INDONESIA DAIRY INDUSTRY

DEVELOPMENT

Presented by:
Dr. Ir. Arief Daryanto, MEc
Director, Graduate Program of Management and Business IPB and
Senior Lecturer, Department of Economics, FEM-IPB
Seminar on Update Dairy Industry, Food Review, June 21, 2012
IPB International Convention Center, Bogor

Presentation Outline :
Introductory Remarks
Current Situation of Dairy Industry in Indonesia
Key Drivers for Dairy Development
Government Policies on Dairy Development
Concluding Remarks

Introductory Remarks

Checkoff Program: Got Milk?

Current Situation of Dairy Cow

Industry in Indonesia

Figure 1. Current Worldwide Total Milk Consumption Per Capita

Table 1. Current Worldwide Total Milk Consumption: Where is Indonesias

Position?
No

Country

Milk Consumption (000 tonnes)

2007

2006

2005

2004

2003

2002

2001

80,040.90

77,105.60

73,895.62

70,842.84

68,084.87

66,360.58

66,078.34

India
United States of
America

78,342.86

76,342.48

76,896.32

76,007.52

76,421.70

76,331.76

74,753.57

China

38,354.33

35,848.09

31,218.86

26,834.22

21,719.60

17,334.36

14,282.55

Pakistan

27,542.69

26,653.65

25,018.76

24,305.15

23,668.84

22,978.51

22,344.13

Russian Federation

24,479.72

21,700.53

24,133.60

21,204.86

21,886.36

20,587.32

21,801.20

Brazil

23,691.08

23,286.69

22,522.93

21,435.39

20,615.03

20,845.08

19,329.97

Germany

20,358.63

19,961.48

20,370.81

19,845.03

21,003.56

20,667.02

19,559.32

France

16,075.18

15,956.66

15,982.35

16,157.00

16,396.35

16,747.95

16,227.70

Italy

15,187.07

15,654.63

15,537.77

14,921.00

14,781.81

15,090.79

14,756.08

14,760.97

14,616.26

15,053.33

14,222.96

14,546.56

13,899.23

13,543.51

...

...

...

...

...

...

...

24 Australia

4,815.57

4,842.11

4,606.02

4,200.16

4,456.44

4,630.13

4,326.37

33 Indonesia

2,578.03

2,437.26

2,124.40

2,211.56

1,771.86

1,670.10

1,590.02

51 Thailand

1,505.94

1,611.85

1,676.88

1,963.93

1,553.05

1,286.34

1,274.76

65 Viet Nam

1,025.63

929.47

949.53

776.26

784.75

592.96

893.43

979.60

1,047.02

1,146.70

1,180.24

1,057.39

1,170.06

1,181.38

10 United Kingdom
...

...

66 Malaysia

Table 2. Current Worldwide Total Milk Consumption (Excluding Butter)

Per Capita: Where is Indonesias Position?
No

Country

Milk Consumption (kg/capita/yr)

2007

2006

2005

2004

2003

2002

2001

Finland

361.19

341.19

341.11

334.89

354.64

349.97

357.82

Sweden

355.86

370.5

368.44

370.27

379.1

375.55

362.23

Netherlands

320.15

331.18

345.35

340.1

325.81

328.14

336.73

Switzerland

315.78

311.59

301

302.49

309.91

306.92

298.28

Greece

314.69

303.6

270.83

261.1

267.58

260.37

244.23

Montenegro

305.87

304.87

Denmark

295.62

265.9

296.79

215.1

198.96

206.75

247.24

Albania

281.17

304.9

300.5

296.93

300.14

280.43

274.38

Lithuania

273.87

256.47

204.61

238.42

213.2

203.56

204.83

10

Romania

266.19

259.39

248.82

246.58

229.78

221.68

203.57

...

...

...

...

...

...

...

...

...

16

United States of
America

253.8

249.73

254

253.51

257.38

259.62

256.89

98

Malaysia

36.89

40.12

44.74

46.88

42.78

48.25

49.7

141 Thailand

22.48

24.24

25.43

30.1

24.1

20.18

20.24

155 Viet Nam

11.91

10.92

11.29

9.35

9.58

7.33

11.2

157 Indonesia

11.48

10.98

9.69

10.22

8.29

7.92

7.64

158 Comoros

11.15

9.79

8.99

11.81

9.27

10.79

8.55

Figure 2. Current Worldwide Total Milk Production

Table 3. Current Worldwide Total Milk Production: Where is Indonesias

Position?
No

Country

India

Latest
Available
Milk
Production
(tonnes)

Year

Cow milk

Buffalo milk Goat milk

Sheep milk

Camel milk

112,114,290

2009

40.26%

56.10%

3.67%

0%

0%

United States of
America

85,859,400

2009

100%

0%

0%

0%

0%

China

39,946,410

2009

88.89%

7.51%

0.68%

2.88%

0.00%

Pakistan

34,362,000

2009

34.88%

62.92%

2.10%

0.10%

0%

Russian Federation

32,561,674

2009

99.28%

0%

0.72%

0%

0%

Brazil

29,255,768

2009

99.51%

0%

0.49%

0%

0%

Germany

27,972,367

2009

99.88%

0%

0.12%

0%

0%

France

24,217,730

2009

96.38%

0%

2.57%

1.10%

0%

New Zealand

15,400,000

2009

100%

0%

0%

0%

0%

10

United Kingdom

13,236,500

2009

100%

0%

0%

0%

0%

...

...

...

...

...

...

...

...

...

18

Australia

9,388,000

2009

100%

0%

0%

0%

0%

68

Indonesia

1,277,843

2009

69.00%

0%

21.60%

9.39%

0%

75

Thailand

840,691

2009

100%

0%

0%

0%

0%

311,398

2009

89.34%

10.66%

0%

0%

0%

51,509

2009

79.31%

20.69%

0%

0%

0%

104 Viet Nam

135 Malaysia

Figure 3. Geographical Variations of Farms

Source : IFCN Dairy Research Center 2011

Figure 4. Cost of Milk Production in 2010

(Average Sized Farms)

Source : IFCN Dairy Research Center 2011

Table 4. Production, Consumption and Price of Milk in Some

Countries
Milk Product
* 1000 t

Cons. L per
capita/year

Milk price
Farmers US
$/litre

Farmers
share of
cons price

Thailand

830

20

0.47

44

Indonesia

670

10

0.37

--

Malaysia

60

34

0.58

30

Vietnam

27

11

0.43

41

Philippines

14

14

0.54

38

Source :IFCN, 2010

Source : IFCN,2010

Table 5. Ownwership Structure and Number of

Farmers Involved in Indonesias Milk Production
OWNERSHIP
STRUCTURE

WEST JAVA
CATTLE

CENTRAL JAVA

FARMERS

CATTLE

102.630

25.263

94.320

25.234

122.315

37.286

1 - 3 Head
70,47%

72.354

19.717

66.496

19.388

86.232

28.013

4 - 6 Head
23,49%

24.118

4.692

22.165

5.037

28.744

8.281

6 Ekor
6,04%

6.158

854

5.697

809

7.399

992

Source : Munawar, GKSI 2010

FARMERS

EAST JAVA
CATTLE

FARMERS

Table 6. Dairy Cattle Population, 2007-2011, by Province, Number of Head

Table 7. Dairy Cows Population and Milk Output by

Main Provinces, 2011*)
Dairy Cows
Number

Dairy Cows
(Percent)

Milk
Milk Production
Production
(Percent)
(Tonnes)
57,9
536.458

East Java

296.262

49,6

Central Java

149.931

25,1

100.350

10,8

West Java

139.973

23,4

268.042

29,0

Other

10.963

1,8

20.925

2,3

TOTAL

597.129

100

925.775

100

GKSI

Source : Statistik Peternakan 2011

*) Preliminary Figures

Table 8. Fresh Milk Production 2005 2011, by Province, in tonnes

Source :www.ditjetnnak.go.id

Table 9. Milk Productivity by Major Provinces, 2009

Dairy Cattle
Province

Productive of Female
(percent)

North Sumatera
West Sumatera
South Sumatera
Bengkulu
Lampung
Jakarta
West Java
Central Java
DI Yogyakarta
East Java
South Sulawesi
Indonesia
Source : www.ditjennak.go.id

Source :www.ditjetnnak.go.id

67,69
50,00
88,71
50,00
50,00
88,54
66,93
57,02
68,42
57,33
58,84
60,70

Productivity / head / year

(Lt)
2.040,00
1.920,00
2.521,75
1.911,00
1.620,00
2.032,83
3.891,45
2.021,62
3.336,63
2.953,96
2.284,80
3.069,36

Table 10. Indonesia Dairy Imports (Jan - December), 2007 - 2010

Product

Volume
Tonnes
2007
Total

Volume
Tonnes
2008
Total

Volume
Tonnes
2009
Total

Volume
Tonnes
2010
Total

Buttermilk /
BMP
Butterfat
Cheese
Milk
WMP

14.075

6.328

10.017

12.823

15.686
13.930
16.697
90.718

9.655
10.557
16.187
83.514

13.273
13.971
9.775
52.929

SMP

90.757

81.207

Whey products

53.367
1.482
296.712

Yoghurt
Total

Value
US$000
2008
Total

Value
US$000
2009
Total

Value US
$000
2010
Total

43.618

24.597

17.498

31.148

14.642
15.683
4.151
49.856

42.974
46.363
19.598
300.852

41.663
54.609
24.532
330.572

36.547
49.299
16.084
157.198

70.900
69.338
11.845
221.985

103.801

132.227

316.477

309.893

238.330

405.153

42.239

65.433

72.619

99.772

78.057

74.206

114.138

968
250.656

356
269.554

156
302.158

1.500
871.153

1.385
865.308

668
589.829

339
924.886

Source: BPS

Value
US$000
2007
Total

Source : BPS

Table 11. Indonesian Dairy Import (Volume) by Country, 2010, Tonnes

Product
Buttermilk /
BMP
Butterfat
Cheese
Milk
WMP
SMP
Whey products
Yoghurt
Total
Source: BPS

Aust
690

NZ
2.839

USA
0

EU
6.865

Other
2.429

Total
12.823

2.306 8.779
659
3.906 7.393 2.975
1.657 1.241
156
10.108 15.436
315
17.487 33.502 40.624
4.492
858 17.974

2.699
520
999
5.440
37.413
42.526

199
889
98
18.557
3.201
6.769

14.642
15.683
4.151
49.856
132.227
72.619

4
0
77
40.651 70.048 62.780

38
96.500

37
32.179

156
302.158

Source : Katalog BPS 8202003

Table 12. Indonesia Dairy Exports - By Value (US$000), 2006 - 2010

Product
Buttermilk / Butter Milk Powder
(BMP)
Butter / Butteroil
Cheese
Milk
Other Milk Preparations
Skim Milk Powder
Whey & Why Powder
Whole Milk Powder
Yoghurt
Total

2006
3.811

Value US$'000
2007
2008
5.538
6.397

2009
6.078

2010
8.596

125
2.139
4.592
65.589

318
1.281
6.220
60.196

1.232
2.397
10.093
184.583

2.455
2.005
9.986
64.598

5.160
2.589
11.755
59.072

1.331
1.452
223
79.261

1.819
305
284
75.961

2.677
844
828
209.051

2.309
807
687
88.925

1.192
268
320
88.952

Source: Katalog BPS 8202003

Source : Katalog BPS 8202003

Figure 5. Indonesian Dairy Industry

Source : Indofood, 2010

Key Driving Forces For Dairy

Development in Indonesia

Key Driving Forces in Dairy Industry

(1)
Increased demand for dairy products
Population growth, income growth, increasing middle
class, urbanization, longer life span and ageing
population
Diversification toward high-value production a demand-driven process in which the private sector
plays a vital role
Food spending is shifting from grains and staples
to vegetables, fruits, meat, dairy, and fish

Key Driving Forces in Dairy Industry

(2)
Demand for ready-to-cook and ready-to-eat foods
is also rising, particularly in urban areas.
Technology change/transfer Improved
technologies shorter production cycle, lower feedconversion ratio
Food security and improved nutrition
Import substitution or export (foreign exchange
earnings)

Figure 6. Primary Drivers

UrbanizaAon 70% of 2050

populaAon

Higher calorie consumpAon

and diet shiQs more
protein, more wealth

Middle Class income &

populaAon increasing
substanAally

~2 X
as much dairy

~2 X
as much meat
~1.5 X
more cereals

1 On a per-day basis, global food consumption is ~17 trillion Kcal in 2000, ~18 trillion Kcal in 2005, and ~28 trillion Kcal in 2050
2 From ~475 to ~892 million tons of dairy, ~1 to ~1.44 billion tons of cereals, ~227 to ~464 million tons of meat, over the period of
2000 to 2050
SOURCE: FAO World Food and Agriculture to 2030/2050; FAO Expert MeeAng on How to Feed the World in 2050

Figure 7. Per Capita Consumption of Selected Food

Commodities in Developing Countries (index 1961=100)

Source :FAOSTAT

Figure 8. Per Capita Income and Dietary Energy Intake From Dairy

Source; World Dairy Situation, 2011

Figure 9. Livestock Revolution

P er c apita m eat c onsumption (kgs)

140
120
100
80
60
40
20
0
0

5,000

10,000

15,000

20,000

25,000

P er c apita incom e ( $ P P P )

30,000

35,000

40,000

Figure 10. Six Dynamic Markets : China, India, Indonesia,

Brazil, Kenya and Pakistan

Source : Tetra Pak, 2012

Figure 11. Emerging Markets Drive Growth

Global LDP Consumption is Accelerating, fuelled by growing demand in

Asis, Africa and Latin America

Source : Tetra Pak, 2012

Table 13. IFCN Top 21 Milk Processor List

Source : IFCN Dairy Research Center 2011

Figure 12. Low-Income Consumers are the

next big opportunity for the dairy industry
They represent 38% of LDP in developing countries

ToP = Top of the Pyramid-above $8/day

DiP= Deep in the pyramid-$2 to $8/day
BoP= Bottom of the pyramid-below $2/day

Source : Tetra Pak, 2012

Figure 13. DiP LDP Consumption is Expected to

Grow in Developing Countries
From 70 bio/L in 2011 to almost 80 bio/L in 2014

Government Policies For Dairy

Development in Indonesia

Figure 14. Key Actors and Other Stakeholders in the

Value Chain

Inputs
Services

Farmer
Producer

Collector

Processor

Retail

Government
Research and development institutions
Educational institutions: universities, agricultural schools
NGOs and interest groups

Consumer
Market

Several Issues in Dairy Development in Indonesia (1)

Scarcity of forage and high price of dairy cattle feed
and concentrates
Small farm size and scarcity of land at suitable elevation
for dairy cattle farming
Low dairy cow productivity with an average of about
10 liters of milk per cow per day
Low farm profitability due partly to low milk yields
Low milk quality with only 12 percent of milk production
meeting the minimum standard
Source: GAIN Report, 2009

Several Issues in Dairy Development in Indonesia (2)

Poor farm and herd management practices
Lack of technology for milking and processing of fresh
milk
Limited access to high quality genetics
Limited access to finance and bank loans
Limited farmer education
Source: GAIN Report, 2009

Some Policy Initiatives

1. BUSEP (Bukti Serap Absorption Proof)
scheme implemented in the period of
1982-1998. This policy is found to be not
significant in increasing the productivity of
Indonesian dairy products.

2. The Blue Print

The blue-print is started by portraying the existing condition of
Indonesia dairy industry by identifying its strengths and weaknesses.
Six generic groups of strategies have been formulated by
matching the SWOT factors.
(a)
(b)
(c)
(d)
(e)
(f)

Human resource and institutions development,

Increasing the number of population and productivity,
Quality and hygiene assurance,
Price and welfare of the farmers,
Increasing fresh milk consumption, and
Improving the infrastructures

3.
4.
5.

6.
7.

8.
9.

Government encouraging domestic and foreign companies to invest in dairy

farming and dairy breeding to meet local demand.
Government provides credit facilities with subsidised interest for small dairy
farmers for purchasing dairy cows.
Coordination with GKSI (Indonesian Milk Cooperation Organisation), the Ministry
of health and the Ministry of Education and Culture to create milk market directly
to the students School Milk, School Children Food Supplement Program
(PMTAS).
Regional government initiatives to promote more milk consumption for school aged
children GERIMIS BAGUS (Gerakan Minum Susu Bagi Anak Usia Sekolah)
Through P2HP (Directorate General of Agriculture Processing) and Ministry of
Industry built facilities for milk processing in many milk collecting unit closed to the
farmers Cluster program.
Training and education for farmers on dairy farming management, milk processing
and market.
Diary Board has been established, but it is still not very active Introduction of
levy?

Major Goals of Blue Print

Self-sufficiency in milk production to increase from 25-30
percent to 50 percent in 2015
Expansion of dairy production in suitable areas outside
Java, especially Sumatera and Sulawesi
Milk production per cow to increase from 8-10 kg cow/day
to 15 kg per cow/day (in 2015)
Calving interval to be reduced to 13 months
Milk quality to be improved from 12 percent of total milk
that meets the SNI standards to 20 percent meeting the SNI
standards in 2015
To ensure dairy farming remains feasible from an economic
point of view, the minimum milk price to be kept at a level of
at least 80 percent of world market prices.

The 50% self-sufficiency?

The policy objectives show the interest of GoI
to increase milk production, through improving
efficiency of farm management and expansion
of milk production, as well as to improve milk
quality.
The goals however are ambitious given the
limited time?

The 50% self-sufficiency?

Policy instruments include among others (a)
financial support to farmer groups (subsidies of
Rp 300 million per group), (b) provision of free
services, like AI services and animal health
services, and (c) advice to farmers (through) local
governments.
As feed resources on the farms are limited,
increasing milk production by expansion of the
dairy herd may conflict with the goal to increase
the milk production per cow.

Concluding Remarks

Happiness is when what you think,

what you say, and what you do
are in harmony
Mahatma Gandhi (1869-1948)

THANK YOU
E-mail address: adaryant@mb.ipb.ac.id