Opportunities for use of meat meal in aquaculture rations Indonesia PRCOP.015a
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1 Opportunities for use of meat meal in aquaculture rations Indonesia PRCOP.015a 2000 Prepared By: Timothy J Ryan & Associates Pty Ltd Published: May 2000 ISBN: This publication is published by Meat & Livestock Australia Limited ABN (MLA). Where possible, care is taken to ensure the accuracy of information in the publication. Reproduction in whole or in part of this publication is prohibited without the prior written consent of MLA.
2 OPPORTUNITIES FOR USE OF MEAT MEAL IN AQUACULTURE RATIONS IN INDONESIA This report provides information which Australian renderers may use to assess the financial feasibility of the Indonesian aquafeed market and to develop strategies to enter and gain market share. Potential meat meal demand for aquafeed in Indonesia could be 34,000 tonnes or more annually. No meat meal is currently used in prawn rations and possibly up to 5 per cent is used in finfish rations. Research however shows that appropriately formulated meat meal can be used in prawn and finfish rations 1. The aquafeed industry has a negative perception of meat meal particularly from Australia, because of experience with poor or inconsistent quality meal. INDONESIAN AQUACULTURE Production Indonesia was the major producer in South East Asia of freshwater fish in 1996 (330,000 tonnes). Production of all farmed finfish was then some 550,000 tonnes, but with the economic crisis commercial fed production has fallen to an estimated annual level of 180,000 tonnes. Indonesia was second in world prawn production from both farmed and captures sources in 1997 at 340,000 tonnes. China is the major prawn producer with 829,000 tonnes and Thailand is in third place at around 340,000 tonnes. Figure 1: Total Indonesian aquaculture production: all species and prawns (source FAO) tonnes ' Year Prawns All species Production of farmed prawns, has stagnated through the 1990s, despite new entrants, due to disease, environmental problems and the recent Asian crisis. Many prawn producers have reverted to more extensive farming systems less reliant on purchased feeds, have ceased production or have moved into finfish production where disease is 1 The Australian term prawn is used rather than shrimp throughout the text Meat and Livestock Australia 2
3 not a problem. Consequently carp, tilapia and milkfish production has increased over the 90s, although compared to prawns, their unit value of production is low (Table 1). Farmed prawn production in 1998 accounted for over 40% of total shrimp production and was worth over $US 1 billion. Tiger prawns are the most important species in terms of production (64%) and value (78)%. Table 1: Production and value of selected farmed species 1998 Species Production Value Unit value tonnes $US 000 $US/kg Prawns Giant tiger prawn 113, ,090 $6.66 Banana prawn 31, ,120 $3.40 Metapeneaus prawn nei 31, ,190 $3.43 Fish Carp 184, ,600 $2.40 Milkfish 147, ,220 $1.80 Mozambique tilapia 41,830 87,843 $2.10 Nile tilapia 29,000 72,500 $2.50 Other species 117, ,224 $2.55 Total 696,880 2,137,787 $3.07 Source FAO Preliminary 1999 figures had prawn production at over 100,000 tonnes. Disease and bad weather conditions, though, severely impacted the industry and now only 30,000 40,000 tonnes of prawn production is estimated. Markets Farmed prawns are virtually all exported with receipts in US dollars. Indonesia was the world s major prawn exporter (farmed and non-farmed) until By 1997, with supply reduced by viral disease, Indonesia had declined to be the 4 th largest exporter behind Thailand, Ecuador and India. The three major prawn-importing countries are Japan, USA and Spain. Indonesia was the major prawn supplier to Japan until the viral disease problems in Demand though was falling in Japan from 1994 on as its economy slowed and later elsewhere in Asia as the economic crisis developed. Demand and prices remained high in the US because of its strong economy. Indonesia exported 12,800 tonnes of prawns to the US out of total imports of 263,000 in World demand for prawns declined overall by 13% from 1994 to In early 1998 tiger prawn prices were very high at over $US20/kg wholesale (Japan), because of the shortage of supply. They had been $US15.30/kg a year earlier. In 1999 they collapsed to a low of $US9.40/kg, but subsequently rebounded above $15. Finfish are consumed domestically. There is a growing export market export for the white, tilapia fillets to the US, (although less than 5% of production is exported) and for milkfish to Taiwan Meat and Livestock Australia 3
4 Aquaculture location Prawn farms are scattered all over Indonesia, but particularly around the coast of Java, in South Sumatra, Borneo, Celebes and in the Moluccas. Many are small operations while others are intermediate in size and independently owned from mills and further processing activities. There were plans for large expansions of integrated prawn farms in the late 1990s. Fully integrated operations include Bratasena, Dipasena and Wahyuni all in Lampung South Sumatra and others in the Japfa Comfeed Group. Bratasena is part of the Charoen Pokphand (CP) Group. Dipasena (part of the Gajah Tunggal Group) is over 16,000 ha in size, but closed in March Its sister companies, Wahyuni, which is 30,000 ha in size, but only 10,000 ha is currently operating, PT Biru Laut, the prawn hatchery and PT Besari, the feed milling company are still operating. There is continuing interest in expanding prawn production with a foreign investor reported to be currently investigating developing over 1 million ha of land. Finfish farms are widely scattered and many are smaller paddy operations, which use little commercial feed. Others are former prawn farms along the coastline from West to East Java and there are concentrations outside Jakarta (Bogor), near reservoirs (Cirata and Jatiluhur) and in North Sumatera and Celebes. There are some integrated operations owned by the CP Group, by Sinta Prima which is pursuing export opportunities for tilapia and by other groups. Feedmills There were 18 aquafeed manufacturers in Indonesia in Most millers are located on Java with Jakarta and Surabaya being the main centres. Many mills though are located near the farms and therefore scattered around the country. The larger mills having machinery, computerized control, quality control systems and hygiene standards which are of world best standards. Major aquafeed mills normally produce rations for their own prawn farms as well as for other farms, (although Bestari produces for itself) and for other animal species, particularly poultry. The larger mills are: Charoen Pokphand Indonesia Tbk. Pt. Japfa Comfeed Indonesia Tbk. Pt. Sinta Prima Bestari Indoprima Pt. Gold Coin Grobest Indomakur and Cargill Indonesia, Karka, Seafer, Romindo, and others. The CP group has extensive poultry, livestock and feedmill operations throughout Asia. It is a market leader in prawn operations technology and is one of the world s largest prawn producers. CP Indonesia had revenues of $225 million in 1998 of 2000 Meat and Livestock Australia 4
5 which 85% came from poultry, prawn and other feeds. It has an estimated 50 per cent of the prawn feed market in Indonesia (excluding Bestari). Bestari Indoprima milled 46,000 tonnes of prawn feed in 1999 (down from 69,000 in 1996), but has suffered a setback with the closure of Dipasena. Gold Coin (part of the Gold Coin Group, a major prawn and fish feed manufacturer in the SE Asian Region) has an estimated 20%, Grobest Indomakmur, part of the Chuen Shin Feed Co Ltd of Taiwan has an estimated 15%, while PT Japfa Comfeed and others have the remaining 15% of the prawn feed market. Sinta Prima has an estimated 50% of the finfish feed market. CP has an estimated 25% with Japfa, which concentrates on finfish feed, Cargill and others the remaining 25%. PRAWN AND FISH RATIONS In 1997 prawn feed production was estimated at between 90,000 and 200,000 tonnes and finfish feed production at 280,000 tonnes. This year production is estimated at 350,000 tonnes for prawns and 300,000 tonnes for finfish. Typical ingredients are set out in Table 2. There are no restrictions or regulations on protein sources for prawn. High quality, expensive fish meal rather than local fishmeal is used, because the local fishmeal is too variable in quality and generally not of sufficient standard. Table 2: Typical ingredients in aquaculture rations Ingredient Prawn ration Fish ration Fish meal 30-35% up to 20% Soymeal 10-15% 20% Wheat 20-25% not common Corn not common 35% Broken rice 5-10% not common Shrimp meal 5-10% not common Squid meal 5% not common Meat meal not used variable up to 5% A 1997 survey found prawn rations cost around $US900 per tonne reflecting the expense of the high grade fish meal. Fish (milkfish, tilapia) rations were much lower in cost at around $US per tonne. Meat meal is a potential lower cost source of protein for aquafeed and was used until 1996 in prawn rations, at least by new entrants to the industry, but is not used now Meat and Livestock Australia 5
6 Fish and meat meal imports into Indonesia The world production of high quality fishmeal is not increasing and fluctuates between 6 million and 7 million tonnes annually. Average export values have ranged from a low $US374 per tonne in the high production year of 1994 to a peak of $US721 in December 1997, when the El Nino impacted on the anchovy catch of the main producers, Chile and Peru. There are a number of grades of fishmeal and the very best can cost $US700/t or more. The May 2000 price of fishmeal #1, superprime in Indonesia is $US 485/t C&F. Fishmeal is imported primarily from Chile and Peru. Imports (FAO data) reached a peak of nearly 250,000 tonnes in 1994 worth over $US103 million ($US416/t), but fell to 122,000 tonnes in 1997 ($US672/t). Figure 2 Indonesian imports of fish and meat meals Tonnes ' Fish meal Meat meal FAO Meat meal Indo Year Meat meal is imported predominately from the US. FAO data show imports peaking in 1994 and 1995 with values around $US64 million or $US336/t in each year and then falling dramatically. Indonesian data, however, show imports rising from 1996 to a peak in 1997 and then falling by over 50% in Indonesian producers moved away from using meat meal in the prawn rations because of unsatisfactory results in the late 1990s combined with import clearance delays associated with Bovine Spongiform Encephalopathy (BSE). The dramatic decline in use however was mainly driven by deterioration in the Indonesian economy. The poultry industry, the major user, is domestically focussed and foreign exchange was difficult or impossible to obtain. As well competition from imported Thai poultry products increased. Trade sources indicate that imports have now returned to about 120,000 tonnes annually and that BSE is no longer an issue Meat and Livestock Australia 6
7 MEAT MEAL New entrants to the farmed prawn industry were using meat meal in prawn rations until 1996 and Users claim that they were not getting satisfactory growth rates and that the feed did not have a desirable fishy smell. Australian meat meal posed particular problems: the meal was very inconsistent in quality in the same shipment, forcing users to change ration formulations frequently, requirements were for minimum 50% protein and less than 14% fat, but the supplied meal had protein ranging from 42 to 46% and more than 15% fat, in comparison US meal was 49-53% protein with 8-12% fat, the rations had a rancid odour (believed to be from ovine ingredients) and there were delivery problems and difficulty in procuring sizeable quantities. US meat meal was preferred (even for the poultry rations) to Australian sources because the price differential of $US5/t was not sufficient compensation. Research into meat meal use in aquafeeds Meat meal is a manufactured product and its composition varies widely depending on input species, processes used and additives. Comparisons between meat meals are difficult without full analyses and knowledge of the analytical technique used. Australian research demonstrates that appropriately formulated meat meal may be successfully used up to certain levels in prawn and fish rations in place of fishmeal. Up to 30 per cent replacement by meat meal can occur in prawn diets without any affect on performance and this could be as high as 50 per cent. Actual use, however will be governed by many factors including nutritional, palatability and water stability of the formulation as well as by the cost of ingredients and by industry acceptance. Work undertaken previously for Meat & Livestock Australia suggest that ideally for aquaculture rations 55% plus protein meat meal is required; anti-oxidants should be added to prevent rancidity; fat should be less than 10 per cent; and ash should be less than 22 per cent. Cost considerations Producing consistent, high quality, premium meat meals requires additional controls on inputs, on processing and generally involves additional investment in plant. A low value by-product is produced, so there is less meat meal produced per unit of raw material. These factors result in higher costs, which would need to be recouped in the sale price of the higher quality product. Nevertheless there appears to be an opportunity to substitute suitable meat meal for the more expensive fishmeal Meat and Livestock Australia 7
8 RATION FORMULATIONS Indicative rations were formulated for prawns and tilapia, in consultation with aquaculture scientists from CSIRO and State Departments, using least cost models. The models were used to investigate substitution possibilities between the major protein sources, fish, meat and soy meals as their prices varied. The results are presented in chart form and provide a guide to ration composition not exact specifications. Table 3: Protein costs in Indonesia Protein sources Cost C&F Jakarta $US per tonne (a) Fish meal: Chilean steamdry/us white More than $700 (estimated) #1 superprime $485 #4 standard A $425 Meat meal: high-premium quality (62% $490 (estimated) protein) Aus/US min 50% protein $ Soymeal Indian/US min 44% protein $ (a) Prices quoted April/May 2000 US or Australian origin meat meal (50% min protein) was $US C&F. Meat meal with 50% protein content is well below the quality recommended as ideal for prawns but would be suitable for finfish such as tilapia. High-premium quality meat meal suitable for prawns is estimated to cost about $US490/t. Prawn ration Nutritional considerations required that a minimum of 35% of the protein in the prawn ration had to come from a premium quality fish meal and soymeal could not be more than 15% of the ration. The meat meal modelled is 62% protein, 9.5% total fat and 25% ash (on a dry matter basis). Percentage of meat meal in ration The percentage of meat meal in the ration is not very sensitive to its own price nor the price of soymeal, lying between 4 and 6% over most of the price ranges investigated (see Figure 3). In these least cost ration formulations, the less expensive protein sources are used as much as possible in preference to expensive fishmeal. The high quality meat meal however does not significantly come into the ration unless its price is below $US350 and soymeal prices are over $US240. At these low meat and high soymeal price combinations, meat meal replaces soymeal and fish meal and constitutes some 10-20% or more of the ration. At other price combinations soymeal is used as much as possible within the ration constraints Meat and Livestock Australia 8
9 Figure 3: Meat meal inclusion rates in prawn rations over a range of meat and soymeal prices ($US per tonne) Prawn: Grow-out ration 40%-50% 30%-40% 20%-30% 10%-20% 0%-10% 50% % Meat Meal in diet 40% 30% 20% 10% 0% $320 $360 $400 $440 $480 $520 $140 $200 $260 Price Soymeal ($US) Price High Quality Meatmeal ($US) The price of high-premium quality meat meal would need to be below about $US350 per tonne to the Indonesian formulator with other protein substitutes, such as soymeal, more expensive than they currently are before meat meal is likely to become a significant ingredient in prawn rations Meat and Livestock Australia 9
10 Tilapia ration The tilapia ration is not constrained to include fishmeal, but soymeal cannot exceed 50%. The meat meal may be of a lower quality and hence a lower price, than the meat meal required for prawns. The meat meal modelled is 52% protein, 11.6 per cent fat and 33% ash (dry matter basis). The prices investigated (see Figure 4), therefore, are lower than the range used for prawns Figure 4: Meat meal inclusion rates in tilapia rations over a range of meat and soymeal prices ($US per tonne) Tilapia: Grow-out ration 40%-50% 30%-40% 20%-30% 10%-20% 0%-10% % Meat Meal in diet 50% 40% $260 30% $230 20% $200 10% $170 0% $140 $200 $230 $260 $290 $320 $350 Price Meatmeal ($US) Price Soymeal ($US) Percentage of meat meal in ration The less expensive meat and soy meals replace the fishmeal as much as possible in the tilapia ration. At prices prevailing in Indonesia in April 2000, 30-40% of the ration could be meat meal. If meat meal costs were lower, say $US230 or soymeal prices over $US220, the inclusion rate could rise to 40-50%. Figure 4 clearly shows a band of meat and soy meal prices over which the meat meal inclusion rate would remain relatively constant at about 6% Meat and Livestock Australia 10
11 IS THERE A MARKET FOR AUSTRALIAN MEAT MEAL? Australian renderers can use these charts as a guide to see if meat meal is likely to be included in the ration in Indonesia. Renderers need to know the return that they require, the cost of competing protein, (soymeal has been used here as the usual competitor) and then determine if their particular meat meal product falls within a feasible area. Australian meat meal prices The meat meals required by prawns and by tilapia and other finfish are different. Indicative Australian meat meal prices are set out Table 4 along with other costs obtained from Trade sources in March 2000 to give estimates of landed costs in Indonesia for three different quality meals. Table 4: Costs of Australian meat meal landed in Indonesia Meat meal quality Standard High Premium specifications (as is) protein 50% 55% 62% ash 36% 30% 25% Costs $A per tonne $A per tonne $A per tonne Fob (a) Freight (container) per tonne Total $398 $458 $797 Total cents $US240 $US277 $US482 (a) The fob export values depend on the $A/$US rate at the time of quote and freight. For example the $A335 fob (relevant to US cents) would increase to $A350 if the exchange rate decreased to 58 cents and freight remained constant (freight may also increase with a decreased exchange rate). What is relevant is the landed $US cost. Possibilities for Australian meat meal The analysis suggests that premium quality Australian meat meal at $US482 in Indonesia ($A735 per tonne fob) is at the top end of the feasible range of costs for prawn rations and would warrant only about a 4% inclusion rate (see Figure 3). Nevertheless, 4% of the estimated Indonesian prawn feed production of 350,000 tonnes is 14,000 tonnes. Australian meat meal at $US240 per tonne in Indonesia ($A335 fob) could be included in tilapia (finfish) rations at 30% or even higher with soymeal price above $US215 (see Figure 4). A conservative assumption that 10% of the estimated 300,000 tonnes of Indonesian fish feed production could be satisfied by meat meal would result in a potential market of some 30,000 tonnes. Given the potential, Australian renderers should carefully consider the possibilities of supplying both the prawn and the fish aquafeed markets, particularly if they can supply the required quality meat meal at lower costs than considered here Meat and Livestock Australia 11
12 REGULATIONS Tariff regulations There are no tariffs on meat meal imports into Indonesia. STRATEGY CONSIDERATIONS Any company interested in developing exports to Indonesia will need to determine its own strategy. In particular the strategy should address the perceptions that users have regarding the poor performance of prawns fed on rations containing meat meal and on the inconsistencies in both meat meal quality and supply from Australian sources. Familiarity with Australian research on the place of meat meal in aquaculture diets would be helpful. The following questions are suggested as considerations in strategy development and assessment. Should you export meat meal as a raw material or in formulated rations? Is the potential price for meat meal in Indonesia and likely sale quantities suitable for your circumstances? Can you consistently manufacture and supply the appropriate grade meat meal? How can you convince an industry with poor perceptions of meat meal that your product will perform adequately in their rations? How can you target the decision makers within the feed manufacturers and develop a close relationship with a manufacturer or several manufacturers? How do you establish or access a satisfactory distribution network? Once accepted, how do you protect the integrity of your product and prevent competing suppliers from taking your market? 2000 Meat and Livestock Australia 12
13 CONTACTS The following contacts are suggested for organizations wishing to further develop opportunities for meat meal in the Indonesian aquaculture industries. MLA have a Bureau in Jakarta which is manned by staff who are well connected with the Indonesian feedmilling and aquaculture industries. Australia Meat and Livestock Australia Ltd Austrade Dr Lewis Atkinson Initial contacts should be directed to the +61 (0) (M) Austrade Export Hotline latkinson@mla.com.au phone Indonesia Austrade Michael Abrahams Senior Trade Commissioner Australian Embassy Jalan H.R.Rasuna Said Kav C/1516 Jakarta Indonesia (P) (F) USEFUL REFERENCES Aquaculture Magazine Buyer Guide FAO Fisheries Circular No 886: Review of the State of World Aquaculture, Rome 1997 (ISSN ) FAO Fisheries Web Site: International Aquafeed Issue International Aquafeed Directory 1999 Meat & Livestock Australia (1999), Prospects for marketing meatmeal for inclusion in Indonesian aquaculture diets, prepared by Venturetech Pty Ltd Meat and Livestock Australia 13
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