Objectives
The project aims to develop a supply chain benchmark of the Eastern Indonesian beef sector to provide market intelligence and enable more effective engagement of future activities in the sector.
The project is of pioneering character in several ways:
It covers the whole beef supply chain from farm to consumer, not just a part of it.
It generates the majority of the data itself via group meetings and interviews.
It covers five regions throughout Indonesia and brings five institutions to work together (Charles Sturt University, ICASEPS in Bogor, the BPTPs in NTT, NTB and South Sulawesi).
It tries to change the view from farm-level to supply-chain level.
Activities
In the first 13 months of the project (May 2008-May 2009), work included activities on all six project objectives. Data on farm level and beyond farm level were collected, the analysis of farm level data is almost completed and the beyond farm analysis has started. Training and direct assistance to project partners are continuously incorporated in the activities. Focus points so far were three project workshops and common data collection and analyses. Permanent - mutual - learning is further assured by regular communication between Indonesian and Australian team members.
Outputs and milestones
The beef supply chain is driven by an increasing demand for beef as a result of raising incomes. Live cattle traders transmit the demand to the farmers. The high demand has resulted in a decline of cattle numbers and average slaughter weights because productive female cattle are killed and animals are slaughtered at premature weights. Regulations to prohibit the slaughter of females as well as breeding programmes to rebuild herd sizes seems to have a limited effect according to interviews in the project regions where participants in the supply chain continuously report the lack of cattle as a major problem. These statements are in contrast to official statistics showing increasing cattle inventories.
The farm level interviews confirm that a cash requirement for special occasions like weddings, birthdays, funerals and school start is the main reason for selling cattle and not the optimum, breed specific weight or carcass conformation. Prices in NTT are lower than other regions whereas in South Sulawesi prices seem to be higher than average. Enormous productivity and cost differences between regions and production systems can be observed but there are profitable as well as unprofitable farms in all regions and systems. Calf losses in NTT are down from record highs but remain at almost 20 percent with potential to be further lowered.
The absence of scales at farm level means there is no reliable data about live cattle weights. At present, traders estimate the weight of the cattle and pay on a per head basis. The knowledge of accurate cattle weights, however, is a precondition for selling at optimum weight, better market transparency as well as for breeding programmes and research. In this context, farmers interviewed asked for an improvement in regular market and price information.
In the meantime, traders get involved in production to secure their supply on a larger scale, for example in NTT. However, any increase in cattle numbers must be accompanied by an increase in productivity. Daily weight gains remains in most cases significantly below the breeds' potential due to low quality and quantity of feed.
In the Jakarta market, imported live cattle and beef imports are increasingly important, and are now more than 30 percent of the consumed volume. The customers in Jakarta have got used to eating beef of non-Indonesian production that is imported from Australia (beef and live cattle) and New Zealand (beef). Wet market prices for imported beef are approximately 10 percent lower than domestic beef. The interviews showed that with the shift in consumption, consumer preference in Jakarta seems to change and the origin of cattle is not a priority with freshness, tenderness and hygiene ranking higher than domestic/local origin. The approval of additional imports from Brazil and India will put further pressure on local beef prices.
At the same time, the beef consumption in the eastern Indonesian region is on the increase. It has become more costly (due to transport costs) to export cattle from eastern Indonesia to Jakarta and the regional increase in demand for beef has narrowed the gap between Jakarta and regional prices, for example in Surabaya. The long and risky transport of live cattle from eastern Indonesia to Jakarta has become less profitable. The inter-island transport study on live cattle 'export' from NTT to Jakarta revealed inadequate boats, a lack of feed and water, stress for the animals resulting in low feed intake during the 14 day journey and leading to cattle mortality and weight losses, costing the industry millions of dollars every year and reducing the much needed cattle supply in Jakarta. Given the multitude of issues surrounding the inter-island transport system, improvements should therefore have a broader base, tackling the underlying factors, instead of just curing symptoms like low feed quality and quantity.
Next steps and recommendations
The project has gained an insight to the most likely development of the supply chain, which will be confirmed. The initial results have led to a future focus of the project on the beyond farm level due to the latest market developments. The farm level analysis should therefore be concluded by end of 2009 (including international context benchmarking, updated from 2007 to 2008).
Consequently, the beyond-farm analysis has been extended by interviews with processors and beef/ live cattle importers which were identified as important for the changes on the demand side. Further, the work on the five existing levels of the supply chain will be continued by improving quality and/or quantity of the data.
Based on farm-level and beyond farm findings, the process of recommendations has started. These include and will be further analysed:
Linking small-holders to local markets instead of Jakarta market
Branding for Eastern Indonesian beef
Industry/policy fund to provide micro-finance and breeding
Inter-island transport best practice pilot study
Cattle insurance
Market and price information system on beef and livestock prices
Introduction of scales throughout the supply chain
Eastern Indonesia Beef Forum (an inter-professional body where the supply chain meets)
Further training for project members on monitoring, analysis and benchmarking
Policy recommendations (more market, less regulations)

In the second 12 months of the project (June 2009-May 2010), work included activities on all six project objectives in the two principle areas: beyond-farm and on-farm.
The on-farm activities focused on finetuning, updating and analysing the typical farm data across the region as well as inclusion of the farms in the international activities of agri benchmark. The farm comparison analysis was finished. Data on farm level were updated with 2008 price data and international context benchmarking were finalised. Further, the quality of farm data also improved by additional/update information collected by project team.
Tools to analyse greenhouse gas emissions from beef production were developed and data collection is underway. The emission tools aims to provide analysis of methane production as result of enteric fermentation, methane and nitrogen oxide from manure storage and handling as well as emissions from feed and forage production.
On the beyond-farm side the work begun was continued and expanded to eight typical value chains. The existing level of beyond-farm analysis (trader, abattoir, wet market, supermarket, and consumer) was extended by interviews with beef processors (small and large) and importers (beef and live cattle) which were identified as important for the changes on the demand side. The findings from the five existing supply chain levels were used to develop a typical supply chain (TSC) framework for in-depth analysis of economics and margins along the supply chain. The TSC framework was refined during the Surabaya workshop in November 2009. Eight TSCs along with its most important supply chain actors were indentified for further data collection. Interviews and data collection of these TSCs are the main activity for 2010.
The cow-calf farms analysis indicates the following:
Key Technical aspects: (1) Huge differences in productivity indicators such as calving percentage, mortality and weights. Due to the lack of records on weights and performance indicators the data gaps were tried to close by expert opinion and literature. (2) Cross cattle farms can often compensate low weaning percentage with higher weights per animal.
Key Economic aspects: (1) Large variation in weaner prices per head and per kg. (2) Less variation in total returns. (3) With few purchased inputs, a major part of total costs are opportunity costs, mainly family labour. (4) Most of the systems are profitable mid-term (w/o opportunity cost).
The finishing farms analysis indicates the following:
Key Technical aspects: (1) Most farms operate with low physical productivities, mostly below breed potential. Feeding quantity and quality is an issue. (2) Daily weight gains and final weights are lower in Bali cattle than in cross cattle.
Key Economic aspects: (1) Considerable beef price variation per kg carcass weight. (2) The proportion of opportunity costs in total cost lower than in cow-calf due to the purchase of animals and feed. (3) Costs seem to determine profitability more than returns. (4) Most of the systems are profitable in mid-term horizon.
It appears that with present price relations, beef production is a profitable enterprise, also in an international context.
The interisland transport study NTT-Jakarta was finished, indicating:
The two feeding trials did not allow the conclusion that different feeding regimes make a statistically significant difference for weight losses.
However, this has to be seen in the context of a whole range of issues surrounding the interisland transport with an impact on weight losses, overall mortality and also stress for the animals: insufficient loading facilities, resulting in injury and stress for animals, inadequate ship design leading to stress, insufficient water supply leading to reduced feed intake.
With the reduced feed intake, comparing different feeding regimes is challenging and it is likely that the lack of water offsets any impact of different feeding regimes. It can therefore not be concluded that different feeding does not have an impact on weight loss, either.
In general, it appears questionable whether the present transport system is sustainable under the changed market conditions and animal welfare aspects, especially as the only reason for the long transport is to slaughter the animals in Jakarta.

The beyond farm level analysis based on the 75 percent market share and the first results from the economic data obtained from the typical supply chains analysis shows that beef presently seems to be a good business throughout the supply chain. At the same time we witness substantial changes in the supply chain.
The main market for Eastern Indonesian cattle / beef seems to shift from Jakarta to local markets and domestic 'export' regions. With the population growth and income development, demand for beef has increased locally. Examples for domestic 'export' destinations are Kalimantan and Papua. At the same time, transport cost and cattle prices have gone up and the price gap between Jakarta and other regions is getting smaller, making it less profitable to ship cattle from the East of the country to Jakarta.
On the other hand, the main market in Jakarta seems to rely more and more on imported boxed beef as well as beef produced in Indonesian feedlots based on Australian live cattle imports. Consumers in Jakarta get used to this kind of beef and their preference is less on domestic origin than on hygiene issues which are better served by supermarkets than wet markets. However, freshness, colour and low fat remain important product features. Processors and importers further report about consumers growing interest for product diversification.
While typically in deficit, the Indonesian beef market at the beginning of 2010 was characterised by an oversupply of beef resulting from a decrease in beef demand and an increased supply of feedlot cattle and boxed beef at the same time. This lead to decreasing beef prices for the first time in years. It is, however expected that the situation normalises in short time.
With increasing demand remaining the main driver, most interviewees reported the ongoing slaughter of productive female cattle which appears to be a particularly concerning issue in NTT. This has triggered plans by the local government to basically take over beef production for at least a while.
The vast majority of the interviewees indicated that they are planning to grow their businesses as well as improve hygiene conditions for their customers.