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THE INDONESIAN FEED INDUSTRY

According to Simatupang and Pakpahan (nd), there was no animal feed manufacturing industry in Indonesia until the end of the 1960s. Beginning in the 1970s, plants began to be built to cater for the needs of the poultry industry. In their examination of the industry, PT Ekamasni Consulting (1995) divided the animal feed industry into the animal feed components industry and the animal feed industry. Firms in the animal feed components industry produce a semi finished raw material that has to be further processed or mixed with other raw materials to be used as an animal feed. Animal feed components cover maize, oil cake from soybean, fish meal and cassava. The animal feed industry uses the outputs from the components industry to produce compound feed and concentrates. The division used by PT Ekamasni Consulting will be followed to a large degree in this part of the report.

Raw materials used in the Indonesian industry

The main raw materials used in the animal feed industry are listed in Table 58. According to PT Data Consult Inc. (1995), the crucial problem for the industry is the high cost of raw materials. Soybeans are an important import commodity for Indonesia. Most of the soybean grain is used for human consumption whereas soybean oil cake - a by product of the oil processing industry - is used as an animal feed. Soybean imports are controlled by BULOG, while soybean meal was deregulated by the government in 1996, allowing for duty free imports. Maize (corn) has experienced a rapid increase in demand that has outpaced production. As a result, Indonesia is a net corn importer. Indonesia is attempting to increase domestic production through the use of new hybrid varieties. In 1996-97, approximately 515000 ha will be sown to new varieties. Feed producing companies are permitted to import corn free of duty. The cost of producing animal feed should decline from 1998 or 1999 when new port facilities will enable larger ships to carry grain imports. Cargill has signed agreements with Indonesian companies to improve port facilities, a development expected to save between US$8 to US$10/t. It needs to be noted that industrial residues play an important role in the animal feed industry. Similarly rice straw (for ruminants) and rice bran (for pigs and poultry) play important roles, particularly for small holders. Manurung (1990) pointed out that crop residue and by products used for feed represented only about 15% of total crop residues available.

Table 58. Raw materials used in the animal feed industry, Indonesia

Seeds

Maize, sorghum

Vegetable proteins

Soybean oil cake, oil cake nuts, canola, corn gluten meal, rape seed meal

Animal protein

Fish meal, meat bone meal

General feed I

Rice bran, pollard, oil cake coconut, sesbana leaf flour, st.e seed, st.e flour

General feed II

Skim milk powder, fish oil, palm oil, sugar cane, salt, premix alimet, choline chloride

Source: PT Ekamasni Consulting (1995)
The animal feed component industry

In 1994 there were 112 animal feed component mills with a total production capacity of 4.8 Mt. per year. Most of these mills are in Java (Table 59). Their concentration on Java is not surprising since this is where the majority of Indonesians live and where the livestock industry - particularly the poultry industry - is concentrated.

Table 59. Animal feed component mills and production capacity, 1994

Province

Number of mills

Production capacity
(t/year)

DI Aceh

1

33600

Northern Sumatera

6

454300

Riau

2

98400

Jambi

1

15000

Southern Sumatera

4

152880

Bengkuku

1

90000

Lampung

20

1216580

Sumatera

35

2060580

DKI Jakarta

3

252603

West Java

13

319261

Central Java

15

544721

East Java

31

1216180

Java

62

2332765

Bali

2

2720

West Kalimantan

2

108000

East Kalimantan

1

42000

Kalimantan

3

150000

North Sulawesi

4

685000

South Sulawesi

6

151100

Sulawesi

10

219600

Indonesia

112

4765665

Source: PT Ekamasni Consulting (1995)
The largest producer of animal feed components is PT Japfa Comfeed Indonesia. The company was started in 1971 as PT Java Pelletizing Factory Ltd in a joint venture with the German company Internationale Graanhandel Teghrau. All of the production from this company was exported. In 1982 the firm was taken over by PT Ometraco and its status was changed to the domestic investment scheme. 1989 saw the company going public and changing its name to PT Japfa Comfeed Indonesia after merger with PT Comfeed Indonesia. With the proceeds from going public, Japfa Comfeed acquired shrimp and chicken breeding companies. By 1995, it had become the “leading and most integrated company in agribusiness in Indonesia” (PT Data Consult Inc., 1995, p13). The capacity of the company is around 470000 t. per year. Table 60 lists the major firms and their location.

Table 60. Major animal feed producers, Indonesia

Company


Location


Production capacity

(t/year)

PT Japfa Comfeed Indonesia

Surabaya

470000

PT Sprained Soybean Industry

Jakarta

244000

PT Miter Megan Cattle Feed

Median

160000

PT Suryadarma Cattle Feed

Deli

160000

PT Lampung Sumber Kencana P.F.

Lampung

150000

PT Inti Tapioka

Lampung

150000

PT Lampung Pelletizing Factory

Lampung

140000

PT Teluk Intan

Lampung

100000

Source: PT Ekamasni Consulting (1995)
Between 1989 and 1993, production of the animal feed component industry increased by about 9.6% to cater for growth in the poultry industry. In 1993 production was about 2.8 Mt., or about 57.9% of capacity (Table 61). Low levels of capacity utilization seems to be a feature of the feed industry. Simatupang and Pakpahan (nd) say that the protection of the feed industry and the policy of import substitution has resulted in an excessively large and highly capital intensive industry. They reported that in 1987, capacity utilization was only 18%.

The Indonesian poultry industry (as will be seen later, it is by far the major market for animal feed) has been facing competition from imported poultry meat. For small producers, operating with slim profit margins, the competition faced by the domestic poultry industry has reduced their marketing opportunities (PT Data Consult Inc. 1995).

Table 61. Production of animal feed components

Year


Production

(Mt/year)

1989

2.0

1990

2.6

1991

2.6

1992

2.9

1993

2.8

Source: PT Ekamasni Consulting (1995)
There has been a high level of investment in the animal feed component industry. Between 1992 and 1994 (January to September), 18 new projects received permits from the Investment Coordinating Board. Of the 18 projects, 12 were new and six were for expanding existing plants. All of the new plants planned are for the fishmeal industry. Details of the applications are presented in Table 62 along with projected production of the industry to 2000.

Table 62. Projected capacity of the animal feed component industry

Year


Increase in capacity


Projected capacity

(t/year)

1992

Nine new project planned to come into production in 1995 and 1 expansion of an existing plant


1993

Three new projects scheduled to begin in 1995 or 1996. The capacity of these new plants is 111200 t/year.


1994

Three new plants and 2 plant expansions will increase capacity by 130550 t/year

4765665

1995


5007456

1996


5304156

1997


5370206

1998


5379206

1999


5379206

2000


5379206

Source: PT Ekamasni Consulting (1995)
Animal feed mills

Indonesia has 158 feed mills with a capacity of 5.5 m.t. per year. Not surprisingly, in light of the fact that most of the population and poultry industry are located on Java island, the feed mills are also concentrated on Java. Table 63 contains information on the production capacity of Indonesia’s feed mills.

Table 63. Production capacity of feed mills

Province


Number of mills


Production capacity

(t/year)

DIAceh

2

9360

Northern Sumatera

29

646386

Western Sumatera

1

220

Riau

3

24920

Jambi

1

48

South Sumatera

3

11600

Bengkuku

1

3600

Lampung

7

194800

Sumatera

47

890934

DKI Jakarta

9

484100

West Java

48

2004835

DI Yogjakarta

2

36250

Central Java

5

262600

East Java

21

1567350

Java

90

4355135

Bali

6

4943

West Kalimantan

2

78000

East Kalimantan

1

15000

Kalimantan

3

93000

West Sulawesi

2

53760

South Sulawesi

8

131800

South East Sulawesi

1

900

Sulawesi

12

186460

Indonesia

158

5530472

Source: PT Ekamasni Consulting (1995)
Fourteen of the animal feed producers are integrated with the producers of animal feed components. The feed producing industry is very concentrated, with the production capacity of the largest firm (PT Charoen Pokphand Indonesia) accounting for almost 20 per cent of the capacity of the entire industry (Table 64).

Table 64. Major companies in the animal feed mill industry and their production capacity, 1994

Company


Type of venture


Location of feedmills


Production capacity

(t/year)

PT Charoen Pokphand Indonesia

Foreign investment scheme

Medan, Jakarta, Surabaya, Tangerang

1000000

PT Japfa Comfeed Indonesia

Domestic investment scheme

Tangerang, Cirebon, Sidoarjo, Medan, Lampung

650000

PT Cargill Indonesia

Foreign investment scheme

Bogor, Semarang, Surabaya, Ujung Pandang

220000

PT Buana Superior Feedmill

Domestic investment scheme

Bekasi

201600

PT Gold Coin Indonesia

Foreign investment scheme

Bekasi, Medan, Surabaya

200000

PT Bulan Tatapurna Feedmill

Domestic investment scheme

Tangarang

200000

Source: PT Ekamasni Consulting (1995)
The majority (55%) of the feed mills are small operations, with annual capacity of less than 10000 t/year. This may be seen from Table 65. Not all of the smaller plants operate every day.

Table 65. Distribution of feed mills by capacity, 1994

Production capacity

Number


Percentagea


(t/year)

over 200000

6

3.8

100000 to 200000

7

4.4

50000 to 100000

10

6.3

25000 to 50000

17

10.7

10000 to 25000

31

19.6

under 10000

87

55.1

Total

158

100.0

Note: a column may not sum to 100 due to rounding

Source: PT Ekamasni Consulting (1995)

The total production of animal feed in 1993 was 2383673 t. or about 45% of capacity. A 1993 survey found that of the 142 companies in animal feed production, only 68 operated continuously. The 1993 production was about 600000 t. above the 1989 level (Table 65). Of the 1993 production, 87.5% was used for the poultry industry, 10% for shrimp and fish, and 2.5% for cattle, pigs, sheep and other four legged animals.

Table 66. Production of animal feed

Year


Production

(t)

1989

1721020

1990

1855259

1991

1911091

1992

2122414

1993

2383673

Source: PT Ekamasni Consulting (1995)
According to PT Ekamasni Consulting (1995), competition in the industry is tight, with the largest three companies in 1993 producing 39% of total production (Table 67).

Table 67. Major companies in the Indonesia feed industry, 1993

Company


Production

Share

(000t.)

(%)

PT Charoen Pokphand Indonesia

730

30.6

PT Central Proteinaprima

161

6.8

PT Central Pangan Pertiwi

40

1.7

PT Anwar Sierad

50

2.1

Others

1403

58.8

Total

2384

100.0

Source: PT Ekamasni Consulting (1995)
As was the case for the animal feed component industry, a number of expansion plans have been made. These are shown in Table 68.

Table 68. New and expanded production facilities, Indonesia

Year

Type of project

Number of projects

Comment

1992


New

5

These projects were due for completion in

Expansions

4

1995 and 1996. Capacity will expand by 527400 t. The projects were scheduled to be completed in 1995 and 1996. One was for shrimp and the others for animals.

1993


New

3

These projects were planned for

Expansions

2

completion in 1996 and 1997. They will add 395200 t to production capacity. Projects are divided equally between animals and shrimp.

1994


New

5

Cattle feed production will expand by

Expansions

11

487000 t. With the completion of two of the 16 plants. One poultry feed factory will expand capacity by 180000 t. Completion of all 16 facilities will increase production capacity by 3609500 t. The new and/or expanded plants will be operating by 1997.

Source: PT Ekamasni Consulting (1995)
With the new and expanded plants, production capacity will expand to just over 10200000 t by 1997 (Table 69). Only moderate increases over this 1997 level are planned for 2000.

Table 69. Production capacity in the Indonesian animal feed industry, 1994 to 2000

Year


Production Capacity

(t/year)

1994

5530472

1995

5933872

1996

7720272

1997

10275772

1998

10538572

1999

10538572

2000

10538572

Source: PT Ekamasni Consulting (1995)
The production of broilers has underpinned the expansion in the feed industry. Deregulation of the Indonesian economy in 1991 encouraged investment in poultry. Partly as a result, broiler production increased from 262.9 million birds in 1989 to 541 million birds in 1993. Table 70 shows the distribution of animal feeds between poultry, four footed animals and fisheries. Data for 1994 published by PT Data Consult Inc. (1995) tell the same story. According to their figures, poultry accounted for 86% of animal feed consumption, pigs 4.6% and other livestock the balance of 9.4%.

Table 70. Consumption of animal feeds, Indonesia

Year


Poultry

Four footed animals

Fisheries

(kt)

(kt)

(kt)

1989

1431.3

69.4

163.8

1990

1619.4

103.1

185.3

1991

1569.9

134.1

184.2

1992

1774.6

107.2

205.8

1993

2062.6

121.1

183.1

Source: PT Ekamasni Consulting (1995)
Between 1989 and 1993, Indonesia was a very modest net exporter of animal feeds, as Table 71 shows

Table 71. Consumption, production and trade in animal feeds, Indonesia

Year


Production

Imports

Exports

Consumption

(kt)

(kt)

(kt)

(kt)

1989

1721.0

114.1

170.6

1664.5

1990

1855.3

123.2

70.7

1907.8

1991

1911.1

120.3

143.2

1888.2

1992

2122.4

76.9

111.7

1087.6

1993

2383.7

87.2

103.5

2367.4

Source: PT Ekamasni Consulting (1995)
Animal feed is a key part of the cost structure of the animal industries. For broilers, it represents about 65% of costs. Day old chicks represent about 25% of costs, while other operating expenses make up the balance. Broiler production profitability also depends on animal feed. When the birds are being maintained, feed is 84% of costs, and this falls to 76% when the broilers are fully in production (Table 72).

Table 72. Share of animal feeds in the cost structure of the poultry industry

Item


Share

(%)

Cost structure of broilers




animal feed

65



day old chicks

25



operating costs

10



Cost structure of layers




animal feed maintenance

84



animal feed production

76



day old chicks

5



operating costs

11 to 19

Source: PT Ekamasni Consulting (1995)

Table 73. Projected consumption of animal feed

Year


Poultry

Four footed

Fisheries

(kt)

(kt)

(kt)

1994

2362.2

147.0

255.9

1995

2667.5

169.1

294.6

1996

3067.6

194.1

338.5

1997

3527.8

223.6

389.2

1998

4057.6

257.1

447.6

1999

4665.5

295.7

514.7

2000

5365.3

340.1

591.9

Source: PT Ekamasni Consulting (1995)

Table 74. Projected production of animal feed

Year


Existing capacity

Expected capacity

New capacity

Total

(kt)

(kt)

(kt)

(kt)

1994

2765.2



2765.2

1995

2765.2

143

18.4

2926.6

1996

2765.2

809.1

147.5

3721.8

1997

2765.2

1989.0

427.7

5181.9

1998

2765.2

2727.9

702.9

6195.8

1999

2765.2

3282.0

891.0

6938.2

2000

2765.2

3484.8

995.8

7245.8

Source: PT Ekamasni Consulting (1995)

Table 75. Projected livestock population

Year


Poultry

Four footed animals


Fisheries

(000)

(kt)

1994

1003247

43591

3856

1995

1097272

44732

4116

1996

1204618

45907

4272

1997

1328629

47118

4501

1998

1457476

48364

4745

Source: PT Ekamasni Consulting (1995)
The prospects for the animal feed industry in Indonesia are, in the opinion of PT Data Consult Inc. (1995), somewhat mixed. The livestock industry - particularly the poultry industry - has a positive outlook. This should mean increased demand for feeds. However, the tightness of the market indicates that only the integrated producers such as PT Japfa Comfeed, Charoen Pokphand, Anwar Sierad and Cipendawa Farm Enterprise, will be able to survive. Whether this is still the case in light of the situation facing Indonesia in the early part of 1998 is uncertain.


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