Files
Abstract
Meat consumption, expenditure and socio-demographic data from the 1990, 1993 and 1996
SUSENAS Household Food Expenditure and Consumption Surveys were employed to estimate
the demand for meats in Indonesia. The focus was on the Provinces of DKI Jakarta and West
Java where about one-fourth of the Indonesian population reside. Statistical and econometric
procedures were used to aggregate the 16 meat types recorded in the SUSENAS into four meat
groups. They were then used to estimate the Linear Approximation of the Almost Ideal Demand
System (LA/AIDS) model, taking into account zero observations and the restriction that budget
shares must lie between zero and unity.
The demand for Meat Group 1 (dominated by beef) is income-inelastic, whereas that for Meat
Group 2 (dominated by commercial and native chicken) is income-elastic. These two groups
comprise nearly 95 per cent of all meat purchases. The estimated own-price elasticity of the beef
group is -0.92, while that for the chicken group is -1.09. The cross-price elasticities indicate that all
the meat groups are substitute goods, as expected.
The results suggest that the current focus of the Indonesian government on strengthening the
domestic poultry industry is well placed, as the demand for chicken is likely to respond more
quickly to income growth than the demand for beef. Further, consumers seem more likely to adapt
their consumption patterns to chicken price changes than they will for beef price changes.
However, these differences are relatively minor and there is still a major opportunity for Australian
agribusiness firms in the cattle and beef sectors to take advantage of the projected rapid growth in
Indonesian beef demand.