In this article, Cahyadi et al. present the findings of a study on herd dynamics of smallholder cattle producers in the two major agro-ecosystems (irrigated lowland and rain-fed upland) in East Java. The research aims to better understand the capacity of smallholder cattle producers in order to increase their production and income in line with government targets. A total of 184 farmers participated in the study in 2010. Their cattle were monitored on a monthly basis to record vital statistics, as well as transfer and sales-related data.

The Bali government has introduced three beef cattle development schemes in recent decades to increase the income of smallholder farmers by improving their productivity and to support high quality beef production through improved technology. These schemes are the Beef NES scheme (conducted under a contract farming system between farmers and finance providers), the Food Safety Credit scheme (providing subsidised credit to farmers) and the Food Safety Project (a cooperative-type arrangement under government credit).

A number of different policies have been implemented to enhance development of different parts of the Bali beef industry. However, information on the benefits is limited and therefore evaluation of the various policies is required to guide future policy development. This paper explores the benefits from cattle development in a multi-stage production representation of the Bali beef industry using equilibrium displacement modelling. The impact on various industry groups such as smallholders, processors, retailers and consumers, is estimated in terms of their welfare changes.