Indonesia to buy 1 million hectares of Aussie land for beef

Beef prices are hitting record highs in Indonesia, forcing the government to look overseas.

Justin Loiseau

Justin Loiseau hails from the great united state of North Carolina, where he started his first business at the ripe age of five: melting crayons into candles. With the infamous Crayola Crash of 1994, Justin moved on to study economics and environmental studies as a Morehead-Cain Scholar at the University of North Carolina. He has worked in a variety of sectors across the globe, from management consulting to the United Nations, and once spent three months examining invasive snails in Vietnam. Justin discovered The Motley Fool in 2012 and it’s been love ever since. Creativity, contrarianism, kerfuffling… what more could one want? When he’s not playing the Fool, you can find Justin at the University of Auckland, where he is pursuing a Masters in Economics as a Rotary Ambassadorial Scholar. Justin finds biogas digesters fascinating and can unicycle a mile in seven minutes.

Published September 13, 2013 3:49 pm AEST

Indonesians want more beef. But with growing demand and limited supplies, the government has approved a 1 million hectare purchase of Australian land to keep hamburgers headed to their home country.

According to ABC News, beef prices are hitting record highs in Indonesia, and the government is ready to revise its "self-sufficiency" policy to allow for foreign-based farms. Specifically, the country hopes to breed cattle on Australian land before shipping them off to feedlots in Indonesia. Not only does this free up land in Indonesia, but it also cuts costs. Breeding is cheaper in Oz, while feeding is cheaper in Indo.

Foolish takeaway

At an acreage equal to the ACT, Indonesia's purchase is no small pudding. For Australian agriculture, this move could be both a blessing and a curse. From the information available, it seems that operations will be run by an Indonesian state-owned enterprise, knocking Australian ownership out the window.

But some corporations like Ridley (ASX: RIC) Australian Agricultural (ASX: AAC), Elders (ASX: ELD) and Primeag Australia (ASX: PAG) stand to benefit from potential product sales or contract work, or even economies of scale and technology and infrastructure spillover effects. If approved by Australian regulators, the true benefit to Australia and its companies will only emerge once Indonesia sets up shop and investors get a first-hand glimpse of just how "self-sufficient" this land will be.

Indonesians knows Australia is a good investment, and they're not the only ones. The Australian Financial Review says "good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit." Get "3 Stocks for the Great Dividend Boom" in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

Motley Fool contributor Justin Loiseau has no position in any stocks mentioned in this article. You can follow him on Twitter @TMFJLo.

Automatic Renewal

By taking up this offer, you will also be enrolled in our auto-renewal program, which is our way of making your ongoing subscription easier by ensuring uninterrupted service. Don't worry, though – you're not locked in, and can cancel your auto-renewal at any time before each 'anniversary' date without question or penalty.