CONTRACT FARMING BUSINESS FOR DEVELOPMENT “CHALLENGES AND OPPORTUNITIES” MR. VICHAI POONPIRIYASUP CROP INTEGRATION BUSINESS C.P. GROUP (THAILAND) 13 MARCH 2007

Total Trade Value 13 billion USD. 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)

Business Lines 1. AGRI-FOODS BUSINESS GROUP ( Agro- Industry, Aquaculture Industry and Frozen Foods & Service) 2. CHIA TAI CO.,LTD. GROUP (Seeds, Fertilizers and Plant Protection) 3. THE CROP INTEGRATION GROUP 4. THE PET BUSINESS GROUP (Pet Foods) 5. INTERNATIONAL TRADING BUSINESS GROUP

Business Lines 6. C.P. GROUP INVESTMENT IN CHINA ( Agri-business, Retail Distribution, Automotive Parts & Industrial, Entertainment Media) 7. MARKETING AND DISTRIBUTION 8. PETROCHEMICAL BUSINESS 9. TELECOMMUNICATIONS 10. REAL ESTATE AND LAND DEVELOPMENT

C.P. Network Investment, operation and trading in 22 countries EU, North America, South America, Africa, The Middle East and Asia

Crop Integration Business, CP Group Core Business Field Crop Business Rice Integration Business Horticultural Business Agricultural Machinery Business

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

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

- suitable production area - soil type - water source 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

Contract Farming Case Study in GMS / ACMECS

Complete Package Project C.P. Contract Farm Operations Complete Package Project Farmers BAAC Dept. of Ag. Ext. C.P.

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

Complete Package Project Cost Reduction/unit Reduce Risk Farmers with Higher Income Yield Increase/area Income Increase/season New Technologies

CP 888 Good Hybrid Varieties CP 989 CP 9988 CP 888S CP AAA CP KKK CP QQQ

Seed Production

Appropriate Technology Pre-Planting Population Chemical fertilizer & Herbicide Treatment

New Technology: Environmental Concern Bio-Fertilizer Organic Fertilizer Bio-Pesticide

Pre Harvest Technology

Activities in THAILAND

Post Harvest Technology Traditional model

Post Harvest Technology Local Dryer Technology

Post Harvest Technology Dryer & Silo

Contract Farming in GMS & ACMECS Expansion to Neighboring Countries Contract Farming in GMS & ACMECS

Champion Farmer : MYANMAR

VIETNAM

Laos

CAMBODIA

ACTIVITIES in CHINA

CP 619

- Cost & Benefit of Hybrid corn grower in GMS/ACMECS Input Land Prep and Planting Harvest and Transport Others Total Average Yield (Kg/rai) Cost per Kg Income Price per Kg Profit per rai %Return on Investment 1,034 684 464 575 2,757 1,000 2.76 5,360 5.36 2,603 94 520 417 280 390 1,607 850 1.89 3,009 3.57 1,402 87 Thailand 469 338 439 375 1,621 800 2.02 3,000 3.75 1,379 85 326 646 304 264 1,540 725 2.03 2,764 3.81 1,224 79 Laos Myanmar Cambodia 1,392 700 188 3,280 720 4.55 4,500 6.25 1,220 72 Vietnam China 2,650 743 1,104 250 4,747 1,080 4.39 7,452 6.90 2,705 56

GRAIN CORN : Selling price at farm gate in THAILAND Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2001 2002 2003 2004 2005 2006 2007

GRAIN CORN : Buyer price at feed mill in THAILAND Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2001 2002 2003 2004 2005 2006 2007

GRAIN CORN : at Chicago BOT Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2001 2002 2003 2004 2005 2006 2007

GRAIN CORN CONSUMPTION THAILAND : 1,000 tons 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 DIFF -400 -500 -600 -700 -800

Supports Need from Government Water source and irrigation Climatic report and forecast Infrastructure Financial supports Training Intellectual property right

F Causes of Failure Uncontrollable Factors - Drought - Flooding Communication gap Misunderstanding 3. Transportation Problems Farmers 5. Team Work 6. Government Policy and Supports

Win + Win + Win Conditions for Success in Contract Farming Key Issues: Production Technology Pre & Post harvesting Technology Technology Transfer Gov. officer Private Sector

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

Thank you