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CONTRACT FARMINGBUSINESS FOR DEVELOPMENT

“CHALLENGES AND OPPORTUINITIES”

MR. VICHAI POONPIRIYASUP

CROP INTEGRATION BUSINESSC.P. GROUP (THAILAND)

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11. . ABOUT ABOUT CharoenCharoen PokphandPokphand ((CC..PP.) .) GROUPGROUP

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 20 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 Integration 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 costof production and risk reduction

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

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Complete Package Project

Cost Reduction/unit Reduce Risk

Yield Increase/area Income Increase/season Farmers with Higher Income

New Technologies

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C.P.

1. Providing technical know-how

2. Selecting and supplying inputs

- hybrid seeds- herbicide- bulk blending + Organic fertilizer- farm equipments and service

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3. Provide experienced field service agronomists

4. Manage grain trading practices

- minimum guarantee price- grain quality- local grain traders- animal feed silo

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New Technologies Recommended

1. High yield potential hybrid seeds

2. Proper soil preparation

3. Using of mechanical planters for uniformdepth and growth

4. Proper cultural practices during theseason

5. Effective weed control

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6. Application of fertilizer as recommendedby soil analysis result

7. Proper harvesting

8. Proper post harvest handling

9. Standardized grain purchase

10. Crop Insurance

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Farmers

1. Preparing production resources asrecommended

2. Cooperation in field work

3. Collecting and providing weatherinformation and production expenses

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BAAC

1. Assisting in project members selection

2. Financing the project Credit in kind

3. Examining and supervising the project

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Dept. of Ag. Ext. & Local Technician

1. Selecting project members

2. Provide training and extension service

3. Provide the demonstration plots

4. Arrange the harvesting field day

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Complete Package Project

- Started in 1984

- Targeted yield for corn 800 kg/rai (5 MT/Ha)

- Area1984 = 480 Ha1989 = 43,200 Ha1990 = 64,000 Ha

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- Average cost in Baht per rai ( 0.16 Ha )

InputLand Prep and PlantingCrop InsuranceHarvest and TransportTotal

Average Yield (Kg/Ha)Cost per KgIncome (Grain = 2.5 Baht/Kg)Profit per rai% Return to Investment

27934030336985

8151.2

2,0361,051107

65320

-190575

3851.596338867

Within Project Outside

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Contract Farming

in

GMS&

ACMECS

Expansion to Neighboring Countries

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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 Misunderstanding3. Transportation Problems

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4. Farmers5. Team Work6. Government Policy and Supports

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Issue for Discussion

Conditions for Success in Contract Farming

Key Issues:

1. Production TechnologyPre & Post harvesting Technology

2. Technology TransferGov. officer , Private Sector

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3. Building TRUSTMutual Benefit

4. Pricing PolicyPrice Information CenterMarket Price, Minimum Guarantee Price

5. Financial Support Bank of Agriculture , CooperativeLocal Grain Collector

6. Human Resource Development

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