Price transmission on the Indonesian beef market

Abstract

Beef has been seen as one of the strategic commodities in Indonesia. As the awareness of people to protein consumption increasing, demand for beef and its prices are also rising. However, the rising consumer price of beef is not followed by the increasing price of beef at the producer level. Therefore, the objective of this study is to analyze the transmission of beef prices at the consumer and producer level. This study used secondary data from the Agency for Central Statistics of Indonesia. The data used were the consumer and producer prices of beef from 2008 to 2016. The data were analyzed using the Vector Error Correction Model (VECM). The results show that the prices of beef at the consumer and the producer level are asymmetric and have uni direct relationships. The consumer prices of beef influence the producer prices of beef and not vice versa. It is recommended for the Government to formulate policies that could facilitate transparent information for every actor along the beef market chain. In the long-run, the Government needs to increase the population of domestic cattle and give incentives to domestic cattle farmers with large business scales.