On December 8 and 9, a Dairy Expert Roundtable Meeting on “Competitive Dairy Value Chains in Southeast Asia” was held in Muak Lek, Thailand. In this regional meeting, participants from six countries in Southeast Asia discussed how the relatively small dairy value chains could be more competitive and sustainable.

1. RECENT DEVELOPMENT OF DAIRY INDUSTRY IN INDONESIA
Adiarto
Staff of Laboratory of Dairy Science and Industry
Universitas Gadjah Mada Yogyakarta Indonesia
Paper presented on the workshop of C0mpetitive Dairy Cattle Chains in Southeast Asia
December 8-9, 2010, Muak Lek, Saraburi, Thailand
Introduction
Indonesia with more than 200 million people becomes one of developing country that
start Improving its living standard with the focus on increasing consumption high quality food,
namely from animal product origin, such as milk, meat, and eggs. Recently, Indonesia is only
25% self sufficient on milk or equal to 679.200 ton of milk produced per year by the farmer and
the rest must be fulfilled by importation in form of skim milk powder, whole milk powder, and
milk anhydrous milk fat. Improvement of living standard as well as better education of people
followed by the increasing of milk consumption, hence make greater national demand of milk.
Indonesian is recognized as a biggest consumer of milk powder in the world and through
the packaging of milk recombine technology, the vary of recombine milk products are available
in the market. According to Department of Industry Republic Indonesia (2008), the consumption
of fresh milk in Indonesia is very low close to only 18%, far lower comparing to India (98%),
Thailand (88%), and China (76.5%). Suggestion from some food nutritionist and dairy
technology experts, that milk consumption ideally must from pasteurized fresh milk rather than
milk powder to get more nutritive value of milk.
The sharing of national fresh milk production on national milk demand shows a
continuously decreasing trend from year 2003 to 2007 as indicated in Table 1. below

2. Table 1. Sharing of Fresh Milk and Imported Milk Toward Milk Consumption
2003 2004 2005 2006 2007
National Population of People 215 218 220 222 224
(Million)
Fresh Milk Production (000 Ton) 466,50 463,60 451.80 519.70 536.90
Net Milk Import (000 Ton) 967.55 1.605.22 1.594.20 1.804.60 1.808.40
Milk Consumption (kg/capita/year) 6.67 9.49 9.30 10.47 10.47
Total Consumption (Ton) 1.434.05 2.068.82 2.046.10 2.324.40 2.345.30
% Fresh Milk Toward Consumption 32.50 22.40 22.10 22.40 22.90
% Milk Import Toward Consumption 67.50 77.60 77.90 77.60 77.10
Source : Department of Industry (2008)
Table 1. above shows that even the consumption of milk is still low, but importation of
milk tend to increase continously from year to year to fulfill the national need. When the
performance of national dairying does not able to be improved significantly and the milk
production remain stable, the dependency of milk on import will be greater and greater and self
sufficiency on milk becomes lesser and lesser , and finally Indonesia is going to be faced on
food trap.of milk.
Challenging of Milk Industry In Indonesia
There are three important issues that influence the performance of dairy industry in
Indonesia as follows :
1. Low productivity of dairy animal
Since 1979 the dairy industry in Indonesia has been implemented using Holstein
Friesian (HF) as foundation stock through importation in huge amount mostly from Australia and
New Zealand. The choosing of those kind of beed like other Southeast Asia countries as well,
is based on simple idea that HF breed is one of breed could easily adapt in the tropical
environment, as well as high milk producer. In fact, that tropical area with high air temperature
and humidity actually physiologically is not really suitable for HF as temperate breed origin. A lot
of problems have been especially faced by the backyard dairy farmer, at least the production
performance of their own cows are very low, with average of milk production 8-10 litre per day

3. or less than 3.000 litre/lactation and still accompanied by low reproduction performance of
animal.
HF as a high producer dairy cattle breed, physiologically has high metabolic rate to
serve the metabolizable nutrients needed for some kind of physiology activities, more special at
the begining of lactation. As a consequency, high nutrient requirement of cow will be followed
by increasing feed consumption and production of metabolic heat , hence increase heat load of
the animal body . To maintain normal body temperature of cow, heat load should be dessipated
with efficient way through presenting of significant gradient temperature between surrounding
air temperature and temperature of animal body. High temperature followed by high humidity in
tropical humid area become serious problem for animal in dissipating their body heat load and
causing heat stress condition of animal (Van Den Berg, 1990). That is way using of temperate
dairy breed raising in tropical area will exposure a lot of problems related to lower performance
of the cow, moreover they are managed by backyard dairy farmer.
2. Quality of human resources of farmer
Dairy industry in Indonesia is backboned by backyard dairy farmer, which mostly are not
well-educated or unskill people with little land ownership as well as belongs to the weak
economic group of people. This development of backyard dairy farmer program at the beginning
has been implemented by simply design, namely to generate employment and growing
economic activities in rural area, and reducing import of milk. Even dairying in Indonesia has
already more than 30 years existed, therefore the performance of most dairy farmers have not
significantly well improved.
The management of dairy cow is very complex, farmers should understand the
physiology process of dairy cattle to serve a proper management menu. Milk cooperative is a
responsible institution in composing appropriate technology for farmer. Skillful human resources
should be available to formulate easily technology that later practiced by farmers and should
continously updated when a new technology available. Successful of a milk cooperative in
encouraging dairy farmers to practice standard management become the first priority of duty.
Except technology, a milk cooperative must serve production inputs such as high quality feed,
AI service, and health service program.
3. High demand of milk
According to the report of USDA Foreign Agricultural Service (2009) because of
economic growth of Indonesian people at level of 5.5 percent in 2010, combined with a stable

4. political outlook, and a growing awareness of the health, the national demand of milk will
dramatically increased. The national production of fresh milk in year 2008, 2009 are 1.2 million
liter/day (48.000 metric tons), and 1.3 million liter/day (56.000 metric tons) respectively and it
fulfills only 25 percent of national demand even with average milk consumption of 10.3 kg/capita
annually, relatively lower than other Asean countries. Growth in domestic fresh milk production
will remain limited because of several fundamental factors such as limited farmer education,
high price of dairy cattle feed, poor farm management practice, limited access to high-quality
genetics, limited access to bank loans etc.
Planning Program
There are some important issues in corresponding the government to improve the
performance of dairy industry in Indonesia as follows :
1. Toward increasing self sufficiency of milk
The higher and higher demand of milk realizes the government to improve performance
of national dairy industry to meet 50% milk self sufficient in 2014. Therefore, the government of
Indonesia support 200.000 heads of dairy cattle within the next five years by issuing the Ministry
of Finance Decree on loan for breeding dairy cattle. The decree provides a five percent loan
subsidy given from the government to any businessman as well as eligible milk cooperatives
who expect to purchase dairy cattle.
2. Toward Improvement of milk marketing
About 90% of milk produced by the dairy farmers is absorbed by Milk Industry Plan and
the rest is sold in the free market or processed in form of pasteurized milk by cooperative. The
government is looking for added value of milk through developing of milk processing program.
The government try to build up the medium scale of Milk Industry Plan that operationally will be
done by milk cooperative or other medium scale private company. Beneficeries of this program
are (1) the consumption of healthy fresh milk will increase, (2) increase added value of milk, it
means the dairy farmer will receive more money, and (3) the milk marketing is not going only in
one market system, but will appear other competitors.

5. References
Indonesian Ministry of Industry, 2008.Development model of policy on Milk Processing Plan.
Directorate General of Agriculture Industry and Chemical
Dairy and Products Annual, 2009. Gain Report, USDA Foreign Agricultural Service.s and
subtropics
Van den Berg, J.T.C. Strategy for dairy development in the tropics and subtropics, 1990. Pudog
Wageningen