New Zealand beef and offal exports to Indonesia have slumped heavily since quotas were introduced to limit overseas supplies, in an effort to encourage local meat production.
The total trade plunged from $185 million in 2010 to $118m last year.
It is understood that it could take some time, perhaps a couple of years, for the quota issue to be resolved and earlier trade levels to be restored, despite soaring prices and beef shortages being reported in Indonesia.
By volume, Indonesia was New Zealand's second-largest beef and offal market in 2010, accounting for about 10 per cent of exports, after the much larger United States market, which accounts for about half total exports.
But in the past year Indonesia has dropped back to become New Zealand's fifth-largest export market. With deep cuts to quotas from big beef exporters including New Zealand, Australia and the US, domestic beef prices in Indonesia reportedly jumped as much as 25 per cent last week.
Meat Industry Association chief executive Tim Ritchie said he hoped Prime Minister John Key's visit to Indonesia this week would lead to a better understanding of the importance of the beef trade there, and that New Zealand was "there for the long haul".
With a better understanding, he hoped to see "some change in policy", Mr Ritchie said. Given rapidly rising prices for beef in Indonesia, there might be consumer pressure for more quota to be allowed in later this year.
Indonesian media reported this week that Sarman Simanjorang, Jakarta branch chairman of the Indonesian Indigenous Entrepreneurs Association, said the government quota on beef imports had driven up prices to 80,000 rupiah (NZ$10.68) a kilogram, pushing meatball and sausage producers to the "brink of collapse".
Mr Ritchie spoke to a food security conference in Indonesia in February when there was a huge focus on the importance of lifting protein consumption among the country's 240 millon people. But the Indonesians thought the best way to do that was through self-sufficiency by producing more beef at home. To do that, the country chose to limit imports, Mr Ritchie said.
New Zealand took the line that it could help Indonesia lift protein consumption through trade, and help them gain farming expertise.
Mr Key met the Indonesian leader Susilo Bambang Yudhoyono on Tuesday and planned to raise concerns about the beef trade. "Technically, almost certainly, that is a breach of the FTA (Free Trade Agreement)." Mr Key said he would raise the matter in a way that was "respectful but nevertheless makes our point".
In the past decade New Zealand beef exports grew from 3600 tonnes to almost 37,000 tonnes a year, a near tenfold increase to Indonesia.
But in 2011 import quota restrictions were imposed, limiting all exports to Indonesia. "Volumes dropped significantly. New Zealand's dropped to around 21,000 tonnes, in 2011," Mr Ritchie said.
The quota this year for all boxed beef is just 36,500 tonnes from the US, Australia and New Zealand.
Indonesia is also an important market for beef offal for human consumption. That lifts the overall value of animals sent to the meat works and reduced by about half the amount rendered to low-value meat and bone meal.
In 2011, the volume of offal exported to Indonesia halved to about 6000 tonnes. Fairfax NZ
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