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CONTRACT FARMINGBUSINESS FOR DEVELOPMENT

“CHALLENGES AND OPPORTUNITIES”

MR. VICHAI POONPIRIYASUP

CROP INTEGRATION BUSINESSC.P. GROUP (THAILAND)

13 MARCH 2007

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1. ABOUT Charoen Pokphand (C.P.) GROUP1. ABOUT Charoen Pokphand (C.P.) GROUP

Total Trade Value 13 billion USD.

MISSION : C.P. is Source of Human Energy - Kitchen of the World - Food for Brain

Pattern of Business :Expansion along Vertical Integration lines

Two main Business Streamlines :• Production and Processing (Agri-business)• Service (Telecommunications Logistics and Retailing)

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Business Lines

3. THE CROP INTEGRATION GROUP

1. AGRI-FOODS BUSINESS GROUP ( Agro- Industry, Aquaculture Industry and Frozen Foods & Service)

5. INTERNATIONAL TRADING BUSINESS GROUP

2. CHIA TAI CO.,LTD. GROUP (Seeds, Fertilizers and Plant Protection)

4. THE PET BUSINESS GROUP (Pet Foods)

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Business Lines

6. C.P. GROUP INVESTMENT IN CHINA ( Agri-business, Retail Distribution, Automotive

Parts & Industrial, Entertainment Media)

7. MARKETING AND DISTRIBUTION

10. REAL ESTATE AND LAND DEVELOPMENT

9. TELECOMMUNICATIONS

8. PETROCHEMICAL BUSINESS

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C.P. Network

Investment, operation and trading in 22 countries

EU, North America, South America,

Africa, The Middle East and Asia

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Crop Integration Business, CP GroupCore Business

Field Crop

Business

Rice Integratio

n Business

Horticultural

Business

Agricultural

Machinery Business

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C.P.GROUP ALWAYS REALIZE THAT

FARMERS ARE OUR LIFETIME PARTNERS

SO WE DO THE BUSINESS FOR DEVELOPMENT

WE HAVE ESTABLISHED SEVERAL DIFFERENT PROJECTS

WITH THE MAIN OBJECTIVE THAT

IF FARMERS HAVE SUSTAINABLE INCOME

AND BETTER QUALITY OF LIFE

THE COUNTRY WILL ALSO PROGRESS

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1. Considerations to Operate Agribusiness

1. Market Potential

- study global and domestic market condition- production volume- export and import- pricing

2. Knowledge and Technology Potential

- R & D objectives- new product development- product differentiation

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3. Production Potential

- suitable production area- soil type- water source- climatic condition

CONTRACT FARMING

4. Human Resource Potential & Management System

5. Food Safety and Environmental Concern

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Contract FarmingCase Study in GMS / ACMECS

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Complete Package Project

Farmers BAAC Dept. of Ag. Ext. C.P.

C.P. Contract Farm Operations

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Objective

1. To educate new production technologiesby maximizing the yield with lowest cost

of production and risk reduction

2. To promote progressive farmers to beleaders in each location which will laterhelp develop farmer society and income

increase

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Complete Package Project

Cost Reduction/unit Reduce Risk

Yield Increase/area Income Increase/seasonFarmers with Higher Income

New Technologies

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CP 888

CP 989 CP 9988 CP 888S CP AAA CP KKK CP QQQ

Good Hybrid Varieties

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Seed Production

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Pre-Planting Population

Appropriate Technology

Chemical fertilizer & Chemical fertilizer & Herbicide TreatmentHerbicide Treatment

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• New Technology: Environmental Concern

Organic Fertilizer

Bio-Fertilizer

Bio-Pesticide

19 Pre Harvest Technology

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Activities in THAILAND

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Post Harvest Technology

Traditional model

22Local Dryer Technology

Post Harvest Technology

23 Dryer & Silo

Post Harvest Technology

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Contract Farming

in

GMS&

ACMECS

Expansion to Neighboring Countries

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Champion Farmer : MYANMAR

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VIETNAM

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Laos

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CAMBODIA

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30 ACTIVITIES in CHINA

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CP 619

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- Cost & Benefit of Hybrid corn grower in GMS/ACMECS

InputLand Prep and PlantingHarvest and Transport OthersTotal

Average Yield (Kg/rai)Cost per Kg

IncomePrice per KgProfit per rai

%Return on Investment

1,034684464575

2,757

1,0002.76

5,3605.36

2,603

94

520 417 280 3901,607

850 1.89

3,009 3.571,402

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Thailand

469338439375

1,621

8002.02

3,0003.75

1,379

85

326646304264

1,540

7252.03

2,7643.81

1,224

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Laos MyanmarCambodia

1,392 700 1,000 188 3,280

720 4.55

4,500 6.25 1,220

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Vietnam China

2,650 743 1,104 250 4,747

1,080 4.39

7,452 6.90 2,705

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ราคาขายข�าวโพดเลี้ �ยงสั�ตว�ที่ � เกษตรกรขายไ ด� ความชื้�� นไ ม�เก�น 14%

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

6.00

6.50

7.00

มค. กพ. ม ค. เมย. พค. ม�ย. กค. สัค. กย. ตค. พย. ธค.

Month

Price( Baht./Kg.)

2544 2545 2546 2547 2548 2549 2550

GRAIN CORN : Selling price at farm gate in THAILAND

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2002 2003 2004 2005 2006 20072001

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ราคาขายสั�งข�าวโพดเลี้ �ยงสั�ตว�ที่ � โ รงงานอาหารสั�ตว�ร�บซื้�� อ

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

6.00

6.50

7.00

7.50

8.00

มค. กพ. ม ค. เมย. พค. ม�ย. กค. สัค. กย. ตค. พย. ธค.

Month

Price( Baht./Kg.)

2544 2545 2546 2547 2548 2549 2550

GRAIN CORN : Buyer price at feed mill in THAILAND

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2002 2003 2004 2005 2006 20072001

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ราคาขายข�าวโพดเลี้ �ยงสั�ตว�ที่ �ตลี้าดชื้�คาโก

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

6.00

มค. กพ. ม ค. เมย. พค. ม�ย. กค. สัค. กย. ตค. พย. ธค.

Month

Price( Baht./Kg.)

2544 2545 2546 2547 2548 2549 2550

GRAIN CORN : at Chicago BOT

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2002 2003 2004 2005 2006 20072001

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GRAIN CORN CONSUMPTION THAILAND

item 2006

2007

2008

2009

2010

Domestic DEMAND

4,200

4,400

4,600

4,800

5,000

Supply in THAILAND

3,800

3,900

4,000

4,100

4,200

DIFF -400

-500

-600

-700

-800

: 1,000 tons

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Supports Need from Government

1. Water source and irrigation

2. Climatic report and forecast

3. Infrastructure

4. Financial supports

5. Training

6. Intellectual property right

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Causes of Failure

1. Uncontrollable Factors

- Drought - Flooding

2. Communication gap Misunderstanding

3. Transportation Problems

F

4. Farmers

5. Team Work

6. Government Policy and Supports

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Win + Win + Win

Conditions for Success in Contract Farming

Key Issues:

1. Production Technology Pre & Post harvesting Technology

2. Technology Transfer Gov. officer

Private Sector

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3. Building TRUST Mutual Benefit

4. Pricing Policy

Price Information Center Market Price

Minimum Guarantee Price

5. Financial Support Bank of Agriculture

Cooperative Local Grain Collector

6. Human Resource Development

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