The vast majority of cattle are traded through spot markets, populated by a familiar hierarchy of actors. Slaughtermen and traders have extensive purchase networks, and can buy direct from farmers, or through local level collectors and spotters (for a small fee). Most end-buyers (slaughtermen) require only small lots (e.g. to slaughter 3-7 head per week), and traders try to aggregate a full truck (7-9 head depending on size) to reduce transport costs, especially where there are significant distances and poor roads. Road infrastructure is generally poor and many secondary roads impassable in wet season, but infrastructure is improving with major new roads to the west and south. Even with few specifications, it can take some time (a week in some cases) to aggregate a truckload of cattle, which incurs search, holding and trucking costs. The need to aggregate a truckload of cattle in a timely way meant that virtually all types of cattle (large, small, age) are bought. Most slaughtermen and traders also dealt with buffaloes too.
Cattle are mostly purchased through visual assessment, where buyers estimate the carcass weight / yield of the animals and costs (aggregation, holding, transport) to establish a price. Farmers have a strong preference for immediate cash payment, but various payment arrangements can be negotiated where there is trust and established relationships.
Because of the low density of cattle numbers and turnoff, there is very limited development of live animal markets, and cattle are aggregated near points of slaughter (wet markets, slaughter sites and near the refurbished abattoir in Dili.
There is also a large and vibrant trade in cattle, buffaloes and other animals for ceremonies (funerals, weddings, graduations etc.). The chains can be short, for example a farmer slaughters their own animals, or draws on reciprocal obligations and debts from families and kinship groups. However, ceremonies can require very large numbers of animals, so often have to be bought in through collectors or traders, markets or agencies (including CCT in Dili). In establishing the value of animals for ceremonies, attributes of horn size and age can be important (which can distort farmer expectations in other markets where carcass weight is the overwhelming consideration).
Like other countries, farmers and other stakeholders hold a widespread a perception that cattle prices are “too low” or “not fair” and that traders and slaughtermen make “too much money”. There certainly appears to be areas where the system could be improved, but the dominant “spot” cattle marketing system is not dysfunctional. For example, while traders inevitably know market prices and the end-value of animals better than farmers (information asymmetries), most farmers have access to price information and can select between multiple sales channels (through word of mouth and mobile phones). While slaughtermen and traders no doubt have trading territories and alliances (collusion), there is still competition for cattle at local levels, and don’t appear to making windfall margins, given the costs and risks (including non-payment) involved.
Modern butchers have sought to buy cattle over-the-scales on a per kilogram basis using a price schedule. This is encouraged by government and development agencies, but the butchers (unusually) also prefer to buy over-the-scales to increase business certainty and avoid over-estimating meat yields. When first establishing this new purchasing arrangement, attempts were made to weigh cattle on-farm, but proved difficult to extend with farmers unfamiliar with the practice or who mistrust scales (commonly manipulated in TL) and there are logistical challenges (carrying and setting up scales in purchasing areas).
Thus, cattle are weighed at the scales set up permanently at Tibar abattoir in Dili. There are examples where a group of farmers aggregated a line of cattle and trucked them to Tibar for weighing and payment. However, this is demanding of resources, including local leadership, coordination, the costs of the truck and feed, and the risks of hold-up in Dili. The other option might be that transporters (or the modern butchers) could truck cattle to the abattoir, weigh at Tibar, and then pay the farmers (or pay a deposit, and the balance after weighing). However, few farmers accept delayed payment because of the risk of not getting paid (or not paid in full, or at a discounted weight).
Thus, the dominant practice is that traders buy cattle on a negotiated subjective basis (by eye, per animal) with immediate payment to farmers, then transport to Tibar where traders sell the cattle to butchers over-the-scales. Differences in the purchase and sales price are accumulated by the traders. This was said in some cases to be significant, suggesting that farmers receive less than the “real” value of their cattle. However, in competitive markets, the trader margins should diminish and be passed back to farmers.
The per kg live weight price schedule of the modern butchers for cattle landed at Tibar in the second half of 2014 and first half of 2015 was: >250kgs – $2.70; 200-250kgs – $2.50; <200kgs – $2.00. Prices dropped about 10 cents in the latter half of 2015. Prices for the heaviest animals were $2.30 in 2013. After taking into account the weights of the cattle and transport and other costs, these prices appear to be similar or competitive with the prices paid by other traders and slaughtermen.
In sum, there do not appear to be major windfall gains to be made in wholesale reforms to the marketing system. However, incremental gains may be possible in particular cases that have to be assessed on an individual area, group and household basis.