The delegation included a policy maker representative from the Department of Livestock production, a representative from a technical research institute Agriculture Research Institute for
Trang 1Ministry of Agriculture & Rural Development
CARD Project 030/06 VIE Developing a strategy for enhancing the competitiveness of rural small and medium enterprises in the agro-food chain: the
case of animal feed
Thailand Study Tour Report
June 9-13, 2008
Date: December 1 2008
Trang 21 Introduction
The study tour was organized in June 9-13, 2008 (See Appendix I for the working schedule in Thailand) The delegation included a policy maker representative (from the Department of Livestock production), a representative from a technical research institute (Agriculture Research Institute for Southern Vietnam), a representative from a SME in the animal feed sector and the research team members from CAP/IPSARD and UWA (see Appendix II for the list of participants)
The study tour aimed at understanding:
• Livestock feed production in Thailand
• Participation of SMEs in the livestock feed sector in Thailand
• Role of public policy in the livestock feed sector in Thailand
The study tour was organized by CAP research team members, with the support of technical advisors from UWA Mr.Teerasant Sirichayaporn, Executive chairman of the Thai Feed Mills Public Company Limited and Mr Pornsil Patchrintanakul, President of Thai Feed Mill Association played host for the trip The delegation met with the Thai Department of Livestock Development, the FAO Regional Livestock Office, the Thai Feed Mill Association, both small and larger field mills and visited a dairy farm Further details
of the visits and contacts are in Appendix 1
The main learning outcomes of the trip in the three areas of interest (above) are outlined in the following Sections 2, 3 and 4 Some Vietnamese policy issues raised by the FAO Regional Livestock Office in Bangkok are discussed in Section 5, and key lessons learnt are outlined in Section 6
2 Livestock feed production in Thailand
2.1 Feed production and input use
In Thailand, the feed sector is dominated by large companies – particularly the CP Group The Thai Feed Mill Association said that their 56 members (some members have more than one mill) produced 70% of the livestock feed products Almost all feed is produced for domestic consumption The DLD listed a total of 655 mills – but this must include many small “farmer mills” Additionally, the Thai Feed Mill Company said that there are also a number of small unregistered mills that really just mix feed products (grinder plus bagging equipment) and are not under the control of the DLD
The number of feedmills has remained relatively stable over a number of years, indicating
a mature livestock feed sector Interestingly, the domestic price of livestock feed has been controlled by the Thai government since 2003 through the Ministry of Commerce (Department of Interior and Internal Trade) Additionally, the annual plan on amount of imported materials is approved by Thailand Feed Association
Thailand is usually self-sufficient in corn and cassava for livestock feed, only importing protein products such as soybean meal, soybean, some fishmeal and bone meal SMEs can have an advantage in proximity to raw materials – buying rice meal, molasses from the local area (and even rejects from pet feed) For example, the Mualek Dairy Cooperative sources all raw materials locally (except for some soybean meal from Argentina) – and
Trang 3look for the cheapest good quality ingredients – to keep the cost of the feed as low as possible They listed their raw materials as:
• wheat bran – from Thailand
• palm kernel – from south Thailand
• cotton seed – from north Thailand
• soybean meal – locally and from Argentina
• cassava – locally
• corn – locally – they contract farms for corn production
• coconut meal – south Thailand
Brokers go from mill to mill to collect waste products – but feedmills using these raw materials cannot produce feed for GMP (accredited “good management practices”) pork
SMEs use whatever they can find – they can’t compete for usual raw materials The SME
has to work out “what are we going to do with this SME?” They can be “niche producers” using “niche raw materials” They need to look at the market and provide a service to
farmers
2.2 Supply chain
There is a high degree of vertical integration in the large companies – from contract
farming of raw material products such as corn, through to livestock production and food processing
The number of feedmills in Thailand is relatively stable – there are not many new companies entering the market, and many un-competitive firms have already left the sector Two SMEs that were visited on the tour were the Thai Feed Mill Company and the Mualek Dairy Cooperative
For Thai Feed Mill Company, the marketing share for the company is low – estimated at 2-3%, but they plan to be the biggest producer of cattle feed Cattle feed was indicated by FAO staff as one area that CP does not dominate, and hence is often targeted by smaller mills Thai Feed Mill Company market to dealers and direct to large-medium sized farms – with the smallest buyer requiring about 20 MT/month They supply a bulk product to some farms
Mualek Dairy Cooperative sells to their own members, other dairy cooperatives in the area, a number of large farms owned by the military, a government farm and one private farm They are looking to expand their market to agents in Chang Mai Of their production, about 900 T/mth is for coop members and the remainder of 800 T/mth goes to their network of other farms
2.3 Quality control
Most of the 56 members of the Thai Feed Mill Association (TFMA) have at least GMP (Good Management Practice) accreditation The smallest mill capacity in the Association
is around 5 – 6,000 T/mth (medium-large from a Vietnamese perspective) Feed quality control is under the control of the DLD – the TFMA is not involved at all There are always markets for low and high quality feeds – small companies compete on price
Trang 42.3.1 Registration of livestock feed products and testing:
The DLD (Bureau of Livestock Standards and Certification) only specify a minimum of four parameters for each type of livestock feed – protein, moisture, fat and fibre percentages These are the minimum requirements for registration of a commercial formulated feed – and all products must be registered with the DLD and the percentages specified (that will be in the label) There is a registration fee of 1000 Baht/every feed product
DLD are responsible for testing of these products and there is a specified protocol for testing Random product samples are taken from all mills at least 3 times per year Each sample is divided into three – one for the DLD laboratory for testing, one for the DLD (in the case of disputes) and one kept by the mill The cost of testing of these official tests is borne by the DLD – 4000 samples at 2000 Baht/test – a total budget of 8 million Baht/year Testing is carried out in the DLD laboratory The testing follows a specified protocol (for Group A and Group B residue substances – see DLD handout), as well as testing each sample to see if it meets the product registration This is possible given that there are only 4 nutrition parameters to test (unlike the 15 required for registration in Vietnam – for which the Vietnamese DLD does not have capacity to test) Other regulations relating to feed safety are the responsibility of the feed mills
The DLD is not responsible for implementing the penalty/punishment procedure If the product fails the test, the mill and police are informed and the matter may go to the Court
A fine or prison sentence may be imposed – but usually a fine The highest fine has been 50,000 Baht
The mills are expected to keep regular records of their testing procedures and these are inspected by DLD officers There is a cooperative approach to feed quality control (part of GMP and HACCP procedures)
2.3.2 Promoting GMP and HACCP systems
The DLD is encouraging mills to have accredited GMP (Good Management Practices) and HACCP systems – mills first get GMP accreditation and then may go on to HACCP The DLD provide training courses - free of charge to mills - a week of workshops are offered 5 times/year
In 2007, 86 mills were GMP approved and 44 HACCP approved (out of 655 total mills) According to the Thai Feed Mill Association, “almost all” of their 56 members had at least GMP accreditation
2.3.3 Export products only from “standard farms”
Only 35 mills supply livestock feed to the “standard farms” which are those licensed to produce meat products for export EU-approved food safety monitoring and auditing systems are in place, including traceability In this way, the Thai government (through the DLD) keeps a close control on feed safety and food safety of export products Food safety
is a high priority (see the handout from DLD which outlines the DLD role for food safety from purchase of raw materials through to farm inspections and slaughtering)
Trang 52.4 Price control
The domestic price of livestock feed has been controlled by the Thai government since
2003 through the Ministry of Commerce (Department of Interior and Internal Trade) A cap is put on the maximum price able to be charged by individual mills for their products (based on costs of production, etc.)
The FAO considers that Thailand government control of the feed price is “unusual”, and has come about because of the political influence of farmers – who often protest against rising livestock feed prices Livestock feed is on the “sensitive list” The Thai Government has to balance “big industry interests” with “farmer interests”
According to the Thai Feed Mill Association these prices have been largely unchanged since 2003, but they have now coordinated a request to the government for an increase (because of rising raw material prices) that is currently under consideration
The Thai Feed Mill Association says that the price increase for each feedmill is considered
on its own merits – even though it seems they play a major role in the application process The Association also indicated that some small mills operate outside this price control system – but it could be safely assumed that they would not be charging high prices for their products
2.5 Role of Thailand Feed Association
The Thai Feed Mill Association (TFMA) has 56 members who pay a membership of 20,000 Baht/year, independent of mill capacity Members produce 70% of livestock feed
in Thailand The TFMA describes itself as a “service organisation” – assisting members by providing information and training Members can “exchange information and discuss difficulties” They also say they are “a one stop shop for Government – we have all the information” – and appear to act as a lobby group for the larger feedmills to government, mentioning that they “propose policies”
The Association has three working groups – raw materials purchasing, feed marketing and technical (quality) committees They appear to be highly influenced by the larger mills, particularly the CP Group – both the current President and Secretary of the Association are employees of CP The FAO Regional Office alluded to this
The TFMA appears to be co-ordinating an application to the Ministry of Commerce for a rise in the selling price of commercial feed – although they say prices will vary depending
on the individual mill situation – a “company-by-company” submission
The Association also plays a role in applying to the Government each year for the amount
of soybean meal imports that can be made at the “quota” tax rate (4%) The “official” quota is too small, and the over-quota rate is officially 119% Because of this, firms must notify the TFMA (in about June the year before) of how much soybean meal they wish to import each year, so that the Association can calculate how much they need to apply for After the application is “considered”, the Association notifies mills of their import amounts
3 Participation of SMEs in the livestock feed sector in Thailand
Trang 6SMEs in Thailand focus on dairy cattle because they can’t compete with CP and Betragro
in other areas Some SMEs in the livestock sector (e.g a piggery with 2000 sows) will
have their own mill SMEs should target the local market – produce an acceptable product for domestic consumption Some main information and insights from the two visited SMEs are given in the remainder of this section
Thai Feed Mill Company has a capacity of 200,000 MT/year (18,000 MT/mth), produces a range of livestock feeds and employs 110 persons The mill has GMP accreditation The Company has 2 other mills and one broiler processing factory By Vietnamese standards
this mill and company would be large (rather than medium)
Mualek Dairy Cooperative was established in 1972 and has around 800 members (around 20,000 head of cattle including 8-9,000 milkers) They provide a variety of services including: milk marketing, livestock feed products, fuel, veterinary and AI services, pregnancy testing, credit (against milk sales), rice straw in the dry season They appear to
be supported by people from government (DLD) and universities (e.g the university
livestock people developed their feed recipes) The feedmill was set up in 2002 –
sponsored by the Asian Development Bank through the Ministry of Agriculture – with an establishment cost of 40 million Baht They produce pelleted and ground feed – roughly 50% of each The products are “guaranteed” by the DLD (we assume this means the product quality) The capacity of the mill is 10T/hr and production is 1700 T/month This makes it a small-medium mill by Vietnamese standards Products are “made to order” and
not generally stored for more than one week
3.1 Challenges facing SMEs
When asked about challenges facing their mill the manager of Thai Feed Mill Company
replied “maintaining our sales volume – we must sell above the breakeven point” This positive marketing approach is very different to the typical responses from Vietnamese mills when asked about challenges
3.2 Advantages of having SMEs operating in the sector
According to Thai Feed Mill Company, they feel they have an advantage being smaller in that they can sometimes buy small quantities of raw materials on the local market more cheaply Raw materials are about 80% of the cost of their products Normally they keep a one month inventory – but at the moment “it is different” (because of the recent increase in raw material prices) Their strategy is to buy quality raw materials from merchants in the provinces They have educated the up-country middlemen – “they must make the raw material product up to our standards.”
3.3 Feed quality of SMEs
Thai Feed Mill Company is also “serious” about quality control and have an adequate laboratory with NIR analysis equipment The DLD people with us on the trip said that
“some of the laboratory equipment is a bit old.” They appear to work closely with the DLD on feed quality monitoring
3.4 Strategies used by SMEs to compete with larger mills in the sector
Trang 7As mentioned by Thai Feed Mill Company, they consider “sales and service” to be their strength They aim to “improve production of the farms by lowering production costs” – even though their price is not low They consider the feed conversion rates (FCR) of their products to be better than their competitors Sales strategy is to target the north and north-east areas Another company mill targets the south They advertise in livestock magazines Targeting farms for direct sales is also a strategy
As for Mualek Dairy Cooperative, they seem to be well managed and offer a diverse range
of services to members They appear to be confident about their products (which are tested
on cooperative leaders’ farms) and their buying strategies for (and skills for locating) raw materials The hygiene standard of the mill for stored products was not high, and the laboratory was only basic They don’t store a lot of raw materials – but “buy fresh continually”
4 Role of public policy in the sector in Thailand
4.1 Government policy supporting livestock feed SMEs
There are policies which directly support or affect firms in the feedmill sector, although they are not specifically focused at SMEs The DLD can assist with education and advice
on how to set up GMP and HACCP standards They provide free training for this (see earlier) The DLD will audit feedmill plant for GMP All official feed sample testing is done in the DLD laboratory – free of charge to the mills The sampling is done by DLD officers at no charge to the mills
Credit is also supported through a number of avenues The Bank for Agriculture and Industry can provide loans to SMEs (at rates of 2% lower) and “interest holidays” The SME business bank will fund SMEs – those that have “a business plan” and meet the criteria of “one district one product” (the Mualek Dairy Cooperative had this slogan at their feedmill) There is no government-provided storage for raw materials The DLD officer thought that the “private sector is much better for this”
The Thai Government controls the price of animal feed (see earlier) Government has not applied the “overquota” tax rate (119%) on soybean meal for a number of years, even though the import quota is routinely exceeded An application for exemption is made each year by the Thai Feed Mill Association VAT for ingredients and feed products is 0% - considered a “special business” (agricultural business)
The Thai Feed Mill Association gets support from the Ministry of Commerce – e.g can hire a consultant to help SMEs upgrade plant (technical advice), and check “calibration” (of feeds)
Additonally, the Thai Government compensates 75% of market value for livestock that have to be destroyed because of disease
5 Policy issues for Vietnam raised by the FAO Regional Livestock Office
The FAO office considered that SMEs in Vietnam currently face great difficulties in light
of the devaluation of the dong, high interest rates and high inflation rates Tax and interest
Trang 8holidays might be needed if small businesses are to survive Domestic investment will become more difficult as credit is tightened in an effort to control inflation
The CP Group is planning a substantial expansion in Vietnam Foreign investment is favoured by the devaluation of the dong CP has 4 plants already in Vietnam but will invest US$30 million to upgrade capacity by 600,000 T/yr – starting in early 2009
The FAO Regional Livestock Offcie considered that there are opportunities for livestock production in Vietnam Vietnam has many ducks – but Avian Influenza is an issue However, ducks require low capital so this is an advantage Vietnam is buying cattle and livestock materials from Laos and Cambodia Why? SMEs should look for import gaps There is potential to go back to draft animal power (because of rising energy costs), and promote cattle raising and cattle feed
Government polices are needed on biofuels The Thai government will soon zone production areas for food versus energy production Planning is needed for this
6 Lessons learnt and their applicability to Vietnam
6.1 Lessons applicable to animal feed policy makers
The DLD has different strategies of quality control for export-oriented livestock products (i.e animal feed for export-oriented farms) and livestock products for the domestic market Firms producing livestock feed for export-oriented livestock farms are strictly controlled However, for both export-oriented and domestic market oriented firms, the Thai DLD is responsible for testing in the DLD lab system, and all the tests required by the DLD are free-of-charge Asking enterprises to keep regular records of their testing results is a good way of monitoring feed quality as well as helping enterprises to get used to the GMP and HACCP procedures Free training courses on GMP and HACCP might be useful for encouraging mills to have accredited GMP and HACCP Currently, similar policy is still not able to be applied in Vietnam due to lack of financial and human resources At the moment, Vietnam DLD does not do the testing but encourages other capable units to provide this service
The Thai government considers feedmills as agricultural business which enjoys a 0% VAT The same situation happens in China This should be a good policy for encouraging the production and reducing the price of animal feed
Additionally, the Thai government controls the price of animal feed which is an interesting policy idea for Vietnam to reference
6.2 Lessons applicable to SMEs
Attitude toward challenges and external shocks: It appears that the marketing approach of
SMEs in Thailand is rather positive Instead of waiting for support from government or elsewhere, they focus on how to sell above the breakeven point
Trang 9Feed ingredients: Try to source material locally, as much as possible, look for the cheapest
good quality ingredient with the cost as low as possible This needs to be considered in the case of Vietnam because Vietnam has capacity to produce raw materials for livestock feed
Seek niche opportunities: SMEs can always find a “niche market”, being “niche
producers”, using “niche raw materials”: in other words, there are always markets for low and high quality feeds SMEs can compete on price and after sale-services for farmers
Cooperative structure: The form of Mualek cooperative is also a good example for
Vietnam feed industry to learn The cooperatives with multiple services supplied to members by the Mualek cooperative could work in Vietnam
6.3 Possible role for the Vietnam Feed Association
Through information attained from Thailand Feed Association, it is possible for the Vietnam Feed Association to learn from their experience to play a more active policy role However, a change in structure of the VFA should be made so that it can be supported both in finance and organization The Vietnam government has a policy to encourage an active role for the private sector, so it is hoped that a more pro-active policy role for the VFA can be supported and promoted in the near future
Trang 10Appendix I: Working schedule in Thailand
Standard and Certification
- DLD
Mrs Kanungknit 089-132-1818, 02 -653 -4444 ext 3127
Bureau of Livestock Standards and Certification
Department of Livestock Development
Phaya Thai Rd., Bangkok 10400, Thailand
(whole day trip)
Thai Feed Mills Mr.Teerasant Sirichayaporn
Executive chairman Thai Feed Mills Public Company Limited
e-mail - tfmpm2@csloxinfo.com Mobile : 081-567-8101
Thai Feed Mills (Saraburi) Co.,Ltd 35,Moo 8, Phatthanapong Road, Tambon Tontal, Amphoe Saohai, Saraburi Province 18160, Thailand Tel : 036-222-260-4 Fax : 036-222104
(whole day trip)
Muaklek Dairy Cooperative Ltd
Prof Somkiat Prasanpanich from the Department of Animal Science
in Saraburi
9:00 -11:00 FAO-UN
Regional Office for Asia and the Pacific
Vishnu 081-6442329 (local call) or
06681-6442329 (from overseas)
39 Phra Atit Road Bangkok 10200 Thailand
Friday (June 13)
14:00 – 16:00 Thai Feed Mill
Association
Mr Pornsil Patchrintanakul, President of Thai Feed Mill Association
Secretatary: Ms Sukanya Chaichuen
313 Silom Road, Bangrak, Bangkok 10500 Thailand Tel 66 (0) 2 6382213, 6258203 Fax 66 (0) 2 6310850
889 Room No 170 17Th Floor Thai
Cc Tower Building South Sathorn Yannawa Sathorn Bangkok 10120
10120 Sathorn