Like most of Southeast Asia, the vast majority of cattle in Indonesia are sold through an ‘open’ / spot marketing system, comprised of a plethora of actors including a hierarchy of traders, butchers and inter-regional traders (Figure 4). Farmers rarely sell cattle themselves at market or to butchers, but rather sell through brokers/collectors or local traders (see for example Mahendri et al. 2012). The cattle can then change hands several times to be aggregated in larger lots (for inter-island traders or feedlots) or for regular buyers (especially butchers).
A significant proportion of this trade occurs at periodic cattle market places. To reduce transaction costs, butchers source a large proportion of their cattle from markets. Markets are most common and concentrated in intensive production systems (East Java, Lombok, Kupang), rare in semi-intensive systems, and almost non-existent in extensive production areas.
Like other parts of Asia, there are widely-held perceptions (amongst farmers, government and even researchers) that cattle traders pay below the “real” value of the cattle to make windfall profits. To support this observation, there are some oligopolistic structures in some markets (especially for inter-island cattle trading). Farmers do not deal directly with downstream buyers (or even at markets) for social reasons. Cattle can change hands many times in the chain, sometimes on the same day, for speculative reasons or because relationships enable more liberal payment terms. This adds (albeit) minor costs to the transaction. There are little or no formal marketing systems – for example formal price reporting or the use of standards and measurement systems.
There is, however, little evidence to suggest that markets are dysfunctional. In almost all parts of Indonesia there is significant competition amongst buyers, reflected in a number of sales choices at household level. While there is limited formal information available, households have access to price information from a range of sources including local brokers, buyers and other farmers, and mobile phones are ubiquitous. Perhaps most importantly, there are few alternative marketing systems (for example, contracts, auctions, aggregation of cattle for direct sales) that would increase returns to producers, although several initiatives (e.g. weighing scales) have proved successful in certain cases.