For years the Thai market has been dominated by large integrators like Charoen Pokphand and Betagro. Other companies, however, also try to gain their share in the agricultural market. On the eve of the tenth edition of VIV Asia, in Bangkok, Thailand, Thai Foods Group has its sights set on becoming number three in the agribusiness market.
By Vincent ter Beek and Ad Bal
Thailand is known as the kitchen of Asia and it is well known that it was here where agribusiness development really caught on. Large agricultural conglomerates like Charoen Pokphand or Betagro have had the possibility of developing into feed-to-food integrators and also important players in the international Asian agribusiness markets.
Charoen Pokphand Foods, with a history going back to 1921, has developed itself to be thenumber one Asian agribusiness company with stakes in a wide variety of countries in Asia and beyond, having investments even in China and Russia. Betagro, on the other hand, in business since 1967, has grown domestically to produce quality products focused on selling, on for example, the Japanese market by securing cooked-meal joint-ventures.
In addition to these two, however, interesting developments are going on. One of the parties trying to get and expand their share of the market very quickly, is Thai Foods Group (TFG). Head-quartered in Ayutthaya, 100 km north of Bangkok, the company was founded 20 years ago by Winai Tiawsomboonkij. TFG started keeping poultry for the domestic market in 1997, with only 20,000 head.
A different picture
In 2011, the picture will be completely different. TFG has developed to become a multi-livestock business. Growing ‘securely and efficiently’, the group has come to consist of ten chain companies, producing both pigs and poultry, with an even emphasis on both animal species. Key in the company’s strategy is the Greater Bangkok area, which is undeniably Thailand’s main market with about 12 million inhabitants. Hence, TFG is locating its current and future farms in a zone around the capital, in the provinces of Kanchanaburi (west of Bangkok), Suphanburi (north west) and Chonburi (south east). Aiming to produce high quality against a low cost, TFG’s projections for the next couple of years reveal high ambitions, with a target of producing 1.5 million day-old-chicks per week (or 200,000 per day) by mid-2011. Currently, the company owns parent stock operations both south east and west of Bangkok and a third will be added in the middle of 2011, to allow for this expansion.
In pigs, ambitions are also considerable. The company hopes to become the third-largest pig producer in Thailand by 2012, after Charoen Pokphand and Betagro.
Allow for profitability
One driver behind TFG’s philosophy is a willingness to be a banker. The company has happily lent money to contract pig and poultry producers, encouraging them to set up a farm of their own, which would allow them to become a part of the TFG family. The only requirement is that the farm has to be located within 150 kilometres of the production centres in Kanchanaburi (poultry and pigs) or Chonburi (poultry) to allow for profitability.
Dr Chaisaks Boonprasopthanachote, deputy managing director, TFG: “Otherwise transport costs and mortality rates are simply too high.”Dr Chaisaks said about 1,000 contract growers will eventually be needed to complete TFG’s future picture. He added, “The free market will change within the next five years; business is going to change and become more integrated. Small farms will join integrations. In poultry this is already happening and in pigs the same will happen in the coming ten years. This happens mainly because of high costs of production. How to control these? We will have to control costs of raw materials, but also make sure mortality rates are low. If you can’t control your costs of production, you cannot survive.”
Thai Foods Group currently exists of ten divisions, four of which are on poultry, three on pigs, two on feed and one on supply of equipment. In poultry and feed, the major divisions are listed below.
Thai Foods Poultry Farm
This division, consisting of the company’s own broiler breeder farms and hatcheries, can be found in several places around Bangkok. Parent stock farms are in Chonburi and Kanchanaburi province, and a third parent stock farm and hatchery are being built in Panomthuan, Kanchanaburi province. TFG is mainly using Arbor Acres and Ross breeds and to a limited extent Cobb and Hubbard. Total production is expected to be 1.5 million day-old-chicks by mid-2011; or about 500,000 on each location. In total, 85% of all day old chicks go to own contract farmers; about 15% is sold off to the market.
Thai Foods Contract Farming
Thai Foods Contract Farming consists of about 1,000 broiler contract farms. These can be found in various sites around the capital – both east and west of Bangkok, like Chonburi, Suphanburi, Ang Thong, Lopburi, and Uthai Thani. All farms are fully privately owned and are using the all-in all-out system. “By doing so, we don’t have to invest in farms”, says Dr. Chaisaks. “Moreover, we believe that a large amount of small producers is less risky than a small number of large farms. In the event of a power breakdown, for instance, only a limited number of birds will be affected. This demands however, that we monitor and advise these contract farms very intensively. We also install the houses by ourselves through our Agro Industry equipment division. That’s a guarantee of creating the best possible growing conditions for the birds.”
Thai Foods Poultry International
This division consists of a six-year-old chicken slaughterhouse in Kanchanaburi, located west of Bangkok. Initially, the company intended to export products to Japan and Europe. After ongoing outbreaks of avian influenza in South East Asia, however, Japan and Europe would only accept cooked products. Since TFG does not yet have an own processing and cooking facility, the vast majority of all 140,000 daily slaughtered chickens have to be sold domestically, which is about 99%. The remainder is sold to the Vietnamese market. TFG is targeting output of 200,000 birds daily in the second half of 2011.
Thai Foods Layer Farm
The TFG layer breeding farm is also located in Kanchanaburi province. Currently this farm, that is keeping Hisex brown birds, produces an offspring of approximately 40,000 birds per week.
Thai Foods Feed Mills
Thai Food Feed Mills is at the moment the only feed manufacturing plant within TFG, and is located in Suphanburi. Most of the feed is used in TFG’s own farms, about 20-30% is sold on the free market. Quality is constantly monitored throughout the feed facility. The first corn silo tower built in the facility, has a capacity of 24,000 million tonnes; a second one of 30,000 million tonnes was taken into use only recently.
Located in Ayutthaya, this facility imports animal health products, mainly from China.
Thai Foods Agro Industry
This division imports farm equipment, mainly from the Netherlands. Elements are supplied to contract farmers.
VIV Asia 2011 expects a strong rise in exhibitors
The tenth edition of the international trade show VIV Asia will be much larger than its previous edition. The next edition of the international show for pigs, poultry, cattle, aquaculture and feed, will be held 9-11 March 2011 in the Bangkok International Trade and Exhibition Centre (BITEC), Thailand.
For the first time, a third hall is added to accommodate the 650 suppliers that will come to exhibit their products, which is 100 more than at the previous edition. Total show flooring will exceed 15,000 m2, hosting companies from more than 45 countries. The previous edition, held in 2009, counted 12,500 m2 of floor space. The 2009 edition of VIV Asia attracted visitors from 91 countries. The 2011 issue of VIV Asia aims to attract 22,000 visitors from 95 countries.Show manager Ruwan Berculo, VNU Exhibitions, said that many companies chose to exhibit in Bangkok after VIV Europe, held in April 2010 in Utrecht, the Netherlands, had been somewhat disappointing due to a volcano outbreak in Iceland. This effectively blocked air traffic for some crucial days prior to the show. Visitors have free access to VIV Asia. Pre-registration is advisable however through www.viv.net.
Other novelties at the show include:
• Co-location with the show Aquatic Asia;
• Feedtech/Croptech Asia forum;
• ChinaVision, focusing on business with China;
• Future projections in Focus 2021, together with Rabobank – focusing on business in ten years from 2011;
• New in Town pavilion, showing all newcomers at the show;
• A food and feed safety technology focus in LAB@VIV Asia.
Asian markets going through reversion of roles
As for longer-term agribusiness projection, the Asian markets will see a partial reversion of roles in the next couple of years, said Eric J. Brooks, senior analyst for eFeedlink, during a presentation paving the way for VIV Asia, to be held 9-11 March, 2011. Brooks pointed out that China and Thailand are the two major countries driving change in Asian agribusiness. He said that at the moment, agricultural demand comes from China; and innovation mainly comes from Thailand. This image is going to turn around, he said, pointing that the Association of South East Asian Nations (Asean) will add its import demand to that of China. A growing insufficiency of available arable land will result in East Asia as a whole, not only China, becoming an importer of feed. Vietnam, Brooks said, serves as a good example as this country is about to overtake Japan as the world’s number two soy importer within 20 years. Imports of corn, fishmeal also grow faster than feed or livestock output.
In reverse, Brooks also said that China will use its scale advantage to challenge the technical supremacy of the Thai integrators. Thai agribusiness conglomerates like CPF and Betagro pioneered the exporting of meat and fish to large markets like the EU and Japan. Thai agribusiness also proved that is was possible for a developing country to contain lethal diseases like avian influenza. It was Charoen Pokphand’s entry to the Chinese market which started the country’s modernisation of the poultry sector – and indirectly that of other types of meat. It is to be expected, Brooks said, that eventually Chinese agribusiness conglomerates will build on this tradition – and grow beyond them.
* The information in this article was gathered with the kind help of Feed and Livestock Magazine, Thailand.