Experience of C.P. Group in Contract Farming in Southeast Asia: Conditions for Success and Causes of Failure

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CONTRACT FARMING BUSINESS FOR
DEVELOPMENT CHALLENGES AND OPPORTUNITIES
MR. VICHAI POONPIRIYASUP CROP INTEGRATION
BUSINESS C.P. GROUP (THAILAND) 13 MARCH 2007
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1. 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
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Business Lines
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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 Group
Core 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

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

• 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
C.P. Contract Farm Operations
Dept. of Ag. Ext.
Farmers
C.P.
BAAC
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Objective

• To educate new production technologies
• by maximizing the yield with lowest cost
• of production and risk reduction

• To promote progressive farmers to be
• leaders in each location which will later
• help develop farmer society and income
• increase

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Complete Package Project
Cost Reduction/unit
Reduce Risk
Farmers with Higher Income
Yield Increase/area
Income Increase/season
New Technologies
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Good Hybrid Varieties
CP 888
CP 989
CP 9988
CP AAA
CP KKK
CP QQQ
CP 888S
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Seed Production
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Appropriate Technology
Pre-Planting
Population
Chemical fertilizer Herbicide Treatment
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• New Technology Environmental Concern

Bio-Fertilizer
Bio-Pesticide
Organic Fertilizer
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• Pre Harvest Technology

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Activities in THAILAND
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Post Harvest Technology
Traditional model
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Post Harvest Technology
Local Dryer Technology
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Post Harvest Technology

• Dryer Silo

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Contract Farming inGMSACMECS
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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ACTIVITIES in CHINA
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CP 619
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- Cost Benefit of Hybrid corn grower in
GMS/ACMECS
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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
2007
2001
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GRAIN CORN Buyer price at feed mill in THAILAND
Jan Feb Mar Apr May
Jun Jul Aug Sep
Oct Nov Dec
2004
2005
2002
2003
2001
2007
2006
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GRAIN CORN at Chicago BOT
Jan Feb Mar Apr May
Jun Jul Aug Sep
Oct Nov Dec
2004
2005
2002
2003
2001
2007
2006
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GRAIN CORN CONSUMPTION THAILAND
1,000 tons
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Supports Need from Government

• Water source and irrigation
• Climatic report and forecast
• Infrastructure
• Financial supports
• Training
• Intellectual property right

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Causes of Failure
F

• Uncontrollable Factors
• - Drought - Flooding
• Communication gap Misunderstanding
• 3. Transportation Problems

• Farmers

5. Team Work
6. Government Policy and Supports
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Win Win Win

• Conditions for Success in Contract Farming
• Key Issues
• Production Technology
• Pre Post harvesting Technology
• Technology Transfer
• Gov. officer
• Private Sector

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• Building TRUST
• Mutual Benefit
• 4. Pricing Policy
• Price Information Center
• Market Price
• Minimum Guarantee Price
• Financial Support
• Bank of Agriculture
• Cooperative
• Local Grain Collector
• Human Resource Development

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Thank you