Projects
South Australia-Indonesia Dairy Industry Development Partnership

The Indonesian Nutritious Meals Program to be delivered through the newly established National Nutrition Agency [Badan Gizi Nasional] is a flagship program of newly elected President Prabowo Subianto. The program is set to significantly enhance the health and nutrition of Indonesian school children, expectant mothers, and toddlers with a planned investment of USD 4.3 billion starting in 2025. This large-scale initiative aims to provide free daily meals – including a serving of milk – to address issues such as malnutrition, stunting, and wasting, while also aiming to reduce educational and poverty disparities, especially in rural regions. The program will require an estimated 83 million litres of milk per week, translating to 4.3 billion litres annually. Indonesia’s current dairy production falls well short of being able to meet this demand. Consequently, the country will need to import at least one million tons of whole milk powder annually in the initial years of the program.

South Australia’s highly advanced and sustainable dairy industry is ideally positioned to partner and collaborate with Indonesia over the next 5-10 years to assist in addressing the immediate milk supply needs of the program and the long-term development of Indonesia’s dairy industry. South Australia can contribute to Indonesia’s dairy sector through several key initiatives, including providing specialised training programs for Indonesian dairy workers, increasing the national herd through the export of genetically selected dairy heifers suited to tropical climates, and providing a consistent and high-quality supply of milk and milk powders to help meet the immediate demands of the Nutritious Meals Program. This proposal outlines the long-term strategic economic opportunities and benefits of this partnership, including economic growth and enhanced bilateral relations, for both South Australia and Indonesia. 

The Opportunity

The Indonesian Nutritious Meals Program represents a transformative initiative aimed at significantly improving the health and nutrition of Indonesian school children, expectant mothers, and toddlers. With a planned USD 4.3 billion investment in 2025 and continuing funding through to at least 2029, the large-scale program will provide free daily meals – including a serving of milk – to give children access to essential vitamins and nutrients. The program aims to address issues like malnutrition, stunting, and wasting, and to reduce educational and poverty disparities, especially in rural areas.

The program’s milk requirement is substantial, estimated at 83 million litres per week and 4.3 billion litres annually[1]. However, Indonesia's dairy industry only produced 555 million litres in 2023[2] and therefore cannot currently meet the demands of this program with domestic production alone. To bridge this gap, the government will need to import about 1 million tons of whole milk powder annually in at least the first two years of the program. 

Additionally, the Indonesian government has committed to the long-term development of the domestic dairy industry to support this program into the future. The development priorities of the Indonesian government include the promotion of dairy farming innovations, proposed investment in skills development and capacity building, and long-term improvements to infrastructure. The government has also indicated ambitions to grow the national herd to improve milk production by importing 1.4 million head of dairy cattle and 1.5 million head of beef breeder cattle over 5 years. Therefore, a significant opportunity exists for international collaboration to improve milk supply and support the development of Indonesia’s dairy industry. There is also an opportunity to discuss the important role of feed grains in supporting these objectives and conduct further consultation on how this program can be supported with international assistance.

South Australia is renowned for its highly advanced and sustainable dairy industry. With over 65,000 cows and an annual production of 474 million litres of milk, the state boasts the highest average milk volume per cow in Australia. Coupled with its internationally recognised standards for sustainability, food safety, and quality, South Australia is uniquely positioned to partner with Indonesia in advancing its dairy sector and enhancing its milk supply. By partnering with Indonesia over the next 5-10 years, South Australia can leverage its expertise to support the long-term sustainable development and scaling of Indonesia’s dairy sector. This collaboration would not only address the immediate needs of the Nutritious Meals Program but also create long-term economic opportunities and strengthen bilateral relations between the two countries. Through this partnership, both countries stand to benefit by advancing their shared interests in health, economic growth, and international cooperation. 

Industry Snapshots

Indonesian Dairy Sector

Overview: Indonesia's dairy industry is rapidly evolving, with a growing demand for high-quality dairy products driven by increasing urbanisation, rising disposable incomes, and health-conscious consumers. 

Production: Indonesia’s dairy industry is characterised by a mix of traditional and semi-modern practices, with challenges related to productivity and quality consistency. The national herd is estimated at 260,000 and produces approximately 555 million litres (~2100L/cow/year) As a comparison, the current South Australian dairy herd producers around 7000L/cow/year). With limited local production capacity, the country currently remains reliant on imported dairy products to meet 84% of its domestic demand. The Nutritious Meals Program will likely increase this reliance if measures are not also taken to improve the country’s domestic dairy production capabilities over the long-term.

Market Size and Growth: The Indonesian dairy market was valued at approximately USD 5 billion in 2023 and is projected to grow at around 6% over the next five years. While per capita dairy consumption in Indonesia is relatively low compared to Western standards, it is on the rise as more consumers become aware of the health benefits associated with dairy. Annual consumption is estimated at 3.6 billion litres annually – with the Nutritious Meals Program expected to require an additional 4.3 billion litres for each year it is run.

South Australian Dairy Sector

Overview: South Australia's dairy industry is a cornerstone of the state's agricultural sector, renowned for its high-quality milk and dairy products. The state is at the forefront of dairy innovation, focusing on sustainable farming practices, advanced processing technologies, and efficient supply chain management.

Production: South Australia’s dairy industry has a strong reputation for sustainable practices and premium products. The state is highly productive with over 65,000 cows producing approximately 474 million litres of milk annually (over 7000L/cow/year). 

Market Size and Growth: The South Australian dairy industry contributes approximately $1.2 billion to the state’s economy, with projections indicating a continued positive trend as demand for dairy products rises both domestically and internationally. South Australia’s dairy production meets a significant portion of its required domestic consumption needs and is increasingly geared towards export markets, including Southeast Asia. Exports have been steadily growing in volume and value, with 31.3 million kgs of dairy products exported in 2023/24, valued at $152.7 million – including $22.7 million of milk to Indonesia.[3]

Potential Areas for Partnership

South Australia’s dairy industry is distinguished by its highly skilled professionals and advanced practices, resulting in a highly productive and sustainable industry. This expertise makes South Australia an ideal partner for Indonesia in supporting the Nutritious Meals Program and developing the country’s dairy industry. Collaborating on the Nutritious Meals Program aligns with South Australian values and the South Australian Dairy Industry Action Plan 2024-2029, which aims to drive productivity, showcase sustainability, expand exports, and foster premium partnerships. Through this opportunity for partnership, South Australia can showcase its premium and sustainable products, boost productivity to meet demand both locally and internationally, and explore new export opportunities. Additionally, this collaboration will enhance the long-term health, nutrition, and educational outcomes for Indonesian children, and supporting regional economic development.

Potential areas for collaboration include: 

• Upskilling Indonesian dairy production and processing workers through exchange programs and specialised training. These workers can then bring new skills and knowledge into the Indonesian dairy sector. Additional skills training can be offered based on areas identified by program stakeholders as most beneficial to them. 
• Provision of dairy cattle genetically selected to perform well in the tropical conditions of Indonesia. These animals can then be exported to Indonesian farms to achieve immediate and long-term improvements to Indonesian milk production. 
• Provision of a consistent and reliable supply of liquid or powdered milk to supplement Indonesia’s domestic production for the Nutritious Meals Program. 

Workforce Upskilling

South Australia is renowned for its extensive expertise in dairy production and processing, boasting a significant cache of skills and knowledge along the supply chain. This includes expertise in animal handling and welfare, pasture management, quality control, and safe milk harvesting procedures. Additionally, South Australian dairy producers excel in business management, supply chain efficiency, training skills, sustainable farm management practices, and cattle nutrition. This expertise could serve as a valuable resource that could greatly benefit the development of the Indonesian dairy industry. By sharing knowledge and training skills, South Australia can help Indonesia to develop a highly skilled workforce capable of sustainably advancing the Indonesian dairy sector. 

Furthermore, the focus of this collaboration could include training and upskilling in various aspects of dairy processing. Training and development of this sector will help to promote the value-adding of dairy products in Indonesia and creating long-term economic opportunities for the country in domestic markets and internationally. Training could focus on aspects of cheesemaking including dairy microbiology, testing and equipment use, milk quality, food safety and sanitation, and processes such as cheese ripening and aging. Additionally, training could also target the production of other high value dairy products from Indonesian milk such as cream, butter, and yoghurt products. Into the future, further training could be provided by South Australia to help recognise export opportunities and understand export requirements. South Australia’s esteemed reputation for quality and premium dairy products and experience in processing and exporting uniquely positions it to provide this high-level training and support.

Other training opportunities may arise from further consultation with stakeholders in the Nutritious Meals Program or Indonesian dairy industry. For example, the program aims to commission the production of the meals from local small businesses and community kitchens to drive regional economic development. Consultation could be conducted with these groups to determine what the most beneficial training would be for them, such as food safety, logistics, distribution, or recipes to incorporate dairy into the program’s meals. Additionally, there is an opportunity to collaborate with Indonesian stakeholders to discuss and support the consideration of alternative dairy products like skim milk powder, whey, and other supplements to support the program’s nutritional goals. Training and workforce development could then also be tailored towards the alternatives that Indonesian stakeholders find of interest. 

The Skills Development Exchange Pilot Program, established under the Indonesia-Australia Comprehensive Economic Partnership Agreement, offers a structured platform for this collaboration to be built upon. This program gives businesses from Australia and Indonesia the opportunity to send employees to undertake work placements for up to twelve months in the other country. By utilising the existing memorandums of understanding in place, this program could be expanded and tailored to facilitate the establishment of a training and upskilling exchange specific to the dairy industry. This program would allow Indonesian dairy workers to travel to South Australia to gain hands-on experience and insights into advanced dairy production and processing operations. Likewise, it would also allow South Australian experts to travel to Indonesia to assist in enhancing skills and capabilities within the Indonesian dairy sector. This could include delivering on-farm training and practical workshops to maximise the potential reach and impact of this program. 

Leveraging South Australia’s dairy expertise through this exchange program aims to enhance the capabilities of Indonesian dairy workers and support the development of a more advanced, sustainable, and efficient dairy industry in Indonesia.

Genetic Solutions and Heifer Export Program

The South Australian dairy industry is a leader in advanced livestock breeding and genetics, specialising in producing cattle with optimal characteristics for milk production, disease resistance, and improved animal welfare. As of 2023, Australia is the only country approved by the Government of Indonesia to export dairy cattle to Indonesia. While other countries are trying to enter this space, Australia, and particularly South Asutralia, are positioned to leveraging genetic solutions to provide significant, immediate, and long-lasting improvements to Indonesia’s dairy sector. 

In the short-to-medium term, South Australia can support the increase of Indonesia’s dairy production by expanding the national herd with affordable genetically selected dairy heifers. Utilising genetic selection expertise, heifers can be bred in South Australia to have traits ideal for the Indonesian climate, such as tropical heat tolerance, disease resistance, and high productivity. Animal welfare concerns could also be addressed by selecting traits for calving ease and consultation with dairy representatives in Indonesia could identify further traits which would be beneficial for Indonesian dairy farmers. To ensure these cattle are well-adapted to local conditions, they would be reared in tropical Australian regions, such as in the Northern Territory, to allow them to acclimatise to a climate similar to Indonesia before export. Once prepared, the heifers could be shipped prior to calving from Darwin to Indonesian farms, so the heifers are ready for productive use immediately upon arrival on farm. The targeted improvements provided by genetic selection will also allow for successive improvements in production across generations by rearing the calves of these cattle to expand the national herd. 

Looking ahead, South Australia could further contribute by providing training and upskilling for Indonesian producers in genetic testing and selection techniques. This training coupled with long-term support would enable Indonesian dairy farmers to enhance the overall efficiency and sustainability of their dairy operations by selecting for traits which are most beneficial to them.

Supply of High-Quality Milk

South Australia’s advanced dairy industry is distinguished by its sustainability and commitment to producing safe and high-quality milk. The industry has established a reputation for excellence, resulting from rigorous quality controls and innovative practices. In addition to the previously discussed upskilling and genetic improvement interventions, South Australia is well-positioned to supplement the milk supply required for Indonesia’s Nutritious Meals Program. South Australia has the facilities and production capacity to provide a consistent and reliable supply of top-quality milk and/or milk powders to help meet the immediate needs of this initiative. By partnering with South Australia, Indonesia can ensure a reliable and consistent supply of high-quality milk, contributing to meeting the substantial demand of milk for the Nutritious Meals Program.

Milk is an excellent source of essential vitamins, minerals, and nutrients, making it highly beneficial for childhood development. Regular consumption of milk and dairy products is known to support overall health and contribute positively to nutritional outcomes. Providing milk directly through schools is known to be an effective way to deliver these benefits to children and reduce socioeconomic disparities by allowing equal access to all children. This is known to promote better educational outcomes by improving school attendance and performance, and thereby contributing to long-term economic development.

South Australia's established dairy production and processing capabilities and commitment to sustainability, quality, and food safety ideally position the state to support the Nutritious Meals Program. This partnership will help to address the immediate need for nutritious milk to foster improved child health and educational outcomes, and also contribute to long-term economic development. By leveraging South Australia's strengths, this collaboration can secure a large supply of milk for the Nutritious Meals Program.

Expected Outcomes and Benefits