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ublicly listed poultry firm Sierad Produce (SIPD) has slashed its budget for new farms in the wake of the government’s plan to issue a moratorium on the expansion of big poultry producers.

Sierad collected almost Rp 400 billion (US$30.78 million) from a recent rights issue and was planning to use Rp 300 billion of those funds to build new close houses for broilers at its farms and use the rest as working capital.

“However, as the government plans to launch a moratorium on the construction of farm houses, we have decided to shift the funds allocated for new close houses to working capital, so that we can use it more effectively,” Sierad finance director Sri Sumiyarsih said after an annual general shareholders’ meeting in Jakarta on Wednesday.

The company had used Rp 27.39 billion of the rights issue proceeds to build two farms in Serang, Banten, and Sukabumi, West Java.

It will now use Rp 290 billion from the rights issue funds as working capital and the rest for facility maintenance and other purposes.

Sierad’s change of plan comes on the back of government efforts to tightly control the poultry industry, where large players dominate both upstream and downstream operations, raising suspicions about cartel-like practices.

To put an end to the alleged monopoly in the poultry industry, Agriculture Minister Andi Amran Sulaiman in March signed a memorandum of understanding with various stakeholders, including the Business Competition Supervisory Commission (KPPU), the Indonesian Poultry Farmers Association and Information Center (Pinsar Indonesia) and the Indonesian Breeder Association (GPPU).

Under to the MoU, big poultry farmers need to build slaughterhouses and are prevented from building new close houses. They are also required to support the government’s efforts to strengthen the downstream industry and boost exports by involving small players in the process.

“We will soon regulate this matter in form of a ministerial regulation,” Amran said, as quoted by Kontan.

Despite the moratorium, the poultry industry is upbeat that its food processing line will not be affected by the policy, said Sudirman, the chairman of the Indonesian Feed Millers Association (GPMT).

For instance, beside selling and processing chicken, Sierad itself also markets processed food, including chicken nuggets, sausages and meatballs, through Belfoods Indonesia, which it acquired in June 2009.

“The industry has been facing oversupply in recent years, so the moratorium will not have a big impact,” he said.

“But in the long run, it might cause several problems, because if the economy grows further, nationwide demand for chicken meat will also increase and we will have to build commercial farms again from the beginning.”

Sierad’s financial report shows the company swung to a net profit of Rp 35.8 billion in the first half from a net loss of Rp 175.7 billion in the same period last year.