Philippine E-Journals

Spatial Integration of Beef Markets at the Retail Level in Central Java, Indonesia

Agus Setiadi | * Sunarso | Flordeliza A. Lantican | Nenita L. De Castro

Discipline: Veterinary Medicine

 

Abstract:

The study aimed to analyze the degree of market integration and price asymmetry of the beef markets in the province of Central Java, Indonesia. Monthly retail beef prices were gathered from the Central Java Animal Husbandry Office and Central Java Trade and Industry Office. Ten regional markets and one central market were selected as the study areas. The Augmented Dickey Fuller method was used to determine the stationary of the data. The Johansen co-integration was used to test the market integration between 16 market pairs of cattle markets in Central Java. Results of the study revealed that beef in retail markets were highly integrated with one another at the retail level. The retail prices were integrated because all of the markets are closed to each other. The Law of One Price (LOP) was found in all of the co-integrated cattle market pairs, implying that the retail prices were fully transmitted between these markets. The value of LOP revealed that the retail price in the central market was similar to the retail price in regional markets plus transportation cost. At the retail level, the price transmission from one market to the other market for all market pairs was symmetric. This is significant since it indicates that any increase or decrease in the retail prices is more efficiently transmitted to the other market. The result indicated that the high beef demand in the Central market (consumer area) drove the retail price in regional markets (producer area).