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INDONESIAN COMMERCIAL NEWSLETTER
February 2012




DEVELOPMENT OF ANIMAL FEED INDUSTRY  IN INDONESIA


Backgrounds
   
Animal feed industry plays a vital role in boosting the growth of animal husbandry industry which is needed to provide   the people's meat and protein requirement. Feed accounts for around 70% of the production cost of animal husbandry industry.  Business in animal feed industry, therefore, is highly potential in the country. 

The prospects are still good for the expansion of animal feed industry in the country. The country's production of animal feed has increased 7.9% annually on the average in the past five years. The country's total production of animal feed rose sharply from 7.7 million tons in 2007 to 11.2 million tons in 2011.

According to the Association of Animal Feed Producers (GPMT),  local producers  could supply up to 5 million  tons of  the country's  annual requirement of 7 million  tons of animal feed  per year on the average. Around 83% of the domestic production goes to poultry farms raising both broilers and egg layers.

High and growing demand for feed has prompted larger producers like Sierad Produce, Malindo Feed Mill, CJ Feed and a Charoen Pokphand to plan capacity expansion. . 

Currently the country's animal feed industry is still facing difficulties over shortfall in supply of basic materials like corn. Feed producers, therefore, have asked the government not to impose import restriction on corn. In 2011, corn imports by animal feed producers totaled 3.5 million tons mainly from the United States, Brazil and Argentina.  High prices of imported corn have resulted in a surge in the price of animal feed in the country. The government, therefore, has encouraged the use of locally produced basic material in a bid to cut the prices of feed.

Animal feed producers have complained about the high import duty on corn. They called on the government to abolish the 5% import duty. The import duty has contributed to the high production cost and prices of animal feed on the domestic market, they said.     

Characteristics of product

a. Types of animal feed

Good quality feed will better guarantee the health of livestock and productivity in meat, eggs and milk as well as breeding. Animal feed include green fresh fodder, silage and concentrate.

Green fresh fodder is from grass (leguminosae) kept fresh with the process of ensilage. The process of ensilage is to be prepared for shortage of feed in dry season. Silage is produced under a temperature of 27-35 degrees C to keep good quality, freshness of the fodder and to protect it from being damaged by mold.

Concentrate is feed to give strength to livestock. Concentrate include rice brand, ground corn, and residue of copra, salt and mineral. Concentrate is produced in factories with composition made up of corn (51.4%), soybean meal (18%), fishmeal or MBM (5%), corn gluten meal (7%), premix (0.6%), Crude Palm Oil/CPO (2%) and rice bran making up the rest.

Concentrate is in the form of flour, therefore it is easily digested. A kilogram of concentrate has a content of at least 2500 Kcal of energy with protein making up 17%, raw fiber 12%.

Feed provides a source of energy, protein, vitamin and mineral needed for the growth of livestock.

Source of energy is all animal feed basic materials with crude protein content of less than 20% and concentration of raw fiber less than 18%. Feed as a source of energy include:

a.        Cereals (corn, wheat, sorghum).
b.        By products of cereals (milling waste).
c.        Tuber (sweet potato, cassava and by products).
d.        Grass species (kind of decorative grass, pasture grass for cattle, setaria grass).

Sources of protein include all basic materials for animal feed with protein content of at least 20% (from animals/plants). Sources of protein include:
a.        Green fodder as residue of farm products consisting of leaves including jackfruit, banana , sweet potato, and cassava leaves and  algae 
b.        Green fodder planted massively such as lamtoro (leucaena glauca) turi (kind of ornamental shrub), Kaliandra and sentero plants.
c.        Materials from animal (fishmeal, meat bone meal).

Sources of vitamin and mineral are almost all basic materials of animal feed   from plants or animals containing vitamin and mineral with varied concentrations depending on levels of harvest, age, processing, storage, types and parts (cereals, leaves and trunks).

Currently feed basic materials as sources of vitamin and mineral have been easily available in the market ready for use as feed ingredients such as premix, lime, Ca2PO4 and minerals.

b. Process of Production and Equipment

- Equipment for animal feed production 
There are different types of silo as equipment for the production of animal feed. Silos could be made in different forms depending on the location, capacity, materials used, and width of area available. The types of silos generally used include:
1.        Pit Silo: silo which is designed in the form of cylinder (like well) and is built underground.
2.        Trench Silo: silo which is built in the form of trench with the shape of V.
3.        Fence Silo: silo in the form of fence or partition made of bamboo or wood.
4.        Tower Silo: silo which is designed in the form of a tower with the top tightly shut.
5.        Box Silo: silo which is designed with the form of a box.

- Process of production 

a. Hay production
Hay is green grass (leguminosae) kept dry with water content of 20%-30%. Hay production is to keep surplus   from harvest to forestall shortage in greed fodder in dry season.

There are two methods of producing hay:

1. Spread out method
This is a simple method of spreading out cut green grass over open space to be dried under sunray. The grass is turnover every day until it is dry. Normally, the hay produced in this method will have a water content of 20%-30% (the hay will be brownish in color).


2. Pod method
In this method rack is used to keep the hay after being dried for 1-3 days (water content around 50%). The grass to be processed is harvested before it is in bloom (having high protein content, raw fiber, and optimum water content), that the hay will not be damaged by mold.

b. Production of silage
Silage is a basic material for animal feed in the form of grass or leguminosae kept fresh through ensilage process. The process is to forestall shortage in feed in dry season or when to feed cattle that could not be sent pasture land. Methods of producing silage:

1.        Cutting method: the grass is cut to 3-5 cm long and it is put in a plastic based silo and then the pile of the grass is crammed and is covered with plastic and soil.

2.        Mixture method: the grass is first mixed with other materials before being stuffed to accelerate fermentation, prevent fungus from growing. The materials mixed with the grass could be organic acid (formic acid, sulfuric acid, chloride acid, and propionate acid), molasses, salt, rice bran, menir (finely ground grains of rice) and onggok. A ton of grass is mixed with organic acid 4-6kg, molasses 40kg, salt 30kg, rice bran 40kg, menir 35kg, onggok 30kg. The additional materials are mixed homogenously with the grass. Molasses is added by phases with two parts on the lower pile of the grass, 3 parts in the middle layer of the pile and 5 parts in upper layer of the pile to ensure that the mixture is homogenous.

3.        Wilting method: the grass is left to wilt for 2 days (dry material content 40% - 50%).

c. Ammoniation
Ammoniation is a process of treatment of farm waste (straw)  by adding caustic soda (NaOH), sodium hydroxide (KOH)  or  urea (CO(NH2) 2. The process of ammoniation could be with the use of urea as a chemical material to cut the cost and to prevent pollution. The urea needed in the process is 4 kg for 100 kg of straw. Other materials added is water as a solvent (1 liter for 1 kg of straw) 

Producers and production capacity

Based on data at the GPMT, by 2011, there were 56 animal feed factories in operation in the country.

The country's animal feed industry is dominated by foreign companies such as PT. Charoen Pokphand Indonesia (PT. CPI), PT. Japfa Comfeed, PT. Sierad Produce, PT. CJ Feed, PT. Gold Coin, and PT. Sentra Profeed. The big producers operate integrated industries that also include livestock farms, and processing facilities for animal husbandry products.

PT. CPI from Thailand has an annual production capacity of around 4.5 million tons. With that capacity PT. CPI has a 32% share of animal feed market in the country. The second largest is PT. Japfa Comfeed with a production capacity of around 2 million tons per year.  


Development of production capacity 

In the past five years (2007-2011), the country's production capacity   for animal feed has increased 6.5% a year. In 2008, the capacity was 11 million tons per year and in 2009, it shot up 18.2% to 13 million tons. In 2010, the production capacity rose further 7.7% to 14 million tons. The increase in production capacity followed the operation of new producers PT. New Hope and PT. East Hope from China and capacity expansion by PT. Malindo Feedmill by 200,000 tons per year. In 2011, there was no change in the production capacity.

In 2012, the country's production capacity for   animal feed is expected to rise further to 15 million tons per year.  The increase will follow plans for capacity expansion by a number of producers such as PT. CPI which will open and operate new factories Cirebon and Lampung in 2012.  Japfa Comfeed also plans to expand its production capacity for animal feed from two new factories in Purwakarta, West Java and Grobogan, Central Java to be operational in 2012.


Locations of animal feed producers 

Large producers of animal feed are located in a number of provinces North Sumatra with 8 factories, Lampung with 4 factories, Banten 11 factories, DKI Jakarta 4 factories, West Java 6 factories, South Sulawesi 2 factories and East Java having the largest number of 18 factories.

East Java has become the production center for animal feed and animal husbandry products in Indonesia. East Java, in addition to the 18 large animal feed factories, has 52 cottage industries producing animal feed, 4 milk processing factories , 201 livestock market centers, 99 units of Final Disposal Place (TPA), 8 units of poultry slaughter house (RPA), 1 unit of  animal slaughter house-A (RPH-A), 33 units of  RPH-C and 49 units of RPH-D. It also has 11 meat processing companies, 50 units of milk village cooperatives (KUD) and an artificial insemination center - Balai Besar Inseminasi Buatan (BBIB) in Singosari.
Poultry farms in East Java include those raising broilers with production centers in Jombang, Malang, Gresik and Mojokerto. Potential areas for expansion of poultry farms for broilers include Sidoarjo, Pasuruan, Lamongan, Nganjuk and Kediri. Free range chickens are raised in rural areas with production centers including Lamongan, Malang, Blitar, Probolinggo, Tulungagung and Trenggalek. Potential areas for expansion of farms raising free range chickens are Jombang, Pasuruan, Nganjuk, Kediri, Pacitan and Bangkalan.

The production centers for egg layers in East Java include Malang, Blitar, Kediri, Pasuruan and Mojokerto. Potential areas for expansion of the farms for egg layers are Jombang, Nganjuk, Tulungagung and Jember. East Java has becomes the largest center for poultry farms in the country partly because of its large production of corn, the main basic material for animal feed.  One of the largest corn production areas in that province is Kediri with corn production of 3.3 million quintals per year on the average. Potential land for corn growing in Kediri is around 54,650 hectare.

Mini Feed Mill

Indonesia still depends on imports for 70% of its animal feed basic material requirement. The country also depends on imports for animal feed production technology and medicines. The heavy dependence makes business in poultry farm risky and highly vulnerable external factors. Feed accounts for 70%-80% of the total cost of poultry farm.

In  2007, the government  developed small scale factories producing animal feed  in 14 locations - in Ciamis, Cirebon, Sukabumi, Subang, and Bekasi (West Java), Magelang, and Banjarnegara (Central Java),  and  Blitar (East Java), and outside Java including in Bangli and Tabanan (Bali), Sawah Lunto (West Sumatra), Bengkulu Utara, Kapuas, and Hulu Sungai Utara.

Starting 2008, the government built small scale animal feed factories (mini feed-mills) in 38 locations mainly in areas producing feed basic materials like corn and palm oil.

The mini mills have a production capacity of 3 to 5 tons per day built with an investment of Rp 250 million each. The presence of the small feed mills will contribute to development of small poultry farms in those areas.  The mills will be managed and operated by groups of farmers (Gapoktan). The basic material in the form of corn grains needed by the mill is expected from local farmers especially those located far from large animal feed factories.

The government also will build big animal feed factories in Subang and Bekasi to increase domestic supply of feed for pure bred chickens and egg layers. .......




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