CC BY
1
UDC 332; DOI 10.18551/rjoas.2023-02.19
INSTITUTIONAL DYNAMICS OF CATTLE AND BEEF MARKETING SUPPLY CHAIN IN INDONESIAN DRY LAND AGRICULTURE
Lole Ulrikus R.*, Keban Arnoldus, Tenang, Mulyantini N.G.A., Makandolu Solvi M., Ratu Maria R. Deno
Faculty of Animal Husbandry, Marine Affairs and Fisheries, University of Nusa Cendana,
Indonesia
*E-mail: ulrikusromsenlole@gmail.com
ABSTRACT
The structure, role and dynamics of various institutions in cattle and beef marketing supply chain management need to be known in detail and comprehensively, so that their performance can be improved. Objectives: 1) analyze the role and institutional dynamics in supply chain management of cattle and beef in dry land agriculture; and 2) formulating efforts to improve the performance of cattle and beef supply chain institutions in dry land agriculture. Methods: A comprehensive survey of cattle and beef supply chain management institutions, covering all stakeholders (farmers, livestock traders, butchers, meat traders, animal markets, slaughterhouses, animal quarantine, transport expeditions, etc.). The data were analyzed descriptively qualitatively and quantitatively, income analysis, and trading margin analysis). Conclusions: 1) The role of cattle and beef supply chain institutions is starting to form a solid network. However, in terms of institutional dynamics, there are still problems with smooth communication and interaction between institutions in transactions, especially at the point of interaction between farmers and village traders; and 2) Transaction costs in the cattle and beef marketing supply chain are still quite high, but the profit for the institution is quite reasonable. The provision of benchmark prices is very important to maintain a fair distribution of profits.
KEY WORDS
Marketing cost, institution, supply chain, beef cattle, dry land.
NTT Province is an area with a dry land area of 3,491,130 ha (94.57% of the total area of 3,691,421 ha), but the potential for dry land that can be used for dry farming is only about 1,528,308 ha (43.78% of the total dry land area). A sizable population of East Nusa Tenggara (NTT) has taken part in the beef cattle business, which promises financial and other socio-cultural benefits. Various stakeholders play a role in the provision of production, production, industrial, marketing, and consumption facilities for various livestock products (for direct consumption or for other needs) (Chopra, 2006; Fatahilah et al., 2010; Hariningsih, 2012; Lole et al., 2021). The dominant condition of dry land directly affects the pattern and type of agricultural business, including beef cattle farming which is still dominated by subsistence (self-fulfillment) and social standing (status/prestige).
Over time, the beef cattle business has begun to shift from subsistence and social standing to a more commercial nature (market oriented) by taking advantage of the surplus production that can be sold to the market (Lence et al, 2007; Lole, 2013; Priyanto, 2011). Furthermore, Hadi (2012) and Suryana (2008) state that an agricultural product that is able to reach markets further downstream in the vertical structure of the supply chain and closer to the consumer center area will be able to develop faster and facilitate the fulfillment of consumer needs.
With a cattle population in NTT of around 1 million heads in 2019 (around 4.3% of the national cattle population) and occupying the fifth position, it shows that NTT's position and role is very important in supporting the provision of national beef. Moreover, nationally, up to now, it still has quite large imports, reaching around 35-40% of the national demand for meat (Lole, 2013). However, the facts show that the level of ability to supply livestock and meat (to national and local markets) still has obstacles that need to be identified. This can be seen in
the lack of smoothness or difficulty in collecting livestock from villages in an effort to meet quotas for inter-island trade each year (Budisantoso et al., 2008; Lalus et al., 2019; Lole, 2013).
In addition, for beef consumption needs (national and local); the activities of collecting, transporting, slaughtering, and distributing beef to the market to the final consumer follow a series of institutional roles and supply chain management (SCM) performance (Hadi, 2012; Hayami et al., 1987; Hosami, 2014; Lalus et al., 2019; Krova et al., 2021). At the initial trading level (farmer, village trader and sub-district trader level), the SCM structure coincides between the marketing of livestock for inter-island needs and for local production and consumption. At this initial stage, the supply chain flows various types of livestock resulting from transactions in the form of male livestock (fattening products, feeders, young seeds, and rejects) and female livestock (productive adults, young seeds, and rejects). Furthermore, at the final level, the supply chain is divided into two supply lines, namely for inter-island marketing channels (slaugtherhouse outside NTT) and local marketing channels (local slaughterhouses and nurseries) (Hadi, 2012; Van der Vorst, 2006; Rachman, 2016; Krova et al., 2019; Lole et al., 2021).
How the specific roles of each agency and supply chain management function in the two cattle marketing channels (especially local marketing) need to be known in detail and comprehensively. Thus, the results can be used to improve the role of the institution as well as its function in the framework of developing livestock in NTT as a whole.
The research aims: 1) describe the structure and role of institutions in the supply chain of livestock and beef in the dry land agriculture of NTT Province; and 2) to analyze the transaction costs of marketing livestock and beef in the dry land agriculture of NTT Province.
METHODS OF RESEARCH
This research was conducted in Kupang area (include Kupang Regency and Kupang City), NTT Province, Indonesia, which is located in a dry land area with a dry climate. Primary data collection was through interviews with related parties through indeep-interrogation in 5 sample districts, namely Amfoang Selatan, Fatuleu, East Kupang, Sulamu, and West Amarasi Districts. Survey through interviews (guided by questionnaires, in-depth interviews, PRA, and FGD) of samples at sample locations. Secondary data from Disnak and BPS Kabupaten/Kota Kupang, Lili Animal Market, slaugtherhouse Oeba/Aldia, Tenau Animal Quarantine, Sea Freight Expedition, Port Administration. and other related parties.
A survey of various parties related to the planning and development of livestock and cattle product business at the Kupang Regency/City level, particularly those related to product marketing, processing and consumption. Respondents at the district/city level, namely Disnak and Bappeda, district heads/village heads, NGOs, cooperatives, farmers, traders (village/sub-district/district/inter-island), butchers, investors, financial institutions, and other parties (key persons). Therefore, an institutional approach was used with the hope of obtaining complete data.
Through an empirical-statistical study, a quantitative approach is used to solve problems, equipped with a descriptive-qualitative approach as needed. Various descriptions of the structure, roles, and functions of each institution and individual/company in the beef cattle marketing chain as a supply chain management (Preckel et al., 2004; Marimin and Maghfiroh, 2011; Monczka et al., 2011; Wang et al., 2014). The strengths and weaknesses of various institutions and related parties will be described in detail and it is hoped that efforts can be found to improve their roles and functions, which are woven into an efficient and effective supply chain system (Paul, 2014; Saaty, 2004).
RESULTS AND DISCUSSION
In general, the vertical structure of the supply chain for livestock and beef in Kupang District/City) is shown in Figure 1 (Lole, 2013; Hadi, 2012; Lole et al., 2021; Lalus et al., 2019). The supply chain for cattle in Kupang Regency starts from village breeders to cattle
slaughterers for local marketing or to inter-island cattle traders for export. On the other hand, the supply chain for fresh beef starts from traders who cut or slaughter cattle (in slaugtherhouse and non- slaugtherhouse) to local consumers in Kupang Regency and Kupang City.
Figure 1 - Supply chain of cattle and beef in Kupang Regency/City
Generally, breeders sell their cows to village level livestock traders (VLLT), whether they are contacted by farmers or visited by VLLT, so that the transaction location takes place in their home or garden. However, a small proportion sell elsewhere (regular markets, animal markets, or traders' residences). The data shows that large cattle buying and selling transactions occur at the Lili Animal Market, where the transaction actors are: VLLT, sub-district/regency level livestock traders (DLLT), inter-island livestock traders (ILT), and cattle slaughterers/butchers (CST). Cattle in the Lili Animal Market come from 5 districts, namely South Central Timor and Kupang (the most dominant), as well as the North Central Timor, Belu, and Malaka (small numbers because they are far away).
In cow marketing, VLLT acts as a cow collector in the village or neighboring villages. This VLLT will sell its cows to PTTK which then also sell them at the Lili Animal Market. Cattle traders in Kupang Regency trade in Bali cattle, because they are adjusted to the supply and demand in this region. Payment in cattle buying and selling transactions is made in cash (cash and carry), because it is the initial motivation for selling cows to get cash.
The determination of the price of cattle in buying and selling transactions between breeders and VLLT is carried out in two ways, namely by estimating the price based on the body condition of the cattle and how to weigh the cattle and then calculating the price. The advantages and disadvantages of these two pricing methods have been described in the previous section (Lole, 2013; Hadi, 2012; Krova et al, 2021).
DLLT generally trades cows for slaughter or seeds/feeders. The amount of sales per DLLT per month for slaughtered cattle and cattle for breeds/feeders is relatively the same. As in VLLT, DLLTs trade cows because of the supply and demand for cows. The demand for feeder cattle for fattening is higher for male cows than for female cows, but the number of cattle slaughtered is more female cows than bulls. The traded cattle come from Belu, Malacca, TTU, TTS, and Kupang (Amfoang, Sulamu, Amarasi, and Fatuleu Districts) which are purchased from village livestock traders. Payment to VLLT is made in cash (cash and carry).
CST (butchers) buy cows for slaughter from DLLT at the Lili Animal Market. Cows are generally from Kupang and TTS districts (40-60 km distance). The price of a cow with a live weight of 300 kg or a meat weight of 100 kg is around IDR 9 million per head. Traders prefer to set prices based on estimated weight of meat to be produced, not live weight (Hadi, 2012; Wiyatna, 2007; Lole et al, 2021; Krova et al., 2021). Payment to DLLT is also made in cash (cash and carry).
BR sells beef at traditional markets (Oeba, Naikoten, and Oebobo Markets) in Kupang City. BR buys beef entirely from CST/butchers in Oeba Slaugtherhouse Kupang and sells it in traditional markets. Fresh meat in the form of pure or whole meat (not mixed with other types of meat). Some fresh meat is differentiated according to category and some are not differentiated (for example, hash meat and thigh meat) (Wiyatna, 2007; Rachman, 2016; Hodi et al., 2011; Lalus et al., 2019; Wang et al., 2014).
ILT is generally headquartered in Kupang City, but generally has a temporary shelter in Kupang Regency while waiting for transportation by ship (livestock ship or modification of cargo ships). ILT has decades of experience in cattle trading. Generally, fattening bulls (paron) for slaughter (Jakarta, West Java, East Kalimantan, and South Kalimantan) and a small portion of cows for seedlings (specifically for Flores and other districts in NTT).
Apart from the sale and purchase of anchovies between traders for slaughtering purposes, there are also transactions for buying and selling seeds and feeders for breeding and fattening by various groups, both individually and institutionally. There are various government programs and projects (central, provincial and district), non-governmental organizations (local, regional, national and international), cooperatives/joint business group, and private companies; which develops cows, both for breeding and fattening.
Roles and Functions of Supporting Service Providers. Cattle are marketed in public markets (small numbers) and animal markets (large numbers). The main animal market in NTT is the Lili Animal Market. The market operates once per week, but in practice it is between Wednesday-Saturday, where large scale occurs on Thursday and Friday. On Wednesday and Thursday it is dominated by large livestock (cattle, buffalo and horses), while Friday and Saturday are dominated by small livestock (goats, pigs and dogs) and poultry (native chickens). The areas of origin of the cattle are five districts, namely Kupang (23%), TTS (57%), TTU (9%), Belu (5%), and Malaka (6%).
Slaughterhouse Oeba is the UPTD for Animal Husbandry and Animal Health (Agriculture and Forestry Office of Kupang City Government). The location of the Oeba slaughterhouse is about 10 m from the settlement and 40 m from the Oeba Market. Value addition activities have begun to occur in the slaughterhouse which transform live livestock into meat and other products (in the form of livestock product processing industries, both main and by-products). Types of facilities in the slaughterhouse: a place for loading/ unloading livestock, a cattle shed, a slaughterhouse (a combination of a dirty room, clean room, withering room, and offal washing room), meat transportation equipment, and a slaughterhouse office
The number of slaughtered cattle in the Oeba slaughterhouse is 10,548 heads (2019) and 7,751 heads (until September 2020). The number of slaughtered during January-September 2019 was 7,734, which means that the number of slaughtered during January-September 2020 was quite stable. The number of CST who slaughtered cows in this slaughterhouse was 16 people.
The construction of the Bimoku slaughterhouse (replacing the Oeba slaughterhouse) with more modern facilities and larger capacity is approaching the operational stage. Currently, they are still waiting for the process of transferring management to the Kupang City Government while continuing to complete various facilities, including the provision of water and electricity.
The Kupang Agricultural Quarantine Center is located 200 meters from the Sea Port of Tenau (Kupang City). This Quarantine Center carries out its main duties and functions (tupoksi), namely the supervision of inter-island livestock traffic, both entering and leaving the Province of NTT, especially in the West Timor Region.
The export of cows through the Quarantine Center in 2019 according to the quota is 69,650 heads (shipping frequency 928 times), while from 2020 to September it reaches 58,746 heads (shipping frequency is 652 times). When compared to January-September 2019 with a total of 48,712 birds, then shipments for the same period in 2020 increased by around 21%. The amount of expenditure is more during the dry season, namely August-October according to the large supply of cattle in this period.
The task of the marine expedition is to serve cattle handling services from the Port of Tenau (Kupang) to their destination. In Kupang, there are only 2 owners of sea freight forwarding services for transporting livestock, who always work together every time they ship cows. The sea freight forwarder does not have its own ship. During the last few months (August to October 2020), cattle were sent to Java and Kalimantan. Shipment uses the Animal Cemara Nusantara Ship and a modified one-way chartered cargo ship. An animal boat with a larger capacity is still needed at a more affordable cost. Specialized animal vessels are able to reduce body losses to 8-10% (modified cargo ships have a shrinkage rate of around 13-15%).
The Kupang Port Administrator Office (ADPEL) is under the Directorate General of Sea Transportation (Ministry of Transportation). In accordance with its main duties and functions, ADPEL is responsible for the safety of the ship and the contents of the ship (goods and passengers) from the port of departure to the port of arrival. In relation to the transport of live livestock between islands, ADPEL wants a special livestock vessel with adequate capacity. Therefore, ADPEL requires that if using a cargo ship, it must be modified by making temporary pens, and the ship only contains livestock (not to be mixed with other goods and passengers).
Table 1 - Number of slaughtered cattle according to sex at slaughterhouse Oeba, Kupang City,
in January-August 2021 (head)
.. ,, Male Female Total (Head)
Month ._. , 0. Head % Head %
January-February 471 32.13 995 68.04 1,466
Marc-April 533 31.54 1,157 68.05 1,690
May-June 596 32.06 1,263 68.02 1,859
July-August 1,115 67.05 584 31.96 1,663
Total 2,715 40.66 3,963 59.07 6,678
Source: Slaughterhouse Oeba Kupang, October 2021.
Table 2 - Type and amount of transaction costs in selling beef cattle in Kupang Regency
Type of transaction cost Unit The amount of costs (IDR) Proportion (%)
Information search (pulse) IDR/acces info 7,000 4.86
Village retribution IDR/head 18,000 12.50
Animal transportation IDR/day 25,000 17.36
Farmer consumption IDR/head 35.000 24.31
Market retribution IDR/head IDR/head 14.000 9.72
Feed cost IDR/day 15.000 10.42
Others (cigarettes and betel nut) IDR/head 30.000 20.83
Total Cost 144.000 100.00
Source: Primary Data (processed).
Analysis of Marketing Costs and Market Participants' Profits. The types of transportation costs incurred by the farmer when deciding to sell cattle (either at the business location or at the animal market) can be seen in Table 2. Transaction costs include: information seeking, village fees, livestock transport, farmer consumption when selling to the market, market fees, feed costs and other costs. When the farmer decides to sell the cow at the business location, it only costs Rp925,000 for information seeking and village retribution (17.36%). Conversely, when the farmer decides to sell it himself to the animal market, the farmer has to pay an additional fee of Rp9119,000 (82.64%) of the total transaction cost.
The purchase price of cows varies, for feeder fattening is around Rp3.75 million per head for a live weight estimated at 125 kg, while the selling price of cows for seed is around Rp4 million. The purchase price of a cow for slaughter is around Rp9 million per head for a live weight of around 300 kg. Most of the transactions are made at the Lili Animal Market. The costs incurred for the sale and purchase of livestock at the Lili Animal Market consist of the cost of transporting livestock to the animal market of Rp935,000, animal market fees of Rp915,000, and animal market crossings of Rp93,000, or a total of Rp950,000 per head. Thus, the profit per village/sub-district livestock trader is Rp9,300,000 for breeds/feeders and Rp9,850,000 for beef cattle, which represent 7.5% and 9.4% of the total cost, respectively.
The total costs incurred are Rp933,897,500 for the purchase of cows and fees at the Lili Animal Market, payment for transportation from the animal market to the Oeba (Kupang) slaughterhouse, purchase of rope/rope to tie the cows, purchase of feed and drinking water, pay for cow carers, processing personnel, and user fees at the slaughterhouse (Table 3). Meanwhile, the revenue amounted to Rp934,492,000, which consisted of sales of meat, skin, head, offal, and others.
Table 3 - Costs and profits of cow slaughterers in Kupang, October 2021
Description_Unit_Volume Price (Rp/unit) Value (Rp)_
A. Cost
1. The purchase price of a cow at the animal market of Lili
a. Male 450 kg
b. Female 300 kg
2. Retribution of animal market
3. Transportation to slaughter house
4. Rope etc
5. Feed and water 5 days in slaughterhouse
6. Maintenance personnel in slaughterhouse
7. Management personnel in slaughterhouse
8. Retribution of slaughterhouse Total Cost
B. Revenue
1. Beef
2. Skin
3. Head, innards, etc Total Revenue
C. Profit
Source: Primary Data 2021 (processed).
Table 4 - Costs and profits of beef retailers in Kupang, October 2021
Description Unit Volume Price (IDR/unit) Value (IDR)
A. Cost
1. Purchase of meat kg 150 50,000 7,500,000
2. Worker at the stall person 2 25,000 50,000
3. Security cost month 1 10,000 10,000
4. Cleaning cost month 1 10,000 10,000
5. Transportation cost from slaughterhouse to stall kg 150 500 75,000
Total Cost 7,645,000
B. Revenue
1. Loin meat kg 30 65,000 1,950,000
2. Thigh meat kg 120 60,000 7,200,000
Total Revenue 9,150,000
C. Profit 1,505,000 (19.69%)
Source: Primary Data 2021 (processed).
Note: *) loss of 5 kg (decreased water content and fat removal).
The total cost incurred by a meat retailer in Oeba Traditional Market (Kupang) is around Rp7.1 million (Table 4). Of the 150 kg of meat purchased, only 145 kg could be sold due to the 5 kg loss in weight as a result of decreased water content and fat removed. With this reduction, the total revenue was Rp7.4 million, so the merchant's net profit was around I Rp279,000 (3.92% of the total cost). If we look at the percentage of profits, retail traders have a smaller risk of business loss than cattle slaughterers.
head 3 9,000,000 27,000,000
head 2 5,000,000 10,000,000
head 5 12,000 60,000
head 5 70,000 350,000
head 5 5,000 25,000
head workday 5 60,000 300,000
person 5 65,000 325,000
head 5 50,000 250,000
5 18,000 90,000
38,400,000
kg 686 60,000 41,160,000
sheet 5 100,000 500,000
head 5 850,000 4,250,000
45,910,000
7,510,000 (19.56%)
With sales of 530 bulls of beef cattle for a month destined for Samarinda (Kaltim), the costs incurred are around Rp1,886 million, while revenues are around Rp1,938 million (Table 5). Thus, the profit earned was around Rp 52.3 million, which was only 2.77% of the total cost. If calculated on the average per head, the profit is around Rp158,500.
Table 5 - Costs and profits of inter-island livestock traders in Kupang, October 2021
Description Unit Volume Price (IDR/unit) Value (IDR)
A. Cost
1. Purchase price head 350 9,000,000 3,150,000,000
2. Expedition cost head 350 650,000 227,500,000
3. Retribution head 350 15,000 5,250,000
4. Load at the port to head 350 50,000 17,500,000
Total Cost 3,400,250,000
B. Revenue head 350 12,600,000 4,410,000,000
C. Profit_1,009,750,000 (29.70%)_
Source: Primary Data (processed).
Note: *) livestock weight 300 kg/head minus 13% loss.
The problem faced by traders is that during the rainy season it is difficult to obtain cattle because breeders rarely sell their livestock and transportation is not smooth. The sale of cattle by breeders occurs more during the dry season because farmers need school fees, traditional events, and building houses. Another problem is that if there is a large sea wave, the ship's arrival time at its destination cannot be determined with certainty. Traders prefer Kalimantan as the destination for porong cattle trade because the demand is more and more profitable when compared to sales to Jakarta because of the higher price, lower cost, and lower risk.
CONCLUSION
The role of cattle and beef supply chain institutions is starting to form a solid network. However, in terms of institutional dynamics, there are still problems with smooth communication and interaction between institutions in transactions, especially at the point of interaction between farmers and village-level livestock traders (VLLT), especially regarding the determination of livestock prices.
Transaction costs in the cattle and beef marketing supply chain are still quite high, but the benefits given to each marketing agency are reasonable in accordance with the level of financing incurred. The provision of a benchmark price based on live weight is very important to maintain the fairness of profit distribution among marketers.
Suggestions: 1) Village group institutions and cooperatives (supported by the government, NGOs, CSR, cooperative members, etc.) can provide bailout funds to farmers to wait for the best prices and benefits; and 2) The use of livestock scales at production center is highly recommended to ensure the income of farmers.
AUTHORS' DECLARATION
The authors declare that there is no conflict of interest for the publication of this paper. All authors read the final manuscript and approved the final version.
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