Preliminary Results Are In!

After more than 2 years of partner engagement and project delivery, key commercial performance indicators (conception rates, calving rates, weaning rates, calving intervals and Average Daily Gains) are starting to show trends, supporting a more conclusive answer on the commercial viability of the SISKA model - cattle breeding in oil palm plantations and the Cut-and-Carry small-holder breeding model. The Open-grazing model will need another 6 months of data given the later start of the open-grazing project. Conclusive results for all three models will be made available to industry in early 2020.

SISKA has strong commercial potential: The cost of production in the SISKA-models varies between Rp. 40,000 and Rp. 60,000/kg liveweight, if raised up to 320kg. The lower-end production costs are equal to the cost of imported feeders. In well-managed SISKA businesses, IRR reaches 10% at year 10. Preliminary research results show oil palm productivity improvement in one plantation at 5 to 12%, which if widely reflected, substantially improves SISKA commercial viability, and a significantly better IRR over imported feeder. Research is on-going and final figures will be available early 2020.

Good performance (and good cost-of-gains) are dependent on (1) effective cattle and plantation integration (2), high quality and consistent herd management, (3) adequate cash-flow to support the ongoing needs of the cattle business, and (4) pasture development, complemented by using palm oil waste products, that ensure enough quality and quantity of feed. Commercial viability is reflected in three out of the four SISKA-partners investing to expand their cattle breeding businesses.

Although production costs in Indonesia are still slightly higher than the cost of imported feeders, there is quite some room for improvement in some of the SISKA-partners which will make production costs decrease. One of the SISKA partners is already producing feeders at a cost lower than the imported ones.

Graph1: Production costs as compared to Australian imported feeders
Graph1: Production costs as compared to Australian imported feeders


Small-holder Cut-and-Carry: Strong conception, calving and weaning rates, short calving intervals, and reasonable growth rates can be achieved under a Small-holder Cut-and-Carry model. It is however very challenging to sustainably achieve commercial viability. Communal breeding systems practiced by farmer groups are rare, except where the communal model is a necessity, and is locally and socially accepted, e.g. by providing collective security for the cattle. Critical commercial success factors include cohesion of the group/cooperative, solid leadership and transparent management, adequate cash-flow, and member and leader cattle breeding experience. The cost of production for a feeder up to 320kg is about Rp. 37,500/kg liveweight in well-managed systems which is lower than the cost of imported feeders. Achievements in the small-holder model using a communal system are much influenced by the collaboration agreement with IACCB and the intensive technical support provided. Replication in a non- communal system will benefit from intensive management from the individual farmers but conception will be challenging if not bulls are provided and/or artificial insemination is not reliable.

Open Grazing: This model requires the least starting capital, and daily expenses per head, compared to the other models. Sustainable commercial viability appears to be dependent on good management, pasture improvement, and the comparative advantage of using the available land for cattle breeding compared to other investment alternatives as investors will have to weigh potential income from investing in cattle breeding against the use of the land for investing in cash crops or other activities. Total costs (feed plus operational costs) are Rp. 6,000 (AU$0.6) per head/per day - half the cost of SISKA. Feed costs are minimal as the cattle almost solely rely on pastures. The cost of production for a feeder up to 320kg is about Rp. 35,000/kg liveweight which is considerably lower than the cost of imported feeders. Approximately six months more data is however required to conclusively determine the commercial viability of the open grazing model.