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Thailand's Poultry Industry

Thailand's poultry industry is crucial to the country's aim of becoming the 'kitchen of the world' and has shown resilience following the 2004 avian flu outbreak, with consistent growth in chicken production. The industry's structural changes have shifted towards larger, vertically integrated farms to meet demand while addressing food safety regulations. Future challenges include managing feed supply costs and maintaining biosecurity standards.

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Thailand's Poultry Industry
CONTACT US • • • • • • The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. © 2013 Ipsos. All rights reserved. Contains Ipsos’ Confidential and Proprietary information and may not be disclosed or reproduced without the prior written consent of Ipsos. www.ipsosconsulting.com contents Thailand's poultry industry Structural changes in the industry Increasing scale of production Vertically integrated farms The future of Thailand's poultry sector Challenges for the Thai poultry industry Feed supply and demand Biosecurity and compartmentalisation Conclusion Footnote References 3 6 6 7 8 9 9 10 10 11 12 Sanpichit Songpaisan Senior Manager, Thailand Email: sanpichit.songpaisan@ipsos.com Krit Saisudthiwong Consultant, Thailand Email: krit.saisudthiwong@ipsos.com September 2013 AGRIBUSINESS RESEARCH AND CONSULTING FROM IPSOS BUSINESS CONSULTING A leader in fact-based consulting, Ipsos is trusted by top businesses, government sectors and institutions worldwide. We support domestic and international businesses in the agriculture, animal health and nutrition arena using our fact-based analysis, as they endeavour to Build, Compete and Grow in emerging and developed markets globally. Having opened our first office in 1994 in Hong Kong, Ipsos Business Consulting is immensely proud of its unique Asian heritage. Over the years we have steadily expanded across the Asia-Pacific into Europe and the US, and recently opened our first office in Africa. We have grown from being an Asia-Pacific market intelligence company into being an integral part of Ipsos’ global network, with a presence in 85 countries around the world. Our agribusiness and animal health practice can also trace its roots back to the 1990s when we quickly established ourselves as a leading provider of research and consulting services to the agribusiness sector. Today, our service range covers agribusiness, animal health and nutrition, and farm machinery sectors. Ipsos Business Consulting continues to support clients doing business in the agribusiness industries by providing practical advice based firmly in the realities of the market place. With more than two decades experience in the agribusiness and animal health market we offer clients the best geographical coverage and solid experience across the region. For more information, contact agribusiness@ipsos.com
IPSOS BUSINESS CONSULTING THAILAND'S POULTRY INDUSTRY agribusiness@ipsos.com 3 Thailand's poultry industry Agricultural and food industries are crucial to Thailand's aim to be the "kitchen of the world", a key government policy. Thailand was the world's 12th largest food exporter last year, with total shipments of 90bn baht (US$2.9bn) according to the National Food Institute. The Office of Agricultural Economics (OAE) expects the value of food exports to exceed 1 trillion baht this year. The poultry industry was one of Thailand's most promising agri-food segments until it was devastated by the 2004 outbreak of Highly Pathogenic Avian Influenza outbreak (HPAI), or avian flu. However, it has proven resilient in the face of adversity and is now ramping up efforts to reclaim its share of the world poultry market, posting constant growth of 5 per cent CAGR from 2004 until the end of last year, according to OAE figures. Chicken meat production reached 1.4m tonnes last year, ranking it the country's no.1 meat product, followed by pork (0.9m tonnes) and beef (0.2m tonnes), according to OAE. Industry supply – estimated at 0.9m tonnes, up almost 40 per cent from the previous decade – was the main driver of domestic consumption. Essentially, Thai people are consuming more chicken now than they were ten years ago because of better prices and availability. Chicken meat is the least expensive source of protein in the meat market (Figure 2). There is also now a wider range of commonly available chicken products such as boneless chicken meat, ready-to-cook chicken meals and chicken nuggets which can be purchased in hypermarkets and convenience stores. In addition, the rising popularity of fast food restaurants has played an important role in stimulating domestic consumption as leading chains such as KFC, Chester's Grill and Sizzler are offering more chicken menus as they aggressively expand their networks. Enjoying current CAGR of 8 per cent, the fast food industry is expected to maintain healthy growth for the foreseeable future. Figure 1: Chicken meat production, Tons Source: Office of Agricultural Economic, 2013 Figure 2: Retail price of pork, beef, and chicken in Bangkok 2004 to 2013 Source: Department of Internal Trade, 2013 0 500,000 1,000,000 1,500,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013(f) Export Domestic consumption 0 100 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Beef Chicken Pork Baht/kg
IPSOS BUSINESS CONSULTING THAILAND'S POULTRY INDUSTRY agribusiness@ipsos.com 4 Table 1: Broiler production in Thailand by region in 2012 Source: Department of Livestock Development Figure 3: Chicken population density in Thailand Source: Department of Livestock Development Regions Number of chicken broiler (head count) Number of chicken broiler and layer households North 84,870,740 727,051 Northeast 152,749,228 1,431,221 Central 748,207,109 341,792 South 70,107,629 381,548 Total 1,055,934,706 2,881,612 There are two main species of poultry produced in Thailand, chicken and duck (Wasan, 2011). Poultry population and production are highly concentrated in central Thailand as broiler producers need to be located near to certified slaughterhouses, feed mills and food processing plants. These facilities are also concentrated in central Thailand. Large-size farms, with an average 70,000 chickens per farm and complying with the FAO's farm practice standards sections 1 and 2 (see table 2), account for 90 per cent of chicken broilers in the central region (Rushton et al, 2007). The integrated commercial farm standards in section 1 and 2 set very high biosecurity and standards and are currently cover 80-90% of national production. Traditional poultry farms (FAO sectors 3 and 4) are spread across the country and account for 10 per cent of national production with most of their produce being consumed locally (Helf-Neal et al, 2008).
IPSOS BUSINESS CONSULTING THAILAND'S POULTRY INDUSTRY agribusiness@ipsos.com 5 The United Nations Food and Agricultural Organization (Table 2) established four sectors of poultry production systems based on their relative levels of biosecurity and the marketing and distribution of the birds and chicken products. Table 2: Poultry production classification, FAO Source: Ruston at el, 2007 and industry interviews. Categories Definition Production contribution Section 1 (Industrial integrated system) High level biosecurity and bird/products marketed commercially 70% of national production Section 2 (Commercial production poultry) Moderate to high biosecurity and birds/products marketed commercially 20% of national production Section 3 (Semi-commercial production) Low to minimal biosecurity and birds/products marketed commercially 10% of national production Section 4 (Village or Backyard farms) Minimal biosecurity and birds/products consumed locally 70% 20% 10% Integrated commercial farms Large to medium commercial farms Small commercial/backyard farms 5% 5% 90% Integrated commercial farms Large to medium commercial farms Small commercial/backyard farms Figure 5: Percentage of poultry producers Figure 4: Breakdown of poultry production Source: Calculated from Department of Livestock Development data and Helf- Neal et al, Source: Calculated from Department of Livestock Development data and Helf- Neal et al,
IPSOS BUSINESS CONSULTING THAILAND'S POULTRY INDUSTRY agribusiness@ipsos.com 6 Structural changes in the industry The 2004 HPAI outbreak was a catalyst for wide-ranging structural changes across Thailand's poultry industry which have increased the scale of production and spurred a transition toward vertically integrated farms. It was clear something needed to be done after the avian flu resulted in the killing of 63m birds at an estimated cost of 96bn baht (US$3.1bn) (Na Ranong, 2008). Increasing scale of production Increasing scale of production by industrialising farms was a key structural reform that aimed to meet growing demand for poultry while controlling costs. The reform led to consolidation within the industry, which saw the average size of commercial farms increase while the number of producers declined. Table 3 shows how the number of commercial broiler producers declined by 32 per cent between 2008-12. However, the number of chickens raised in commercial broiler farms increased by approximately 55 per cent to an average 37,147 chickens per farm. Major producers, such as Charoen Pokphand Foods, CPF and Betagro, have not only adopted advanced technology, they have also helped transfer this technology to smaller farms. Such technology has shortened the broiler period from 60 days to 40-49 days, improved the feed conversion ratio and reduced costs. Table 3: Number of broiler commercial farms, number of chickens, and average farm size, 2008-12 Source: Department of Livestock Development Table 4: Commercial broiler holding by farm size, 2012 Source: Department of Livestock Development 2008 2012 Growth (2008-12) Number of commercial broiler farms 8,030 6,082 -32% Number of chickens 101,841,267 225,930,564 55% Average farm size (number of chickens per farm) 12,683 37,147 66% Regions Number of chickens Commercial broiler holding Non-commercial broiler holding 500 - 1,000 1,001 - 2,000 2,001 - 5,000 > 5,000 Country 225,930,564 295 344 1,063 4,380 35,947 North 16,454,798 70 28 49 684 5,517 Northeast 29,788,673 37 23 65 655 19,639 Central 168,888,816 71 100 361 2,375 4,812 South 10,798,277 117 193 588 666 5,979
IPSOS BUSINESS CONSULTING THAILAND'S POULTRY INDUSTRY agribusiness@ipsos.com 7 Vertically integrated farms Major poultry exporters nowadays rely more on vertically integrated farms than contract farms to meet EU regulations on food safety and animal welfare. For much of the past two decades Thailand's broiler production relied heavily on contract farms where the exporter would provide farmers with day-old chicks and feed, medicines and some other supplies and then buy-back the raised chicken at a guaranteed price. Switching to vertical integration may increase risks, as broilers lack expertise in setting up and operating feed mills, however, this is outweighed by benefits from the transformation which include facilitating complete control of the production process, ensuring reliability of supply and improving production efficiency. The Thai broiler industry is aggressively industrialising and moving towards more vertical integration as a result. It is now commonplace for medium- to large-scale companies to own feed mills. Moreover, large integrated farms will even include (cooked and semi-cooked) food-processing plants as part of their integration (Figure 6). Figure 6: Value chain map Source: Calculated from Department of Livestock Development, Office of Agricultural Economics data, and Na Ranong, 2008 Domestic consumption : 947,458 Tones 65% of national production in 2012 Grandparent & Parent stock farm Wholesale Fresh markets Grandparent and parent chickens are imported from USA and UK. In 2012, Thailand imported 450,000 of Grandparent and parent chickens. Hatchery 88 farms Medicine Broiler 7,612 farms • Company Farms • Contract Farms • Independent Farms Slaughterhouse 210 across the country, 25 Slaughterhouses possesses license from DLD to export chicken meat. Feed 293 factories Large retail Restaurant Processed Factory 69 factories Supermarkets Hypermarket Export: 492,542 tones 35% of national production in 2012 • Chicken meat :75,000 tones valued at 4,801 million baht • Processed chicken : 420,000 tones valued at 58,388 Million baht Upstream Downstream
IPSOS BUSINESS CONSULTING THAILAND'S POULTRY INDUSTRY agribusiness@ipsos.com 8 The future of Thailand's poultry sector Average domestic chicken consumption from 2004-12 stands at about 70 per cent of national production, making the local market the key focus of the Thai poultry industry. This year domestic consumption is estimated at 953,000 tonnes, about 65 per cent of forecast national production (OAE, 2013). The expansion of fast food chains and chicken's relatively cheaper price compared to other meats such as pork and beef, are expected to see domestic consumption continue to grow at a moderate but steady pace. The export market is also on an upward trajectory. Current world chicken consumption is 80m tonnes, with growth of 3 per cent a year. Thailand recently clawed its way back onto the global leader board for chicken exports, ending last year in fourth position with an export value of 63.2bn baht (US$2bn) (OAE, 2013). Japan is the major destination for Thai processed chicken products. Last year the country imported 212,673 tonnes of processed chicken, accounting for just over half of Thailand's exports of the product. Many countries including Bahrain, Hong Kong, South Africa, Russia, Philippines and some European Union member states, last year lifted their Avian flu-related import bans of uncooked frozen chicken products from Thailand. This move increased the potential for Thai poultry exports in those markets, which was a boon for the local industry. However, the top five Thai players – CPF, Betagro, Cargill, GFPT and Leamthong – account for approximately 70-75 per cent Thai chicken exports. This year alone CPF is targeting 90,000 tonnes of chicken exports, comprising 80,000 tonnes of processed chicken and 10,000 tonnes of frozen chicken. Table 5: Key importers of Thai processed chicken products Source: Thai Broiler Processing Exporters Association Country 2010 2011 2012 Percentage contribution Volume Value Volume Value Volume Value Japan 174,011 23,421 189,103 27,901 212,673 32,836 53% EU 195,620 23,533 195,207 25,248 195,432 24,269 39% Singapore 11,648 1,401 12,648 1,650 13,023 1,794 3% South Korea 10,164 1,126 10,997 1,231 12,662 1,465 2% Hong Kong 4,275 444 3,553 450 4,154 580 1%
IPSOS BUSINESS CONSULTING THAILAND'S POULTRY INDUSTRY agribusiness@ipsos.com 9 Challenges for the Thai poultry industry Since most of the fallout from the avian flu outbreak has passed, the future of the Thai poultry industry will now largely depend upon basic economic factors, such as feed supply and demand. Another significant factor will be the move toward replacing chemical protection (antibiotics, antiseptics and vaccination) with enhanced biosecurity and compartmentalisation. Feed supply and demand The supply of essential raw materials for poultry production, particularly grain and protein, has become a key issue in determining the growth, competitive strength and future of the industry as feed accounts for about 70-80 per cent of the cost of chicken meat, depending on the fluctuation of feed mill prices (Pornsri, 2010). Thai Feed Mill Association estimated broiler and layer chickens consumed some 8m tonnes of feed, comprising 4.8 tonnes of maize and 2.2m tonnes of soybeans, last year. Thailand's promotion of biofuel production further complicates the issue as a large proportion of grain (such as maize) and tubers (such as cassava) production, as well as sugarcane, will be diverted toward lucrative gasohol and bio-diesel production, pushing the cost of animal feeds significantly higher. Table 6: Domestic consumption and production of maize and soybean Source: Department of International trade, 2012 Figure 7: The price of maize and soybean from 2001 to 2012 Source: Thai Feed Mill Association Domestic production (Tons) Domestic consumption (Tons) Maize 4.6 4.8 Soybean 0.96 2.2 0 5 10 15 20 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Maize price Soybean price
IPSOS BUSINESS CONSULTING THAILAND'S POULTRY INDUSTRY agribusiness@ipsos.com 10 Biosecurity and compartmentalisation* Department Livestock Development issued new farm standards in 2000 requiring all broiler farms producing for export to convert into closed systems. These regulations were more strictly enforced after the 2004 avian flu outbreak. Currently, about 7,000 of the 10,000 broiler farms nationwide that meet the department's new standards. Most integrated broiler farms have now upgraded to these new standards which ensure higher levels of safety and the Thai poultry industry as a whole has adopted more stringent control systems. Only about 5 per cent of broiler producers raise their poultry with minimal to low biosecurity as outlined in FAO sections 3 and 4. The breeds of chicken most commonly bred in backyard farms are highly susceptible to some common chicken diseases such Newcastle disease, fowlpox, fowl cholera and pasturellosis. These poultry producers usually rely on chemical solutions, such as vaccinations, antibiotics and antiseptics to prevent or cure these diseases. Thailand's animal health market was valued at 23bn baht last year. With global food demand expected to rise by 3-5 per cent a year, the local animal health market is forecast to grow by 5 per cent a year, according to the Animal Health Product Association. Table 7: Top 5 animal health products in Thailand Source: Animal Health Product Association Relying on medical interventions is costly and such use can also result in import barriers to key markets. In light of the avian flu outbreak and the implementation of more stringent safety standards, biosecurity** appears to be the most effective solution for the industry. Conclusion Thailand's poultry industry has successfully recovered from 2004 avian flu outbreak and returned to dynamic growth. A positive outcome from the HPAI outbreak was that it forced the Thai poultry industry to adopt new farming practices, and a higher rate of adoption modern farming facilities, and industry restructure. With its new industry structures, Thailand will undoubtedly increase its production capacity and return to its former position as a recognised leader in global poultry exports. The poultry industry has shown that is has a prosperous future, partly driven by the reopening of EU market and a greater presence in the Japanese and South Korean markets. To sustain and grow the market share in these high values markets it is inevitable that we shall see a greater level of investment in new climate control housing and leading edge biosecurity technique in the Thai poultry industry. Whilst the major corporations can easily absorb the cost of this investment, there is a question over the future of smaller Products Market values in 2012, (Million Baht) Feed mills 6,340 Swine 6,352 Fishery 4,509 Broiler industry 1,873 Pet industry,(Cat and Dog) 1,626
IPSOS BUSINESS CONSULTING THAILAND'S POULTRY INDUSTRY agribusiness@ipsos.com 11 Footnote *Compartmentalisation is a system to control and monitor disease on livestock farms. The OIE has defined the process as "an animal subpopulation contained in one or more establishments under a common biosecurity management system with a distinct health status with respect to a specific disease or specific diseases for which required surveillance, control and biosecurity measures have been applied for the purpose of international trade". Great Britain has defined‘poultry compartment’or other captive birds compartment as a holding or holdings under a common biosecurity management system containing a poultry or other captive bird sub-population with a distinct health status with respect to avian influenza subjected to appropriate surveillance, control and biosecurity measures. **Biosecurity can be defined as actions taken to reduce the risk of infection entering a farm and to remove infection from a farm (Food Standard Agency, 2006). farmers and whether they can meet the financial strain associated with investment in a poultry farming upgrade. Climate control housing, closed system and leading edge biosecurity technique, all present significant financial demands on the smaller farmers. How will they grow their business in an industry where they cannot always afford access to modern poultry farming techniques. Whilst these farmers only account for approximately 10% of poultry production, they are 90% of the poultry famer population and therefore require consideration. The estimated future growth of the Thai poultry farming sector is impressive and the industry is actively seeking to improve the quality of the feed ingredients and nutritional supplements. The industry benefits from government policies aimed at growing the industry and the size of the export market (though these policies are favoured towards the large players). Notwithstanding rising operational costs, there is a great deal of opportunity for players in each stage of the value chain. The only significant question is what will happen to the smaller farmers and whether they can survive in an industry that is increasingly skewered towards the large players.
IPSOS BUSINESS CONSULTING THAILAND'S POULTRY INDUSTRY agribusiness@ipsos.com 12 References Department of Livestock Development, Poultry statistics annual data, http://www.dld.go.th (Retrieved 1 August, 2013) Department of Internal Trade, Retail price of fresh chicken in Bangkok, http://www.dit.go.th (Retrieved 1 August, 2013) Department of International Trade Promotion (DITP), Poultry export data, http://www.thaitradelondon.com (Retrieved 1 August, 2013) Department for Environment, Food and Rural Affairs of Great Britain 2009 Compartment for protection against Avian Influenza and Newcastle disease in poultry breeding companies in Great Britain. EU Council Directive 2005/94/EC, Article 2:11 Food and Agricultural Organization of the United Nations (FAO), (2004), "Recommendations of the prevention, control and eradication of Highly Pathogenic Avian Influenza in Asia" FAO position paper, September 2004. Rome: FAO, 2004; 16:1-59 Heft-Neal S, Otte J, Pupphavessa W, Roland-Holst D, Susdsawasd S, Zilberman D. (2008), "Supply Chain Auditing for Poultry Production in Thailand" Na Ranong, V. (2008),“Structural Changes in Thailand's Poultry Sector and its Social Implications” Thailand Development Research Institute, Thailand. National Food Institute, NFI, Annual statistical data: http://fic.nfi.or.th/ (retrieved 1 August, 2013) Office of Agricultural Economics, OAE, (2012) "Thailand Agricultural Industry Statistics 2012" (in Thai) Pornsri, L. (2010) "The direction of the global and Thai agricultural industry" (in Thai) Rushton J, Viscarra R, Bleich EG, McLeod A. "Impact of the avian influenza outbreak on the poultry sectors of five Southeast Asian countries (Cambodia, Indonesia, Lao PDR, Thailand, Vietnam) outbreak costs, responses and potential long-term controls". Rome: F. TCP/RAS/310:2007; 10:1-25 Wason, C. and., Kaneene B (2011) "Poultry raising system and highly pathogenic avian influenza outbreak in Thailand“
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Thailand's Poultry Industry

  • 1.
  • 2.
    CONTACT US •• • • • • The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. © 2013 Ipsos. All rights reserved. Contains Ipsos’ Confidential and Proprietary information and may not be disclosed or reproduced without the prior written consent of Ipsos. www.ipsosconsulting.com contents Thailand's poultry industry Structural changes in the industry Increasing scale of production Vertically integrated farms The future of Thailand's poultry sector Challenges for the Thai poultry industry Feed supply and demand Biosecurity and compartmentalisation Conclusion Footnote References 3 6 6 7 8 9 9 10 10 11 12 Sanpichit Songpaisan Senior Manager, Thailand Email: sanpichit.songpaisan@ipsos.com Krit Saisudthiwong Consultant, Thailand Email: krit.saisudthiwong@ipsos.com September 2013 AGRIBUSINESS RESEARCH AND CONSULTING FROM IPSOS BUSINESS CONSULTING A leader in fact-based consulting, Ipsos is trusted by top businesses, government sectors and institutions worldwide. We support domestic and international businesses in the agriculture, animal health and nutrition arena using our fact-based analysis, as they endeavour to Build, Compete and Grow in emerging and developed markets globally. Having opened our first office in 1994 in Hong Kong, Ipsos Business Consulting is immensely proud of its unique Asian heritage. Over the years we have steadily expanded across the Asia-Pacific into Europe and the US, and recently opened our first office in Africa. We have grown from being an Asia-Pacific market intelligence company into being an integral part of Ipsos’ global network, with a presence in 85 countries around the world. Our agribusiness and animal health practice can also trace its roots back to the 1990s when we quickly established ourselves as a leading provider of research and consulting services to the agribusiness sector. Today, our service range covers agribusiness, animal health and nutrition, and farm machinery sectors. Ipsos Business Consulting continues to support clients doing business in the agribusiness industries by providing practical advice based firmly in the realities of the market place. With more than two decades experience in the agribusiness and animal health market we offer clients the best geographical coverage and solid experience across the region. For more information, contact agribusiness@ipsos.com
  • 3.
    IPSOS BUSINESS CONSULTINGTHAILAND'S POULTRY INDUSTRY agribusiness@ipsos.com 3 Thailand's poultry industry Agricultural and food industries are crucial to Thailand's aim to be the "kitchen of the world", a key government policy. Thailand was the world's 12th largest food exporter last year, with total shipments of 90bn baht (US$2.9bn) according to the National Food Institute. The Office of Agricultural Economics (OAE) expects the value of food exports to exceed 1 trillion baht this year. The poultry industry was one of Thailand's most promising agri-food segments until it was devastated by the 2004 outbreak of Highly Pathogenic Avian Influenza outbreak (HPAI), or avian flu. However, it has proven resilient in the face of adversity and is now ramping up efforts to reclaim its share of the world poultry market, posting constant growth of 5 per cent CAGR from 2004 until the end of last year, according to OAE figures. Chicken meat production reached 1.4m tonnes last year, ranking it the country's no.1 meat product, followed by pork (0.9m tonnes) and beef (0.2m tonnes), according to OAE. Industry supply – estimated at 0.9m tonnes, up almost 40 per cent from the previous decade – was the main driver of domestic consumption. Essentially, Thai people are consuming more chicken now than they were ten years ago because of better prices and availability. Chicken meat is the least expensive source of protein in the meat market (Figure 2). There is also now a wider range of commonly available chicken products such as boneless chicken meat, ready-to-cook chicken meals and chicken nuggets which can be purchased in hypermarkets and convenience stores. In addition, the rising popularity of fast food restaurants has played an important role in stimulating domestic consumption as leading chains such as KFC, Chester's Grill and Sizzler are offering more chicken menus as they aggressively expand their networks. Enjoying current CAGR of 8 per cent, the fast food industry is expected to maintain healthy growth for the foreseeable future. Figure 1: Chicken meat production, Tons Source: Office of Agricultural Economic, 2013 Figure 2: Retail price of pork, beef, and chicken in Bangkok 2004 to 2013 Source: Department of Internal Trade, 2013 0 500,000 1,000,000 1,500,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013(f) Export Domestic consumption 0 100 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Beef Chicken Pork Baht/kg
  • 4.
    IPSOS BUSINESS CONSULTINGTHAILAND'S POULTRY INDUSTRY agribusiness@ipsos.com 4 Table 1: Broiler production in Thailand by region in 2012 Source: Department of Livestock Development Figure 3: Chicken population density in Thailand Source: Department of Livestock Development Regions Number of chicken broiler (head count) Number of chicken broiler and layer households North 84,870,740 727,051 Northeast 152,749,228 1,431,221 Central 748,207,109 341,792 South 70,107,629 381,548 Total 1,055,934,706 2,881,612 There are two main species of poultry produced in Thailand, chicken and duck (Wasan, 2011). Poultry population and production are highly concentrated in central Thailand as broiler producers need to be located near to certified slaughterhouses, feed mills and food processing plants. These facilities are also concentrated in central Thailand. Large-size farms, with an average 70,000 chickens per farm and complying with the FAO's farm practice standards sections 1 and 2 (see table 2), account for 90 per cent of chicken broilers in the central region (Rushton et al, 2007). The integrated commercial farm standards in section 1 and 2 set very high biosecurity and standards and are currently cover 80-90% of national production. Traditional poultry farms (FAO sectors 3 and 4) are spread across the country and account for 10 per cent of national production with most of their produce being consumed locally (Helf-Neal et al, 2008).
  • 5.
    IPSOS BUSINESS CONSULTINGTHAILAND'S POULTRY INDUSTRY agribusiness@ipsos.com 5 The United Nations Food and Agricultural Organization (Table 2) established four sectors of poultry production systems based on their relative levels of biosecurity and the marketing and distribution of the birds and chicken products. Table 2: Poultry production classification, FAO Source: Ruston at el, 2007 and industry interviews. Categories Definition Production contribution Section 1 (Industrial integrated system) High level biosecurity and bird/products marketed commercially 70% of national production Section 2 (Commercial production poultry) Moderate to high biosecurity and birds/products marketed commercially 20% of national production Section 3 (Semi-commercial production) Low to minimal biosecurity and birds/products marketed commercially 10% of national production Section 4 (Village or Backyard farms) Minimal biosecurity and birds/products consumed locally 70% 20% 10% Integrated commercial farms Large to medium commercial farms Small commercial/backyard farms 5% 5% 90% Integrated commercial farms Large to medium commercial farms Small commercial/backyard farms Figure 5: Percentage of poultry producers Figure 4: Breakdown of poultry production Source: Calculated from Department of Livestock Development data and Helf- Neal et al, Source: Calculated from Department of Livestock Development data and Helf- Neal et al,
  • 6.
    IPSOS BUSINESS CONSULTINGTHAILAND'S POULTRY INDUSTRY agribusiness@ipsos.com 6 Structural changes in the industry The 2004 HPAI outbreak was a catalyst for wide-ranging structural changes across Thailand's poultry industry which have increased the scale of production and spurred a transition toward vertically integrated farms. It was clear something needed to be done after the avian flu resulted in the killing of 63m birds at an estimated cost of 96bn baht (US$3.1bn) (Na Ranong, 2008). Increasing scale of production Increasing scale of production by industrialising farms was a key structural reform that aimed to meet growing demand for poultry while controlling costs. The reform led to consolidation within the industry, which saw the average size of commercial farms increase while the number of producers declined. Table 3 shows how the number of commercial broiler producers declined by 32 per cent between 2008-12. However, the number of chickens raised in commercial broiler farms increased by approximately 55 per cent to an average 37,147 chickens per farm. Major producers, such as Charoen Pokphand Foods, CPF and Betagro, have not only adopted advanced technology, they have also helped transfer this technology to smaller farms. Such technology has shortened the broiler period from 60 days to 40-49 days, improved the feed conversion ratio and reduced costs. Table 3: Number of broiler commercial farms, number of chickens, and average farm size, 2008-12 Source: Department of Livestock Development Table 4: Commercial broiler holding by farm size, 2012 Source: Department of Livestock Development 2008 2012 Growth (2008-12) Number of commercial broiler farms 8,030 6,082 -32% Number of chickens 101,841,267 225,930,564 55% Average farm size (number of chickens per farm) 12,683 37,147 66% Regions Number of chickens Commercial broiler holding Non-commercial broiler holding 500 - 1,000 1,001 - 2,000 2,001 - 5,000 > 5,000 Country 225,930,564 295 344 1,063 4,380 35,947 North 16,454,798 70 28 49 684 5,517 Northeast 29,788,673 37 23 65 655 19,639 Central 168,888,816 71 100 361 2,375 4,812 South 10,798,277 117 193 588 666 5,979
  • 7.
    IPSOS BUSINESS CONSULTINGTHAILAND'S POULTRY INDUSTRY agribusiness@ipsos.com 7 Vertically integrated farms Major poultry exporters nowadays rely more on vertically integrated farms than contract farms to meet EU regulations on food safety and animal welfare. For much of the past two decades Thailand's broiler production relied heavily on contract farms where the exporter would provide farmers with day-old chicks and feed, medicines and some other supplies and then buy-back the raised chicken at a guaranteed price. Switching to vertical integration may increase risks, as broilers lack expertise in setting up and operating feed mills, however, this is outweighed by benefits from the transformation which include facilitating complete control of the production process, ensuring reliability of supply and improving production efficiency. The Thai broiler industry is aggressively industrialising and moving towards more vertical integration as a result. It is now commonplace for medium- to large-scale companies to own feed mills. Moreover, large integrated farms will even include (cooked and semi-cooked) food-processing plants as part of their integration (Figure 6). Figure 6: Value chain map Source: Calculated from Department of Livestock Development, Office of Agricultural Economics data, and Na Ranong, 2008 Domestic consumption : 947,458 Tones 65% of national production in 2012 Grandparent & Parent stock farm Wholesale Fresh markets Grandparent and parent chickens are imported from USA and UK. In 2012, Thailand imported 450,000 of Grandparent and parent chickens. Hatchery 88 farms Medicine Broiler 7,612 farms • Company Farms • Contract Farms • Independent Farms Slaughterhouse 210 across the country, 25 Slaughterhouses possesses license from DLD to export chicken meat. Feed 293 factories Large retail Restaurant Processed Factory 69 factories Supermarkets Hypermarket Export: 492,542 tones 35% of national production in 2012 • Chicken meat :75,000 tones valued at 4,801 million baht • Processed chicken : 420,000 tones valued at 58,388 Million baht Upstream Downstream
  • 8.
    IPSOS BUSINESS CONSULTINGTHAILAND'S POULTRY INDUSTRY agribusiness@ipsos.com 8 The future of Thailand's poultry sector Average domestic chicken consumption from 2004-12 stands at about 70 per cent of national production, making the local market the key focus of the Thai poultry industry. This year domestic consumption is estimated at 953,000 tonnes, about 65 per cent of forecast national production (OAE, 2013). The expansion of fast food chains and chicken's relatively cheaper price compared to other meats such as pork and beef, are expected to see domestic consumption continue to grow at a moderate but steady pace. The export market is also on an upward trajectory. Current world chicken consumption is 80m tonnes, with growth of 3 per cent a year. Thailand recently clawed its way back onto the global leader board for chicken exports, ending last year in fourth position with an export value of 63.2bn baht (US$2bn) (OAE, 2013). Japan is the major destination for Thai processed chicken products. Last year the country imported 212,673 tonnes of processed chicken, accounting for just over half of Thailand's exports of the product. Many countries including Bahrain, Hong Kong, South Africa, Russia, Philippines and some European Union member states, last year lifted their Avian flu-related import bans of uncooked frozen chicken products from Thailand. This move increased the potential for Thai poultry exports in those markets, which was a boon for the local industry. However, the top five Thai players – CPF, Betagro, Cargill, GFPT and Leamthong – account for approximately 70-75 per cent Thai chicken exports. This year alone CPF is targeting 90,000 tonnes of chicken exports, comprising 80,000 tonnes of processed chicken and 10,000 tonnes of frozen chicken. Table 5: Key importers of Thai processed chicken products Source: Thai Broiler Processing Exporters Association Country 2010 2011 2012 Percentage contribution Volume Value Volume Value Volume Value Japan 174,011 23,421 189,103 27,901 212,673 32,836 53% EU 195,620 23,533 195,207 25,248 195,432 24,269 39% Singapore 11,648 1,401 12,648 1,650 13,023 1,794 3% South Korea 10,164 1,126 10,997 1,231 12,662 1,465 2% Hong Kong 4,275 444 3,553 450 4,154 580 1%
  • 9.
    IPSOS BUSINESS CONSULTINGTHAILAND'S POULTRY INDUSTRY agribusiness@ipsos.com 9 Challenges for the Thai poultry industry Since most of the fallout from the avian flu outbreak has passed, the future of the Thai poultry industry will now largely depend upon basic economic factors, such as feed supply and demand. Another significant factor will be the move toward replacing chemical protection (antibiotics, antiseptics and vaccination) with enhanced biosecurity and compartmentalisation. Feed supply and demand The supply of essential raw materials for poultry production, particularly grain and protein, has become a key issue in determining the growth, competitive strength and future of the industry as feed accounts for about 70-80 per cent of the cost of chicken meat, depending on the fluctuation of feed mill prices (Pornsri, 2010). Thai Feed Mill Association estimated broiler and layer chickens consumed some 8m tonnes of feed, comprising 4.8 tonnes of maize and 2.2m tonnes of soybeans, last year. Thailand's promotion of biofuel production further complicates the issue as a large proportion of grain (such as maize) and tubers (such as cassava) production, as well as sugarcane, will be diverted toward lucrative gasohol and bio-diesel production, pushing the cost of animal feeds significantly higher. Table 6: Domestic consumption and production of maize and soybean Source: Department of International trade, 2012 Figure 7: The price of maize and soybean from 2001 to 2012 Source: Thai Feed Mill Association Domestic production (Tons) Domestic consumption (Tons) Maize 4.6 4.8 Soybean 0.96 2.2 0 5 10 15 20 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Maize price Soybean price
  • 10.
    IPSOS BUSINESS CONSULTINGTHAILAND'S POULTRY INDUSTRY agribusiness@ipsos.com 10 Biosecurity and compartmentalisation* Department Livestock Development issued new farm standards in 2000 requiring all broiler farms producing for export to convert into closed systems. These regulations were more strictly enforced after the 2004 avian flu outbreak. Currently, about 7,000 of the 10,000 broiler farms nationwide that meet the department's new standards. Most integrated broiler farms have now upgraded to these new standards which ensure higher levels of safety and the Thai poultry industry as a whole has adopted more stringent control systems. Only about 5 per cent of broiler producers raise their poultry with minimal to low biosecurity as outlined in FAO sections 3 and 4. The breeds of chicken most commonly bred in backyard farms are highly susceptible to some common chicken diseases such Newcastle disease, fowlpox, fowl cholera and pasturellosis. These poultry producers usually rely on chemical solutions, such as vaccinations, antibiotics and antiseptics to prevent or cure these diseases. Thailand's animal health market was valued at 23bn baht last year. With global food demand expected to rise by 3-5 per cent a year, the local animal health market is forecast to grow by 5 per cent a year, according to the Animal Health Product Association. Table 7: Top 5 animal health products in Thailand Source: Animal Health Product Association Relying on medical interventions is costly and such use can also result in import barriers to key markets. In light of the avian flu outbreak and the implementation of more stringent safety standards, biosecurity** appears to be the most effective solution for the industry. Conclusion Thailand's poultry industry has successfully recovered from 2004 avian flu outbreak and returned to dynamic growth. A positive outcome from the HPAI outbreak was that it forced the Thai poultry industry to adopt new farming practices, and a higher rate of adoption modern farming facilities, and industry restructure. With its new industry structures, Thailand will undoubtedly increase its production capacity and return to its former position as a recognised leader in global poultry exports. The poultry industry has shown that is has a prosperous future, partly driven by the reopening of EU market and a greater presence in the Japanese and South Korean markets. To sustain and grow the market share in these high values markets it is inevitable that we shall see a greater level of investment in new climate control housing and leading edge biosecurity technique in the Thai poultry industry. Whilst the major corporations can easily absorb the cost of this investment, there is a question over the future of smaller Products Market values in 2012, (Million Baht) Feed mills 6,340 Swine 6,352 Fishery 4,509 Broiler industry 1,873 Pet industry,(Cat and Dog) 1,626
  • 11.
    IPSOS BUSINESS CONSULTINGTHAILAND'S POULTRY INDUSTRY agribusiness@ipsos.com 11 Footnote *Compartmentalisation is a system to control and monitor disease on livestock farms. The OIE has defined the process as "an animal subpopulation contained in one or more establishments under a common biosecurity management system with a distinct health status with respect to a specific disease or specific diseases for which required surveillance, control and biosecurity measures have been applied for the purpose of international trade". Great Britain has defined‘poultry compartment’or other captive birds compartment as a holding or holdings under a common biosecurity management system containing a poultry or other captive bird sub-population with a distinct health status with respect to avian influenza subjected to appropriate surveillance, control and biosecurity measures. **Biosecurity can be defined as actions taken to reduce the risk of infection entering a farm and to remove infection from a farm (Food Standard Agency, 2006). farmers and whether they can meet the financial strain associated with investment in a poultry farming upgrade. Climate control housing, closed system and leading edge biosecurity technique, all present significant financial demands on the smaller farmers. How will they grow their business in an industry where they cannot always afford access to modern poultry farming techniques. Whilst these farmers only account for approximately 10% of poultry production, they are 90% of the poultry famer population and therefore require consideration. The estimated future growth of the Thai poultry farming sector is impressive and the industry is actively seeking to improve the quality of the feed ingredients and nutritional supplements. The industry benefits from government policies aimed at growing the industry and the size of the export market (though these policies are favoured towards the large players). Notwithstanding rising operational costs, there is a great deal of opportunity for players in each stage of the value chain. The only significant question is what will happen to the smaller farmers and whether they can survive in an industry that is increasingly skewered towards the large players.
  • 12.
    IPSOS BUSINESS CONSULTINGTHAILAND'S POULTRY INDUSTRY agribusiness@ipsos.com 12 References Department of Livestock Development, Poultry statistics annual data, http://www.dld.go.th (Retrieved 1 August, 2013) Department of Internal Trade, Retail price of fresh chicken in Bangkok, http://www.dit.go.th (Retrieved 1 August, 2013) Department of International Trade Promotion (DITP), Poultry export data, http://www.thaitradelondon.com (Retrieved 1 August, 2013) Department for Environment, Food and Rural Affairs of Great Britain 2009 Compartment for protection against Avian Influenza and Newcastle disease in poultry breeding companies in Great Britain. EU Council Directive 2005/94/EC, Article 2:11 Food and Agricultural Organization of the United Nations (FAO), (2004), "Recommendations of the prevention, control and eradication of Highly Pathogenic Avian Influenza in Asia" FAO position paper, September 2004. Rome: FAO, 2004; 16:1-59 Heft-Neal S, Otte J, Pupphavessa W, Roland-Holst D, Susdsawasd S, Zilberman D. (2008), "Supply Chain Auditing for Poultry Production in Thailand" Na Ranong, V. (2008),“Structural Changes in Thailand's Poultry Sector and its Social Implications” Thailand Development Research Institute, Thailand. National Food Institute, NFI, Annual statistical data: http://fic.nfi.or.th/ (retrieved 1 August, 2013) Office of Agricultural Economics, OAE, (2012) "Thailand Agricultural Industry Statistics 2012" (in Thai) Pornsri, L. (2010) "The direction of the global and Thai agricultural industry" (in Thai) Rushton J, Viscarra R, Bleich EG, McLeod A. "Impact of the avian influenza outbreak on the poultry sectors of five Southeast Asian countries (Cambodia, Indonesia, Lao PDR, Thailand, Vietnam) outbreak costs, responses and potential long-term controls". Rome: F. TCP/RAS/310:2007; 10:1-25 Wason, C. and., Kaneene B (2011) "Poultry raising system and highly pathogenic avian influenza outbreak in Thailand“
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