Social capital and cattle marketing chains in Bali and Lombok, Indonesia

Abstract

The majority of cattle owners and managers in eastern Indonesia have multiple motivations for keeping cattle, of which profit maximisation is only one. The Government of Indonesia (GOI) also has multiple motivations for supporting the cattle industry. For the GOI, cattle provide both a means of improving smallholder welfare and an opportunity to develop an efficient industry producing a competitive local product for the domestic market. These multiple objectives of producers and government result in an industry where producers are as diverse as those who are keen to develop their cattle program into profit-maximising enterprises and those who are content to buy and sell cattle when required to meet personal and social needs. A potential limitation restricting cattle industry development in the eastern islands of Indonesia is the inability of smallholders to access a marketing chain that rewards cost-effective production of a high-quality product. For smallholders to compete with imported products, both the ability to minimise transaction costs and the capability to buy and sell when appropriate need to be improved. Previous research has identified the potential role that social capital, as well as financial and human capital, may play in assisting smallholders to gain better access to marketing chains. Government rural development programs form and use community groups as the institutions through which they distribute cattle to the poor. This allows not only cost-effective distribution of cattle and extension support, but also encourages farmers to work together and support each other in regard to cattle marketing. The GOI provides the means through which individual cattle owners can take advantage of economies of scale, and hence form stronger links with the marketing chain. This study defines the cattle marketing chain and describes the role of its various stakeholders. It also identifies the role that farmer groups may play in assisting smallholders to link to the market chain, and the characteristics of farmer groups and group leaders that lead to groups having greater market access.