENCES

Bauer, T.L. (1997) Indonesian Poultry Industry. An Overview for US Exporters and Investors. Foreign Agriculture Service, US Embassy, Jakarta, Indonesia.

Capricorn Indonesia Consult Inc. (1992) Study on the Marketing of Animal Feed in Indonesia.

Capricorn Indonesia Consult Inc. (1996) Study on the Animal Feed Industry and Market in Indonesia.