Economic assessment of the beef cattle commodity chain for smallholder and large farmers in East Java, Indonesia

The study aimed to analyze the commodity chain, market structure and performance, value-added contributions, and opportunities and constraints in the beef cattle industry in East Java Province. The core processes in smallholder and large farmer beef cattle commodity chains consist of input provision, fattening, marketing and slaughtering with many market actors involved. However, the large farmer commodity chain was shorter and less complex than the smallholder chain. The market of the calf supplier sub-market was monopolistic competition in the smallholder chain and weak oligopoly in the large chain. The farmer sub-market showed a monopolistic competitive industry in the smallholder chain but a strong oligopoly in the large chain. In the trader sub-market, the structure was strongly oligopolistic in both smallholder and large chains while the processor sub-market revealed a strong and weak oligopolistic structure in smallholder and large chains, respectively. The low market concentration in the smallholder farmer sub-market contributed to the limited market powder of small farmers in influencing the price of traded beef cattle and terms of sale. The profitability and operational efficiency ratios of market actors in the smallholder chain were smaller than those of the large chain. Marketing efficiency of the channels was higher for smallholder chain than for large farmer chain. Large farmers contributed more to value-added than the small farmers both in absolute and percentage terms. Gross profit in both chains comprised the biggest share of value-added followed by personnel remuneration, tariff and taxes, and financial charges. Industry opportunities were the high potential demand for beef cattle availability of forage, and good quality of the local cattle species. The constraints were pasture of forage, and good quality of the local cattle species. The constraints were pasture scarcity, adverse effect of importance on the beef cattle price, occurrence of diseases, and inadequate marketing infrastructure particularly lack of weighing scale in traditional markets for small cattle farmers. Limited working capital was another problem for the large chain actors. The following policy recommendations are proposed: focus on smallholder beef cattle development program, review of beef cattle importation policy, strengthening of the smallholder commodity chain, improvement of the extension program for good breeding and farming practices, innovation in the marketing information system, availability of marketing infrastructure, provision of credit for cattle farmers, and formation of strong farmers' associations and cooperatives.