Thailands Swine Industry: Moving Forward

Thailand"s swine industry is relatively mature. According to the country"s Department of Livestock Development, 960,000 sows produced 15 million slaughter hogs in 2009. Chilled- and frozen-meat exports tallied about 1,350 tons, worth U.S. $49 million. Frozen meat primarily goes to Hong Kong; with Japan a favored destination for cooked product. Thailand"s per capita pork consumption is about 35 pounds per person.

Thailand has two major integrators, which control about 30 percent of the country"s swine industry. The bigger of the two is the Thai agri-food conglomerate CPF (Charoen Pokphand Foods plc). CPF started in 1921 and operates in 14 countries, including Russia. It"s one of the world"s larger animal-feed manufacturers, with 2009 profits at U.S. $297 million. CPF has several retail outlets in Thailand and long-term plans are to increase investments in those chains and its food business while reducing investments in the less-lucrative farm sector.

The other major Thai integrator is the Bangkok-based Betagro group. Part of its business involves a joint venture with Japan"s Ajinomoto group to produce frozen pork products for the Japanese market. Like CPF, Betagro is focusing on the more profitable retail sector. Its goal is to open 31 new outlets this year, bringing the total to 65. Sales from Betagro"s chain are forecast to be U.S. $49 million this year. The pig production business contributed around 5 percent of this, with feed accounting for 50 percent.

Betagro"s Future Trends

Betagro"s central operations are based in Lopburi province, about 100 miles northeast of Bangkok, which primarily produces processed meat products for export.

Chief Operating Officer Vasit Taepaisitphongse says the company"s 2010 sales are projected to increase 10 percent. Apart from meat exports and sales in metropolitan areas such as Bangkok and other tourist venues, Betagro intends to increase its sales in provincial markets across Thailand"s four regions. This will occur through investment in production and processing facilities to the tune of U.S. $49 million into 2012.

The goal is to invest in chicken- and pork-processing plants in all regions of Thailand "to supply processed meat products to the regional markets, which are growing rapidly due to consumers" rising incomes," says Narongchai Srisantisaeng, senior vice president of regional and feed business.

"Our regional investments, especially in modern pig abattoirs, aim to provide hygienically processed pork for the Thai consumer in response to the government"s food-safety policy," he adds. (Much pork is still sold through the "wet market" or by the roadside where pieces of pork are displayed in the open with temperatures reaching 80' F or more. The meat is uncovered and exposed to insects and such. It is how things still operate in many Asian countries.)

Betagro now operates three pig abattoirs: one in Lopburi province (central) with a daily throughput of 1,700 pigs; another in Chiang Mai province (north), slaughtering 200 pigs; and one in Pattalung province (south), with a throughput of 240 pigs.

"We"re considering investing in the south with another abattoir, which would slaughter 240 pigs per day and would cost U.S. $3.1 million," Srisantisaeng says. Betagro has no pork processing facilities in the northeastern region, but the company is planning to build three pig abattoirs there; one is nearly completed. It is located in Khon Kaen province and will have a daily throughput of 240 pigs.

With all these facilities in place, Srisantisaeng expects revenue from the regional and feed business will increase 8.5 percent to U.S. $54 million this year.

"The southern region is an important market. Although it has a smaller population than the other regions, meat consumption there is nearly double that of the rest of Thailand, standing at 50 pounds per person annually. The southerners have a higher purchasing power relative to other regions," Srisantisaeng adds.

Betagro operates a feed mill in the south and has 1,200 contract farmers, with a combined finishing capacity of 22,000 pigs.

According to Srisantisaeng, Betagro will reduce the number of live-pig sales and increase sales of hygienically processed pork. Currently, only 25 percent of pigs marketed are processed in hygienic abattoirs in the south.

"Ten percent of fresh, chilled pork from our abattoirs will be sold through Betagro shops, 60 percent will be supplied to institutional customers such as hotels and restaurants, and the remaining 30 percent delivered to wet-market stores. However, those vendors have to follow our food-safety guidelines and must store the meat in the chiller," he adds.

With Betagro"s hygienic pork, Srisantisaeng projects that sales in the south would increase by 20 percent from 2010 to 2012, a sum of U.S. $195 million.

CPF Moving from Farm to Food

It"s clear that CPF is moving from being a multinational, agro-conglomerate and is repackaging itself as a globally integrated food firm. It is building up its "CP" brand worldwide and selling food products in Thailand and abroad, instead of selling products under the customers" brand labels as in the past.

This strategy has increased CPF"s sales for the first half of  2010 by 21 percent year-on-year, while net profit soared 82 percent, according to Adirek Sripratak, CPF"s president and chief executive officer.

International sales from CPF"s overseas subsidiaries increased 91 percent, while sales in Thailand increased 7 percent compared to the same period in 2009. "This outstanding performance is a result of improved efficiency in production, cost and financial management," Sripratak reports.

CPF aims to become "the kitchen of the world," supplying safe, quality food for consumers worldwide, he adds. "We continually focus on innovative production processes, creating new products and human resource development to improve the competitiveness of our business."

According to Sripratak, CPF will off-load its farming facilities in Thailand and turn to outsourcing live animals for processing.

CPF"s Chief Operating Officer Pong Visetpaitoon explains that outsourcing will allow CPF to trim production costs, gain better margin and limit the company"s exposure to price volatility in the fresh-meat market.

"We plan to sell pig and chicken barns, which will remove the burden of costs and depreciation of such assets," he notes. (Contract growers are likely to buy CPF"s barns.)

Food accounted for 25 percent to 30 percent of 2009"s sales, and is expected to increase to 35 percent to 40 percent this year.

"Overall profits have risen because profit from food sales averages around 15 percent compared with only 5 percent for fresh-meat sales," Visetpaitoon says.

Sripratak points out that investment in farming sectors will occur in CPF"s subsidiaries outside of Thailand where markets for live animals and fresh meat are growing fast. Such countries include Russia and the Philippines.

In 2009, the company invested in a 2,400-sow seedstock operation in Russia, along with commercial units to hold 18,000 pigs. CPF also is setting up its own pig business in the Philippines and is building a 1,200-sow breeding pig farm, as well as commercial facilities to accommodate 10,400 pigs.

As you can see from a snapshot of these two integrators, Thailand"s pork industry is indeed moving forward.



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