Chaos in Indonesia – processors urged to buy local milk
Dairy cattle farmers in Pasuruan in East Java, Indonesia, recently protested against the central government of Indonesia. Milk processors that regularly buy fresh milk are choosing to buy more imported skimmed milk, which has led to local fresh milk spoiling.
Meanwhile, farmers from Boyolali in Central Java brought their fresh milk to the city centre and in protest ‘bathed’ in it, while some others sold their fresh milk to pig farmers at a cheaper price of US$0.19 per litre.
Daniel Johan, a member of the People’s Representative Council, said the protests showed that the government has not paid attention to the welfare of the country’s dairy farmers. “Farmers are taxed from many different aspects, while imported [skimmed] milk from Australia and New Zealand are free from import duties, making it cheaper than locally produced milk. It’s unfair,” said Johan, who continued saying that as the price of imported milk is cheaper, milk processors are increasingly buying it, gradually reducing their buying volumes of local fresh milk. Despite this, the government’s policy encourages milk processors to partner with farmers and absorb their fresh milk.
Partnerships between processors and farmers
“In fact, only a few milk processors do partnerships with farmers. The government should check this and evaluate the policy of free import duty for imported skimmed milk. The government should also give incentives to farmers to increase milk production and reduce our dependence on milk imports,” Johan stressed.
Aslokani, director general of Customs at the Finance Ministry, said the free import duty policy is an impact of a free trade agreement (FTA) between Indonesia and Australia and New Zealand. Asean countries, including Indonesia, have signed the Asean-Australia-New Zealand FTA (AANZFTA). Due to this FTA, milk from Australia and New Zealand are financially preferred by milk processors than other exporting countries that bear 5% import duty.
If compared with local fresh milk, the price of imported skimmed milk is 15-25% lower, according to Budi Arie, Minister of Cooperatives. Currently, local fresh milk is priced at around US$0.44 per litre while the ideal price is US$0.57 per litre. Arie added that the preference is also driven by declining consumer demand, pushing some milk processors in East Java to reduce their procurement of local fresh milk.
Different arguments
Sonny Effendhi, executive director of Indonesia’s Milk Processing Industry Association, told local media that they are reducing local fresh milk absorption due to quality considerations. He said they found some local fresh milk contained unwanted materials, such as water, sugar, and other additional materials. “These are not in line with the standards of food safety, so we cannot buy them. As milk processors, we are obliged to control the food safety aspects of our products,” he added.
Meanwhile, Teguh Boediyana, chairman of the National Milk Board, said the statement from the Milk Processing Industry Association’s representative is wrong. “Where is the data? Where is the lab test result?” he asked. According to him, dairy farmers and milk cooperatives have partnered with milk processors for about 50 years. “This is the first time I have heard the statement about their concern on unwanted materials,” he said.
“Farmers already know that if they are to improve their milk quality, their fresh milk will be priced higher, so they will have better farming management and give good rations,” said Boediyana. “I strongly believe that farmers always want to grow together.”
Solution from the government
Responding to this, agriculture minister Amran Sulaiman said his ministry will change the current regulation where the new regulation will oblige milk processors to buy local fresh milk. As long as the fresh milk is good, milk processors must buy it.
“We have agreed and sent letters to livestock agencies in all provinces and regencies to follow up,” stated Sulaiman. “We want milk processors together with the government to support farmers to improve their milk production and quality and business.”
Boediyana suggested that the government implement an import ratio system where milk processors are allowed to import if they have absorbed local fresh milk. “This is a win-win solution,” he said.
Currently, the Agriculture Ministry is postponing import recommendations to 5 milk processors to ensure these companies absorb local fresh milk first before they import. “I believe milk processors will obey our policy. If they refuse, we will revoke their import permits forever. This is our firmness to protect farmers,” Sulaiman stressed.
