Spatial integration of beef cattle markets in Central Java, Indonesia

The study aimed to analyze the degree of market integration, price asymmetry, and the effects of the meat self-sufficiency program on the beef cattle industry in Central Java, Indonesia. Ten regional markets and one central market were selected as the study areas. The effect of the transportation cost on the retail price of beef was also examined. Results of the study revealed that at the farm level, cattle markets were highly integrated with one another. The Law of One Price (LOP) was found in all of the co-integrated cattle market pairs, implying that the farm prices were fully transmitted between these markets. At the wholesale level, beef markets were likewise highly integrated with one another. LOP was found in all of the co-integrated cattle market pairs, indicating that wholesale prices were fully transmitted between these markets. At the retail level, beef markets were also highly integrated with one another. LOP was found in all of the co-integrated cattle market pairs, suggesting that the retail prices were fully transmitted between these markets. The integration pattern at the farm, wholesale, and retail levels was found to be perfect. The implementation of the meat self-sufficiency program has positively affected the cattle production in Central Java, average per capita meat consumption, total and average per capita beef consumption, and retail price of beef in this province. Transportation cost has a significant effect on the retail price of beef in the central market. An increase in transportation cost leads to a rise in the retail price of beef in the central market. At present, the Indonesian government still provides subsidy on the gasoline price in the country to reduce transportation cost in Central Java. Based on the results of the study, the following policy directions are recommended: 1) strengthen the meat self-sufficiency program in Central Java; 2) proper maintenance of good market infrastructure and communication facilities; 3) enhancing technical support to improve the cattle farm productivity; 4) establishment of a cattle auction center; 5) improvement of the live cattle market facilities; and 6) production of better quality beef.