Australian feed grain enjoys first access to Indonesia through IA-CEPA

IA-CEPA has made Australian feed grain producers the only foreigners allowed to sell feed grain to Indonesia’s livestock industry.

This comes at a time when Indonesia’s growing middle class are seeking more protein in their diet.

This, and the fact that the new tariff rate quota system will support a more transparent market are among the highlights of IA-CEPA according to Tim Ross, Operations Manager at Grain Trade Australia.

“We welcome the opportunity to extend [our milling-wheat] trade relationship to feed grains and we believe there are significant, mutually beneficial opportunities for Australian feed grains to complement Indonesia’s feed milling industry to meet the increasing demand for protein,” Ross told the AIC.

Until the 1930s Australia mainly exported flour, rather than the unmilled wheat of today, but Indonesia and other key export destinations then developed their milling industries and shifted their interest to Australia’s unmilled wheat to supply noodle, bread and other industries.

Now with its slowly growing domestic cattle industry, Indonesia needs more feed grain, which are grains fed to livestock such as some crops of wheat, barley and sorghum (the three grains included in the new arrangement). Australia farmers are keen to find export markets for these, with barley in particular recently being hit with huge tariffs for exports to China.

First come, first served

“A practical issue for government and industry,” Ross explains, “has been to devise arrangements for exporters to be able to access the quota tonnage in an open, transparent and equitable manner and to ensure the tariff rate quota is fully utilised each year.”

Here, Grain Trade Australia worked with the government to ensure IA-CEPA would benefit all exporters wishing to trade with Indonesian grain buyers. Reservations for sales as part of the tariff rate quota, or TRQ, can be made by any size exporter, including new entrants.

“It was decided that quota tonnage would be available on a first come, first served basis where complete applications (including all supporting information) are provided,” Ross says.

“A reservation for TRQ can be made for a small amount, even one container of 20 tonnes, or for a full bulk shipment of more than 40,000 tonnes.”

“Given TRQ is allocated based on proof of a contract of sale, market participants can freely discuss opportunities to trade between the countries. This ensures the TRQ is available and accessible to all buyers and sellers up until the point the [IA-CEPA] allocation of 500,000 tonnes is consumed. This opens the market to small exporters and even to individual farmers that may wish to trade directly on the export market.”

“Though it’s very unusual for farmers to directly export grain themselves,” Ross adds, “particularly for the volumes involved in IA-CEPA.”

Overall, Grain Trade Australia believes IA-CEPA will unlock the vast potential of economic cooperation between business, communities and individuals in Australia and Indonesia, providing “an excellent opportunity for the Australian grain industry and for Indonesian consumers through the reduction of impediments to trade”.

Grain Trade Australia is an industry group that facilitates more efficient commercial processes across the grain supply chain. Over the years they have helped to formalise commodity trading standards, and develop and communicate trade rules across the Australian industry.

Image: Jordan Condon via Wikimedia Commons.