Integrated oil palm and cattle production

An estimated 10 million hectares of Indonesia is devoted to palm oil production, largely in Sumatra and Kalimantan.

Palm oil operations offer significant commercial potential because the land is already purchased and in use for palm oil production. Cattle breeding under palm can provide owners with an additional income stream, and may reduce production costs and increase productivity.

IACCB is testing these propositions in four locations:

The selection of 4 projects with quite different operating environments is allowing IACCB to identify the key challenges and solutions to commercial sustainability within the Integrated Oil Palm and Cattle Production model.

The video is showing the Partnership's 4th Commercial Cattle Breeding Course which was also participated by some of IACCB's partners.


SISKA is Commercially Viable

Well-managed SISKA enterprises have been proven by IACCB to have strong commercial potential. Well-managed SISKA enterprises can produce feeder cattle (average 320 kg) at around the same or lower live-weight cost than the cost of imported Australian BX feeders. Production costs in Australia is approximately 30% cheaper than in Indonesia but the freight cost from Australia adds about 25% on to CIF (Cost, Insurance and Freight) costs.

The graph above shows there are significant differences in commercial results between the SISKA projects. The production cost of feeder cattle differ substantially, as one partner can produce feeder cattle at about Rp 35-36,000/kg liveweight whereas another partner has an estimated cost of Rp 56,000/kg.

The production cost is greatly influenced by achievement of key-performance indicators. Comparative analysis between the best and worst performing partner shows for instance calving rates fluctuating between 69% for the well-performing and only 43% for the worst performing partner. A similar discrepancy is visible in calf mortality rate which is fluctuating between only 5 and 15% severely impacting weaning rates. Another factor heavily influencing commercial results is Average Daily Gains figures of between only 0.3kg and 0.6kg/hd/day which impacts the cost of gain when feed and operational expenses are relatively similar.

Investment for a productive herd of 300 BX cattle is about AUD$650,000 and operational expenses to cover the first three years will amount to AUD$350,000 to AUD$400,000 depending on the additional feed provided. These costs assume most progeny is retained on the farm until they can be sold as feeders.  

A positive cash-flow can be achieved by Year 4, a result that is particularly supported if progeny is grown up to around 320-350kg, which should be achieved at around 24 months given the Average Daily Gains in SISKA-grazing of about 0.4kg/hd/d.

Projected Internal Rate of Return for the cattle enterprise is between 10 and 16%.

Net Present Value at year 10 is relatively low, at about AUD$58,500 for smaller herds of 300 cows, that will organically grow up to a herd of 750 by year 10. Net Present Value increases substantially to about AUD$800,000 if an additional 300 cows are procured in Year 4 which will enable the herd to grow organically to about 1,300 by by year 10.

For SISKA, professionally managing the herd is key to commercial success, most importantly to ensure that key productivity indicators such as weaning rates and average daily gains/cost of gain are achieved in an efficient and effective way. IACCB experience has proven that sustainable commercial viability can only be achieved when there is an optimal integration between the plantation and the cattle enterprise, to the extent that they become mutually supporting. The plantation provides feed for the cattle including native grass, palm fronds, and palm kernel cake, and the cattle provide weeding services and additional organic manner potentially increasing fresh fruit bunch yield.

Professional management requires access to experienced staff, from ranch manager to stockmen/women, who have a passion for the cattle industry. Adequate technical skills and experience are essential to pro-actively identifying issues in the herd and immediate action to address them.  The lack of suitable staff and management in Indonesia at present is a key barrier to industry growth.


IACCB SISKA Partner Update

After experiencing very positive commercial outcomes, several IACCB partners have decided to increase their cattle business investment, with several planning to invest more than AUD$500,000, mainly in additional livestock and the additional infrastructure and equipment to support their expanded herd.

PT Buana Karya Bhakti, in South Kalimantan, is planning to expand their herd to 600 productive cows by acquiring another 300 head of cattle. They are also establishing their SISKA Center of Excellence which will function as a training center for people from government and the private sector interested in SISKA. They recently received a visit from Ministry of Agriculture officials eager to learn about SISKA opportunities and the challenges experienced in terms of feed availability in different seasons of the year.

PT Superindo Utama Jaya (SUJ), in support of the vision of the Lampung Governor to develop Lampung into one of the main producers of cattle meat in Indonesia, is expanding their semi SISKA-semi breedlot in Nakau. They are expanding their herd to 1,000 head of cattle, with the cattle originating from their mother company. Expansion will include approximately 550 female breeding stock comprised of about 50% BX and 50% local cattle. SUJ is also investing in the expansion of infrastructure and the development of 30ha pasture partly for grazing and partly for cut-and-carry.

PT Kalteng Andinipalma Lestari (KAL), the Board of Directors is discussing plans to scale up their cattle breeding enterprise through an increase of their cattle herd, an expansion of the grazing areas and more pasture development.

PT Bio Nusantara Teknologi (BNT), feeling the brunt of the declining palm oil prices and the down-turn in the sector has decided to solely focus on their core-business. They will soon stop cattle breeding and organic fertilizer production.

Promotion efforts and promising commercial results have generated broader industry interests as evidenced by an increased number of requests for information and an increased interest in downloading of the IACCB tools and manual. GAPUSPINDO (Indonesian Beef Cattle Business Association) has shown considerable recent interest, as they are looking for alternative models to comply with the recent Regulation of the Minister of Agriculture (Permentan 41/2019) on the import of big ruminants.