The announcement by Prime Minister Modi of a ban on the “sale of any bovine animals for slaughter” has caught analysts of guard, with some early reports filtering through that this is not a major event on the world beef stage; we are not so sure.
It is pretty clear from reading the government decree that failing any backflip by the government, this will impact the slaughter of cows, buffalo and even camels.
MLA reported last year that the Indian Buffalo Meat (IBM) exports had grown to 20% of the total beef market in the greater Jakarta area. The total Indonesian beef demand is 600,000 tonnes, while local production is around 400,000 tonnes so the deficit is filled by imports. IBM has been a cheap source of beef protein.
Australia also has had a long-standing supply arrangement in place with Indonesia, however the Australian herd rebuild and subsequent reduction in available beef for sale has increased prices. Indonesia was looking to use India as a cheap source of beef to balance the demand for beef protein with the concern that increasing prices from Australian suppliers would upset the local population.
The announcement by India this week that is was banning the slaughter of all bovine was a “defacto countrywide ban on the slaughter of cattle & buffalo, and the consumption of beef”, according to a report in The Financial Times. As reported earlier on Mecardo, on a global beef exports scoreboard, India sits in second place behind Brazil.
The Indian cattle herd is estimated at about 190 million, with a further 108 million buffalo. While it has the largest combined bovine herd in the world, it also has a significant export value of circa $5 billion.
The biggest impact will be felt in Vietnam. The flow into Vietnam of beef product has long been viewed as a grey channel for beef product into China. Currently the flow of Australian boxed beef into China sits at 11.5% of our total boxed beef exports and the flow of live cattle into Vietnam from Australia is around 9% of our total live export trade. So, any impact on available supply into Vietnam, and by default into China is important in assessing the future prospects of Australian beef demand & price.
It is difficult to see anything but positives out of this announcement for Australian beef, and for red meat in general. While there is still a lot of water to flow under the bridge, and providing the government doesn’t back track on this decree, the demand for meat protein in Asia in particular will need to be met, one way or the other with a reduced supply coming out of India.
In relation to the backlash that the Muslim & Christian communities in India are mounting, it should be noted that they are by far the minority to the Hindu majority. It is also worth reflecting on the government’s recent effort to stamp out corruption; the impact was to dramatically inconvenience the majority of the country when the cash economy was targeted by making cash held in large denominations worthless. Despite widespread anger this progress has been implemented. The impact of a ban on beef for slaughter in a country that is predominately Hindu, and has close to a 40% vegetarian population will likely be less dramatic.
It also has to be noted that of all Indian exports, agriculture makes up on 13.2%, and of this only 14% is bovine. Will this have a strong enough financial impact on India to make the staunchly conservative Prime Minister Modi, and his government perform a U-turn.
Can we speculate on what this might mean to the rest of the worlds exporters?
The simple fact is that with a total ban of India’s beef slaughter and therefore exports, the world would suddenly be 20% of beef short. This will have an impact within India also as the non-vegetarian population will also be short of beef; it is also highly unlikely that any imports will be permitted so this has the potential to cause a massive change in diet.
Countries that have been relying on India’s beef exports will suddenly find that imports are now much tighter, supply from the large exporters will be keenly sought. This is a favourable situation for beef sales negotiators around the world; increased demand as a result of a supply shock puts the power in the hands of the seller.
The announcement was a major shock coming out of left field, a typical “black swan” event for India’s beef exporters and processors. These types of events are not uncommon in the world of agricultural commodities, however in this case one of the beneficiaries will be the Australian beef producer.
Mily Wilson is the Mecardo Software Development Manager, she is currently completing a Masters of IT at Federation University, Ballarat. Mily’s home is in the province of Kerala in India, this is an area that is directly impacted by this ban with a high number of meatworks and markets based in the province.
This main purpose of this rule is to prevent cruelty against cattle and provide them proper facilities such as feeding, feed storage area, enough water supply, housing etc. However, this ban aimed at addressing cruelty would put an end to cattle and buffalo slaughtering in India. Many states have already filed petitions against this rule. The beef export industry is worth more than $4.1 billion to the Indian economic value. Modi government’s ban on beef trade is going to be huge blow to beef export industry, which would directly affect the Indian economy. This is a conflict between religious ideals and economic value. Only time will tell who is going to win.
The full details of the ruling, Cruelty to Animals (Regulation of Livestock Markets) Rules, 2016 can be read on the following link: