The survey revealed that the economic crisis of 1997 had a severe impact on the beef industry. Many feedlot and partnership operations collapsed, the domestic breeder herd decreased, slaughtering cattle became prohibitively expensive and beef sales declined sharply. Since 1999 the industry has largely recovered and significant live cattle imports are making up for the shortfall of native cattle.
The researchers constructed a detailed economic model of the Indonesian beef industry, describing the links between cattle production, processing and final consumption. The model enabled them to analyse the effects on Indonesia's beef industry of changes occurring in each part of the value chain-depicting retail beef sales in terms of costs from the time animals leave the farm (or arrive in the country in the case of imported live cattle) including processing, transport, and trader margins, and how these affect the price of the final product.
The model showed that achieving self-sufficiency in beef production through tariffs on imported beef and imported live cattle was not a sensible policy objective. Smallholder breeders presently had limited scope to increase production and the tariffs would need to be very high to stimulate enough production to replace imports, and higher prices would mean less beef consumption. It would be far better, particularly in terms of benefits to smallholders, to encourage more research and development to increase the productivity of native cattle.
The researchers made other key findings in terms of taxes (for instance the retribution charge, a tax on internal trade was not an efficient means of raising government revenue), improvements in beef processing efficiency, technical efficiency of smallholder producers, reductions in costs of marketing native cattle and implications of currency fluctuations for consumption of both local and imported beef. They also assessed demand for beef in relation to costs and availability of other meats such as chicken and fish.
The researchers also evaluated the current arrangements of commercial feedlots, which are entirely dependent on imports of feeder cattle from northern Australia, and weighed up the various elements governing their output and profitability. Indonesia's future economic development will likely favour commercial feedlot operations at the expense of smallholder producers, and this will be more evident with strong growth in the economy and consequent rise in the demand for beef.
A major output of the project was ACIAR Monograph No. 95, Improving Indonesia's Beef Industry, which gave a detailed account of the survey and analysis undertaken in the project.