FBA Issue 5: November / December 2005


Feed Milling

Still overcast?



by Daphne TAN


JANUARY 23, 2004--a day that Thailand would never forget and one that Pornchai Suwitayarat remembers all too vividly. "It was the second day of the Lunar New Year. I was on holiday upcountry in Chiang Mai with my family," recalls the senior executive of a Thai broiler and feed producer. A call from a colleague in Bangkok confirmed his worst fears--Thailand had fallen victim of the dreaded bird flu outbreak in the region. "For some time now, we suspected that Thailand already had bird flu, judging from the many 'stories' circulating around," said Pornchai. "We just knew it was a matter of time before bird flu would be confirmed here."


Nothing, however, could prepare Thai feed millers and poultry producers for what was to come next. A nationwide poultry culling exercise to contain the disease led to the virtual collapse of the domestic poultry market. Overnight, Thai producers suffered their biggest financial loss in the history of world poultry production as broiler meat prices dived from 26 Thai baht a kilogramme to a paltry 8 baht or 20 US cents. Production was cut by at least 60 percent at all broiler plants, if not shut-down altogether. Exports were clamped almost immediately as major export markets like the EU and Japan banned the import of Thai broiler meat in the wake of the crisis. 


The impact on feed millers was devastating. "Our duck feed production halted almost overnight after media reports stated that native ducks were responsible for the outbreak," recounted a sombre Pornchai. For a company that was established to "export animal feed for profit", feed businesses like Pornchai's were hit far beyond the immediate financial losses from the culling of day-old chicks and adult grown birds. With an average of two million poultry birds and almost 3 million hatching eggs destroyed at any one single producer, the exponential losses sustained from the bird flu crisis had a far reaching impact that was to ripple through the domestic feed and livestock industry for months to come.


Down to new heights in Thailand


The worst-ever crisis for Thai feed manufacturers, 2004's bird flu has radically changed the way the industry views its business in the long term. A more immediate impact had been the drastic fall in feed output across Thailand that year. The average 24-hour production schedule at the country's biggest feed mills was cut to a third, or only eight hours a day while domestic output was halved from an average of 40,000 tonnes a year to 20,000 tonnes. Smaller operators, meanwhile, were forced to shut down as the cost of producing lower quantities of feed far outweighed any sales revenue gained.


One year on, production levels at Thai feed mills have yet to resume pre-bird flu levels, although producers have shown far greater optimism for the coming year than they did a year ago. Still, the cautionary "wait-and-see" stance was very much prevalent among feed millers that FEED Business Asia spoke with. Almost without exception, all had targeted end-2006 as a likely timeline for when feed manufacturing might resume to previous higher capacities.


After bird flu forced the closure of many small feed operations, consolidation has become the new buzzword and traceability systems the new hype. No doubt, technology will be the means to facilitate this change. "Farms and feed operators are now emphasising closed systems, with easy cleaning of premises and traceability for all feedstuff," says Banphot Apikeeratikul, whose company Luft-Tech supplies feed milling equipment from manufacturers like Laidig, CPM and Champion. "To do all this efficiently, technology is the only way."


The efficiency that technology enables is the linking up of an entire information and processing system that begins when a truckload of feedstuff enters the feed mill to the time when the finished feed product leaves the feed mills. Clearly, such a system can only benefit large-scale producers in an industry that is fast undergoing consolidation. Export-oriented integrators, like Thailand's Charoen Pokphand (CP) Group, began launching full traceability systems at all its domestic feed- and farm-integrated operations soon after Thailand's first bird flu outbreak in January last year. "It used to be that demand was for equipment which enhances productivity," says Banphot. "Now, everyone is asking for full data systems that can support the entire traceability process." This includes recording feed formulations, tracing raw material sources and the final destination of finished feed products.


With poultry vaccination against bird flu banned in export markets like the EU and Japan, adopting stringent hygiene and phyto-sanitary measures have become the number one priority, and perhaps only option, for Thai feed manufacturers. "When bird flu came, we began to realise the need for a truck spraying system at each site," said Virote Kumpeera, vice president at CP Group and the person-in-charge of its newest feed mill in Thailand at Pak Thong Chai. This practice, which had begun with the group's first feed mill in Bangkok in 1974 but was relaxed over the years, was quickly reinstituted at each of CP's 11 feed mills in Thailand. Now, all vehicles, from private cars to trucks that deliver feedstuff and transport finished feed, have to be sprayed with an antibacterial wash. As the largest producer of poultry products in Thailand, CP is determined to do all it can to keep its markets. Says Virote: "We don't design what we need, but what our end-users require."



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