March 15, 2004

 

 

Thai Poultry Industry Set To Undergo Major Restructuring Process

 

The devastating impact of the bird flu outbreak in Thailand has prompted the poultry industry to undergo major restructuring, both in farm and processing areas, with a trend towards a closed-farm system and exporting more cooked products.

 

Charoen Pokphand Foods (CPF) and the Betagro Group - the country's second and third largest chicken exporters, respectively - share the view that the viral epidemic will force the industry to accept major production restructuring.

 

Companies of all sizes will face a slowdown in business expansion as they become more concerned about investment risks created by factors such as epidemics and halts in exports.

 

Moreover, the number of chickens in the country will not increase sharply to the extent seen in the past few years. Breeders with no contracts with exporters and manufacturers will reduce their numbers due to high business risks.

 

Both major exporters said broiler and layer farms would concentrate more on closed-farm systems to prevent widespread disease in cases of epidemics.

 

Adirek Sripratak, president and chief executive officer of CPF, said the bird-flu outbreak would reduce the number of independent manufacturers - those without contracts with exporters or manfucturers - which will also reduce chicken production.

 

The recent outbreak has directly hit layer farms, accounting for 80 per cent of the 30 million chickens culled, while it has had a small impact on broiler farms. The virus also hit almost 20 per cent of indigenous chicken breeds.

 

"It is time for layer-farmers to undertake closed-farm systems for survival. Those farms which have been used for three to four decades should be reconstructed," Adirek said.

 

The outbreak will also cause import patterns to change, with countries concentrating more on processed foods rather than fresh meat due to rising concerns over food safety.

 

The ban of Thai chicken by major importers such as Japan and the European Union will cause the Kingdom's export value to drop by Bt10 billion this year from the Bt48 billion-Bt49 billion achieved last year.

 

To achieve sustained exports, Thailand should shift to producing and exporting more cooked products in order to avoid export bans, Adirek added.

 

The Kingdom's total chicken exports reached more than 500,000 tonnes last year, of which cooked products accounted for only 160,000 tonnes. The rest was frozen fresh produce.

 

Of the country's total export value last year of Bt48 billion-Bt49 billion, fresh products generated Bt28 billion and cooked food the rest.

 

CPF is the biggest exporter of cooked chicken products, shipping 47,000 tonnes or 30 per cent of the country's total finished-product exports last year.

 

Starting this year, CPF will reduce the export volume of fresh frozen meat and focus more on processed food.

 

Adirek forecasts that the export volume of fresh frozen produce will drop from last year's 390,000 tonnes to 140,000 tonnes this year, while cooked food will increase from 160,000 to 225,000 tonnes.

 

The company plans to increase the export volume of its processed product to 78,000 tonnes this year, an increase of almost 100 per cent on last year.

 

"Thai chicken exports are expected to recover next year and export value will increase to Bt50 billion," Adirek said, adding that Thailand could start exporting chicken products again in September or October due to the cycle of production.

 

To support the company's export drive, the company's new Bt4-billion manufacturing complex in Nakhon Ratchasima will soon be operating.

 

"We hope to become the country's leading processed-food manufacturer," he said.

 

CPF's sales were hit by a significant drop in domestic consumption rather than a fall in exports. However, the consumption rate has now increased by more than 30 per cent compared with the past two months.

 

About 10,000 chicken-farming families under CPF's wing have already turned to closed-farm systems.

 

Kriengmas Punchai, senior vice president of Betagro Group, said chicken production in Thailand would face big changes. For instance, exporters should focus more on manufacturing-standard requirements, both for broilers and layer farms.

 

"We have gained a lot of experience from the bird-flu outbreak. We have to restructure our manufacturing to protect the whole industry and bio-security manufacturing is to be the focus of exporters," he said.

 

Independent chicken manufacturers will become more professional to survive in the industry. In particular, open-farm systems will be rebuilt into closed-farm systems to reduce business risks, he added.

 

"They will think much more carefully and consider international standards before investing. The slowdown of investment will reduce industry expansion," Kriengmas said.

 

Due to the uncertainty of exports during the bird-flu outbreak, exporters have turned to producing processed food, which also generates value-added income.

 

"Cooked products will help reduce export risks and encourage Thai chicken exporters to concentrate on our strengths. Whether small or big, manufacturers cannot avoid the industry's major restructuring," he said.

 

Kriengmas predicted that Thai chicken exports would recover in the fourth quarter.

 

Almost all of Betagro's 3,000 contract farms are closed-farm systems.