Thai government fighting market volatility

Over the last five years, the Thai pig industry has seen both remarkable growth and contraction. The volatility in the market makes investments difficult – and the Thai central government announced plans to make the Asian country's pig market more stable.

By Chayanon Kittayachaweng, president, Animal Husbandry Association of Thailand (AHAT), Bangkok, Thailand

Between 2006 and 2010, the main destination for pigs produced in Thailand was Thailand itself. In this period, pork exports have only accounted for about 2-3% of the country’s total production capacity. Average annual meat consumption per person in Thailand has been 14-15 kg and demand for pork in Thailand has not been fluctuating strongly. Supplies, however, have been swinging strongly, having some far-reaching consequences which are outlined below. There are three different reasons for the supply volatility:

Various pig diseases
Fluctuating prices for feed, e.g. for corn, soy meal or cassava
Fluctuating prices paid for live pigs

Expansion
In the years 2005-2006, pig prices have generally been good, hence Thai pig farmers have been working hard to make profit. This resulted in an expanded number of pigs that were produced on larger farms. Keeping in mind, however, that domestic demand did not increase, the oversupply led to a slump in pig prices in 2007.
In addition, just like the rest of the world, the Thai pig industry met higher animal feed and raw material prices during 2007 and 2008. Disease outbreaks such as PRRS, Porcine Epidemic Diarrhoea, Porcine Circovirus (PCV2) completed the picture. As a consequence, profits dwindled and soon the pig industry was suffering losses. This, in turn, led to supplies being affected: in 2006, sow breeders kept approximately 930,000 sows. It is expected, however, that in 2010 the number of sows will be reduced to 840,000, yielding about 11 million pigs/year. Stakeholders in the Thai pig industry have been disappointed about this continuous situation of market volatility in Thailand. Therefore, it has been decided that the government and private sectors ought to cooperate more. Recently, the government announced to install a Pig Board, focusing on pig production and relevant policy development. In this board, representatives were appointed from both the government and the private sector. The board’s directors appointed four sub-committees to zoom in deeper on different developments in the pig market.

Pig production: To manage farming systems, farm development standards, disease prevention and farm registration.
Pork products: To develop marketing plans for the promotion of value-added processed products and to stimulate consumption.
Transport: To develop market standards for transport of pigs and pig carcasses – and for pig slaughtering. This also includes communication to consumers about hygiene standards.
Quality standards: Setting standards for quality analysis on feed, food and meat products.

Developments in the Thai pig industry
Sow numbers:

Larger farms have been quicker able to expand their numbers of breeding pigs than smaller farms, see Table 4.
Production and culture
Change from closed system to an open, evaporative system increased from approximately 30% in 2006 to 70% in 2010.
Raising pigs has increasingly become an integrated business (from sow breeding to piglets and finishers).
Problems related to disease outbreaks like PRRS and PCV2 have affected both pig supplies and live pig prices.
Especially in smaller farms, the use of illegal substances in pig production has grown. The government is trying to clamp down on this.

Slaughtering

The number of pig slaughter plants having export licenses by the government has risen to ten. The government accelerated efforts to build hygienic local slaughterhouses all over the country.
About 80% of the pigs in Thailand were slaughtered locally.• Marketing and sales
Farmers in an integrated system notice that the role of middlemen is reduced. Integrators have direct access to consumers.
Thai consumers have developed a growing focus for food safety; pig producers have to adapt themselves.
The price of pork cuttings are controlled by the Department of Internal Trade. • Government policy
The government helped to increase knowledge among pig producers and developed policies to enhance both production and marketing, e.g. hallmark meat products such as Q Mark.

Trade liberalisation

Imported pork units have not been less than 10,000 tonnes – this is equivalent to an amount of 1 million pigs in Thailand. This affected both prices for pigs and domestic meat prices.

Zoom: The Thias pig industry behind CPF and Betagro
When people think of the Thai pig industry, they often think of the two largest integrators on the market, being Charoen Pokphand Foods and Betagro. Since they occupy approximately 30% of the total domestic market, more than 70% remains in the hands of small, medium and larger farms. Among these followers, no real winner can be spotted. There is a wide variety of different groups with different objectives, all involved in raising pigs. One thing, however, binds them together: they all professionalise and increasingly take into account the desires from customers.

Associations and cooperatives
In various places throughout the country, groups of farms can be found establishing associations or uniting themselves in cooperatives. This way producers can better respond to current challenges in the pig industry, like e.g. the influence of Free Trade Arrangements, causing foreign pork to enter the Thai market. Other topics include the government’s approach to control pork prices and communication with consumers. Swine producers are also united in the Swine Raisers Association of Thailand, a primary and a central service to address challenges like these.
The group of larger farms have developed a culture towards becoming integrations. Good examples are Kanchana Farm, Veerachai Farm, Laemthong Sahakran Farm, Panas Phokkhaphun Farm, SPM Farm, Porn Prachuap Farm, Mitraphap Farm, VP Farm and RMC Farm. These can be found high up in Table 4, ranking the 20 most important swine breeding companies in Thailand at present. These farms have been growing and developing their farm management systems, production management, biosecurity system standards, marketing management and supply chain development – in short, they increased their compliance to their local market.

Direction
In this sense, the direction the pig industry is going does not differ much from the leading two agricultural giants CPF and Betagro. Thailand’s larger independent farms have a long experience in the pig industry. Apart from continuous development, they are developing strains of both GGP stock and parent stock, there have been construction of feed plants, adding of contract farms, building of pig slaughterhouses, creating pork product distribution channels and good marketing developed.
It is believed that this pool of larger and medium-sized farms has the potential of growing further. Experience gained in a long tradition of raising pigs, the Thai pig industry is confident to transfer technology to neighbouring countries, like is also done in the broiler industry.
Development is guaranteed for Thai pig producers in the years to come. New heirs to family pig farms receive good education from both within and outside the country, as access to continuous care and development is key to keep the family business growing and to bring new technology into their farms. Educational institutions and universities, in turn, applaud cooperation with operations in the field for research purposes. This way they are making it an important part in stimulating and driving the development of larger and medium-sized farms. This way, universities contribute to reaching the goal of being competitive to improve production all the time. For the future, basic production will continue to be key, but by applying modern technologies. It is fundamental to the development of primary production to increase efficiency and productivity. There are various fields where continuous modernisation is required:

Breeding: Increasing productivity and having a strong and more prolific breeding herd.
Animal nutrition: Developing renewable energy sources and materials that will decrease the cost of raw materials to manufacture appropriate feeds.
Management systems: Developing modern and appropriate housing to increase productivity, and prevent diseases.
Pollution and environment: Developing installations like biogas to producing electricity for own use. This can also help reduce environmental problems related to smell.
Legislation: Creating more awareness for food safety, animal welfare and disease prevention.
Marketing & communication: Developing of own product brands, e.g. by using quality marks like the Q Mark from the Department of Livestock Development; and creating information systems that will state what impacts a Free Trade Agreement (FTA) can have.