Indonesia beef prices soar amid sufficiency drive

Wednesday - 3/20/2013, 7:08pm EDT

Associated Press

JAKARTA, Indonesia (AP) -- Haji Hidayat makes his living selling one of Indonesia's most popular dishes: a tasty meatball soup known as bakso. Earlier this week, after 22 years he decided to take a break and leave the capital for his village, no longer able to afford to keep ladling the brothy goodness customers had come to expect from him.

The price of beef, the main ingredient in bakso, has hit a record high while other essential components -- garlic, shallots and chilies -- have also recently skyrocketed.

Beef now costs more than $10 a kilogram (2.2 pounds), up from around $6 a kilogram nine months ago. Meanwhile in the past month alone, sellers at a large traditional market in Jakarta report garlic has leaped three and half times to $7.20 a kilogram, while shallots increased more than fourfold to $4.60 and chilies more than tripled to $5.15.

"This is insane!" said Hidayat, who held out as long as he could after hiking the cost of a bowl of his steaming soup last month from 30 cents to $1 to offset rising beef prices. "If we subtract the seasoning, our buyers don't like our meatball soup. If we raise the price, they can't afford to buy, so I'd better close my stall until the price returns to normal."

Other desperate bakso sellers, who typically hawk their dish from rolling food carts, ignited a firestorm late last year after opting to cut corners by mixing pork into their meatballs -- a forbidden food for most in the world's most populous Muslim country.

Analysts say the high cost of beef is an inevitable side-effect of Indonesia's drive to achieve self-sufficiency in the meat as well as corn, rice, sugar and soybeans by 2014, a policy sparked by the global food crisis that hurt tens of millions in developing countries in 2007 and 2008. Garlic, shallots and chilies are not among those commodities, but the surge in their prices, pinned on market manipulation by importers and flooding, underline other problems in the food industry that complicate efforts to keep prices affordable.

The spiraling costs have sparked intense debate in the media and online, prompting President Susilo Bambang Yudhoyono to demand that the trade and agriculture ministries stop pointing fingers and fix the surging prices.

Political scandal has eclipsed Indonesia's largest Islamic party after the leader was arrested two months ago and accused of accepting bribes to secure a government contract for a beef importer. A watchdog organization has also accused garlic and shallot importers of creating a cartel by holding shipments of the pungent cloves hostage on the dock while prices climbed.

Last year, Indonesia slashed import quotas for live cattle by more than a third and boxed beef by nearly two thirds as part of its self-sufficiency plan, but its domestic production has not been high enough to fill the gap. Further import reductions are planned this year. The government says imported beef now accounts for only 14.5 percent of national consumption, down from 53 percent in 2010 with imports reduced from 220,000 tons to an expected 80,000 tons this year.

The self-sufficiency policy got significant political impetus in 2011 when Australia temporarily banned exports of live cattle to Indonesia following public outcry over a video showing animals bellowing in pain and slowly bleeding to death at an Indonesian slaughterhouse. Then in 2012, Indonesia banned U.S. beef imports following one reported case of mad cow disease. Washington has accused Indonesia of protectionism and in January filed a complaint with the World Trade Organization.

Vice Agriculture Minister Rusman Heriawan said the government is pressing ahead with its agenda even as he acknowledged it had overestimated the ability of Indonesia's smallholder cattle farmers, many of whom have just three or four cows, to supply the market.

"Unfortunately, there are too many distortions which are not taken into account, causing meat prices to soar so high," he said.

"We need time to correct all the deficiencies that exist." People in Jakarta, who eat six times more beef than the national average, should "learn to realize self-sufficiency," he said.

In a report last year, the Paris-based Organization for Economic Co-operation and Development called Indonesia's self-sufficiency goal "misplaced." Its archipelago geography, unreliable transport and lack of industrial farming mean it is ill equipped to engineer a significant increase in local food production. The OECD warned of rising prices that would ultimately harm the country's poor majority.

Andrzej Kwiecinski, senior agricultural policy analyst at the organization and the report's main author, said beef is possibly the least challenging of the commodities in which Indonesia hopes to achieve self-sufficiency. Rice and corn production were already close to meeting local demand while sugar and soybean production is years away from that.