VI. Profile of Sample Survey

This chapter will describe the profile of 4 types of sample farms, i.e., swine, broiler, layer and dairy.

6.1 Profile of Pig Farms from the Livestock Farms Survey

Tables 6.1-6.30 show the profile of the survey sample of pig farms. The description of the sample profile is divided into 6 topics.

6.1.1 Farm Size and Contractual Arrangements

The sample of 174 farms are from 5 provinces, two from the eastern region, two from the central and one from the Northeast (Table 6.1 and Figure 5.1). All five provinces have connecting borders with each other. The largest sample of pig farms comes from Chachoengsao which is also the largest swine producing province in Thailand (Table 6.1). The second largest sample is from the central province of Lopburi which is the new swine growing area. Korat has the smallest sample size.

Most sample farms (64 percent) are of medium-scale, followed by the large scale (24 percent). Seventy out of 112 medium-scale farms have 101-500 pigs per farm (Table 6.1). Chachoengsao has the largest number of farms in both the large-and medium-scale categories. Most of the small farms are in Korat, a Northeastern province. In term of average pigs per farm, therefore, Korat farms are the smallest, averaging 268 pigs. Korat used to be a major pig producing province in the Northeastern region. But in recent years, Korat has suffered water shortage. The province with the highest average number of pigs is not Chachoengsao, but Saraburi with the average of 2,736 pigs which is almost twice as large as that in Chachoengsao.

Except Chonburi, the province with the high number of pigs per farms tend to have high density of pig population per rai^[97]. Although Saraburi have both the highest number of pigs and largest land area per farm, it has the highest density of pig population (Table 6.2). This is because Saraburi's average number of pigs per farm is almost twice as high as those in Chonburi, while the average land holdings in both provinces are almost the same. Chachoengsao has the second highest density of pigs per rai, followed by Lopburi which has the smallest land holding. Korat has the smallest number of pigs per farm and also the smallest number of pigs per rai.

Most of the farms (84 percent) are specialized farms, growing either piglets or fattened pigs for sale (Table 6.3). The integrated farms, both partially and fully integrated, still account for only 16 percent of the sample farms. However, the industrial specialists claim that the number of integrated farms is on the rise as it is difficult for the piglet farms to make profit as a result of wide fluctuation of the piglet price. Moreover, the piglet production is a care-intensive activity. As a result, most of the new entrants are forced to be integrated farms. But our survey data contain too small number of new entrants to substantiate the argument^[98].

The fattening farms have the largest number of pigs per farm, while the piglet farms have the smallest farm size (Table 6.3). This is not surprising since growing sows and weaning piglets are very much care-intensive activity. Pig fattening farms can exploit the economies of scale from bulk purchase of feeds and mechanization of the fattening process. The integrated farm size is almost three times as large as the piglet farms but 50 percent smaller than the fattening farms.

Out of 174 sample farms, 125 farms are the independent farms (Table 6.3). The other 30 farms are the wage contract farms and 19 are the price-guarantee (or forward) contract farms. There are two types of wage contract, i.e., fixed wage per kilogram of fattened pigs and fixed wage per piglet. Most of the contract farms are in Lopburi and Chonburi (Table 6.5).

The farmer who has a contract to fatten pig will be paid, say, 1.7 for each kilogram of live pig. He will be supplied with a 14-kg piglet and required feeds to fatten the pigs up to 100 kg in 17 weeks. The minimum conditions are that FCR should not exceed 2.7 and the mortality rate not higher than 3 percent Piece-rate incentives are awarded if the performance is better than the conditions. On the other hand, if the feed used exceed the requirement, the farmer will have to bear the cost difference. The contract will be terminated if excessive use of feed is observed for two consecutive batch of fattened pigs.

The contract to produce piglets is a more sophisticated contract. The farmer will be supplied with sows, sires, feeds and drugs to produce and wean 4.5-kg piglets (about 17-18 days old). In return, he will be paid 90 baht for each piglet plus a bonus of 1 baht for each extra gram of piglet. Moreover, the farmer will receive 30-baht premium wage if the farrowing rate is 75 percent. If the farrowing rate is higher than 75 percent he will receive additional 5 baht for each percentage of the farrowing rate. The maximum premium is 105 baht if the farrowing rate is 90 percent or higher and number of piglets is 9 per wean. On the other hand, when farrowing meets the 75 percent target, but each sow yield less than 9 piglets, he will not receive any premium payment.

The third type of contract (about 19 farms) is the price - guarantee on a credit term from the contractor at the price slightly higher than the market prices. The contract allows him to sell the 12-kilogram piglets to the contractor at the fixed price of 800 baht, with an additional bonus of 25 baht for each kilogram of piglets in excess of 12 kilograms.

The above description of the pattern of contracts in the swine industry is also consistent with that in the broiler industry in which the market is overwhelmingly dominated by the wage contract. Although farmers may prefer the price-guarantee to the wage contract because of the absence of risks of output price and more flexibility in their production decisions, they find it difficult to enforce the contractor to comply with the terms of the contract when the market price of pigs is lower than the guarantee price. Under the wage contract, both the risks of output and input prices are eliminated. But the farmers still assume most of the production risks. Since the production of piglets is highly care - intensive, the contractors have to devise a sophisticated incentive scheme to ensure that the contractees put great care in their production. Comparing to the wage contract to produce piglets, the wage contract for fattened pigs has relatively simple terms, i.e., a single wage rate for each kilogram of pigs, provided that the minimum weight (say, 90 kgs) is achieved.

Most contracts (24 out of 49 farms) are a one-year contract, and 15 farms have the contract on a batch (or cohort) basis. Only 5 farms have a contracting period longer than one year. That most farms have a short-term contract should not be interpreted as a temporary contract (Table 6.6). In fact, most contracts are usually renewed automatically unless the contracting parties want to terminate their relation.

6.1.2 Farms' Characteristics

The majority of swine farmers (68 percent) are older than 40 years. Only 10 percent are younger than 30 years old (Table 6.7). Most owners are male (68 percent), particularly the owners of large-scale farms. But women owners are almost equally represented among the small farms (Table 6.8).

More than 51 percent of farmers have no education, comparing to only 5 percent for the Thai agricultural workforce. Another 30 percent have only primary education, comparing to 79 percent for all agricultural workers. However, Table 6.8 shows that the owners of the larger farms tend to have higher educational attainment.

To compensate for the low level of education, the farmers have acquired their farming skills from accumulated work experience. About 62 percent of the farm owners have more than eight years of experience (Table 6.9). Moreover, 83 farmers (48 percent) have attended some training programs in swine production. Some farmers have also hire the services of outside swine advisors (most of whom are university professors) veterinarians (9 percent of farmers), feed and drug companies (31 percent) and the contractors (20 percent).

6.1.3 Employment and Capital Investment

All, but the large-scale farms, employ more family workers than hired labor, indicating that most of the swine farms are still dominated by the family enterprise business. Even in term of full-time equivalent workers, the number of family workers in the small and medium-low scale farms is still higher than hired employees (see Table 6.10).

All of the workers hired by the small farms have only primary education. Larger farms employ workers with higher education. One lower medium scale farm hires an animal husbandry worker and three other medium-scale farms hire a few workers with secondary education. Farms larger than 500 pigs begin to hire accountants because they need to use the financial statements to properly control their high volume of daily cash flow. But on the average, the average number of hired employers is still small, ranging from less than 2 workers for the small farms to less than 7 workers for the largest farms (Table 6.10).

Most of the sample farms are professional modern farms with permanent concrete houses. Twenty eight farms (or 16 percent) have the houses equipped with evaporation system to control the temperature within the house (Table 6.11). As a result, fixed investment (excluding land) is quite high. The average investment is 1.87 million baht^[99] (or US$ 44,457) ranging from less than 1-2 million baht for the medium-scale and to 4.4 million for the large scale farms. The largest investment is as high as 20 million (Table 6.12). Therefore, the labor-intensity is quite low, with an average labor-capital ratio of 0.48 worker per one hundred thousand baht of investment.

6.1.4 Sources of Inputs

Table 6.13 shows that total feed costs account for 86 percent of total variable costs, with mixed feed representing 65 percent. The cost of piglets is only 3.2 percent because only 74 farms buy piglets from the market. The other 100 farms have their own breeders, and hence there is no explicit cash cost of piglets. The implicit costs of piglets is the cost of maintaining the pig breeders and weaning.

Drug cost is the third largest item, representing 4.5 percent of total cost, while the cost of hired labor and interest cost each account for about 2 percent. The smallest cost item is tax, accounting for only 0.2 percent (Table 6.13). However, the figure does not include the value added tax borne by the farmers when they buy non-agricultural inputs. And yet this indicates that the Thai pig farmers pay small amount tax relative to the fixed salary employees who pay 5 percent-37 percent of tax on their taxable income.

The survey shows that farmers do not have serious problems in buying inputs. In all provinces, sixty percent of the farms reported that there is at least one animal feed store in the locality (Table 6.14). Except those who obtained feeds from their contractors, 47 percent of farmers bought animal feeds from more than one stores, (Table 6.14). The local animal feed stores were the major suppliers of raw materials for feeds, supplying 80 percent of the farms. On the other hand the market for ready mixed feeds was shared by three groups of suppliers, i.e., the contractors (who supplied 41 percent of all farms), the local animal feed stores (supplying 30 percent of all farms), and the large-scale feeds companies which used the direct sale method (accounting for 28 percent, see Table 6.15).

Only 38 percent of the farmers reported that there are some problems with the feeds bought (Table 6.16). The most frequent problem reported by 45 percent of the farmers was that the feeds were infected with bacteria, followed by the high price problem (36 percent). Among those 54 farms that changed the feeds formula last year, the most important reasons for change were feed quality (25 farms), and high feed prices (21 farms- see Table 6.16).

There are also a number of competing suppliers of piglets, sows and sires as well as semen for artificial insemination in the locality that the farmers can buy from. About 55 percent of farmers buy piglets, sows and sires from at least two suppliers (see Table 6.17).

Among 116 farmers who grow breeders, 70 farmers produced their own artificial insemination for use on their farms; 22 buy semen from the contractors and 21 from the breeder farms.

In conclusion, the markets for all inputs used in the swine production are active. There are effective choices of suppliers from which farmers can buy.

6.1.5 Efficiency of Feed Utilization

After dropping the extreme values of reported feed conversion ratio (FCR), the average FCR is 2.43 which is slightly better than the norm (2.7) used by the swine experts. The smaller farms tend to have better feed efficiency as their FCRs are between 2.17 - 2.18, while the FCRs of the larger firms are 2.54 - 2.62 (see Table 6.18).

The FCRs estimated from the actual amount of feed used and weights of pigs sold show that the average FCR is better (lower) than the FCR reported by the farmers (Table 6.18).

6.1.6 Diseases and Drug Use

Detailed investigation of drug usage shows some evidence of over-use of anti-biotic drugs among the pig farms. First, more than 81 percent of farm use anti-biotic drugs (Table 6.19) which may have residue left in the pig carcass. Almost 85 percent of farms have to use ailment laxative. It is also worrying that at least 52 farms admit that they use Beta Agonist to produce the red meat carcass which are highly demanded by the consumers. The Beta Agonist, if excessively used, could be a cause cancer in human. Most farmers (31 out of 52) believe that the use of Beta Agonist helps increasing the net farm gate price since the consumers prefer to buy red-colored pork. Thirty one farmers reported that when the use of Beta Agonist was banned, the price of pigs dropped.

Secondly, although most farmers (62 percent) reported that the trend of drug uses was constant in the last 3 years, 25 percent admitted that they are using more drugs for their animals.

In the last three years, about 4-15 percent of pig farms reported some incidence of communicable diseases on their farms (Table 6.20). Foot and Mouth disease has the highest incidence, followed by Aujesky and Micoplasm. The most popular curing method is the use of vaccination (reported by 37 percent of the farms). The second most popular method is the use of anti-biotic drugs only 17 farms employed the veterinarian to help solve the problems and 10 farms seek help from the Department of Livestock Development.

Among 113 fattened farms, 67 farms have the mortality rate less than 5 percent. But the mortality rate has the mode of 10 percent. Table 6.21 shows that 16 out of 22 farms that have 10-percent mortality rate have more than 500 pigs. This is can be explained by the fact that they tend to hire inexperienced unskilled labor as the turn over rate is very high. One farm has the labor turnover rate of 10 percent in 2002.

Although disease and illness are major factor accountable for the death of the animals (as reported by 53 percent of the farmers, they are only one of many factors that affect the mortality rates of on-farm animals. The other important cause is that the pigs bite each other (reported by 10 percent of farmers), (see Table 6.22), meaning that the density of pigs is too high. When the Department of Livestock Development learns about epidemic, most farmers (97 percent) reported that the officials did not take any action which included asking the farmers to file report or to send the sample. Only 10 percent of farmers experienced the official visits when they had epidemic problem.

6.1.7 Markets for Fattened Pigs and Piglets

Fourty six contract farmers do not have marketing problems because the activity is responsible by the contractors. The competition among the contractors is outside the scope of our survey. But it should be noted that the survey found that the contract farms are concentrated in 2 provinces, i.e. Chonburi and Lopburi. In each province, there are at least 3 contractors offering the contractual choices for the farmers. The largest contractor is CP which is the largest agri business company in Thailand. CP and its subsidiaries engage in all stages of livestock business.

There are 3 major channels the farmers sell their products, i.e., the contractors, the middlemen, and the other farmers (Table 6.23). Although the middlemen are the most important channel of marketing as reported by 112 farmers, only 63 farmers report that they are their main buyer (Table 6.23). The second largest buyers' are the local market and fattening swine farms upon which 19 percent of the farmer rely (Table 6.23). Moreover, about 48 farmers also report that in addition to the main buyer, they also have an extra buyer. The local market is the most important extra market for those farmers (58 percent of 48 farmers).

The major problems facing the farmers who sell their swine are the low prices, followed by the pressure to use Beta Agonist (Table 6.24).

When there are dead pigs or dead piglets, 70 percent of the farmers are able to sell some or all of them (Table 6.25). If they do not sell the dead animals, most farmers (37 out of 87 farmers) will bury or burn them, while 18 farmers will use them as feeds for on their fish farms, and 13 farmers send the dead animals back to the suppliers.

6.1.8 Price & Gross Margins

The gross margin, measured by the difference between the prices of pigs and the prices of feeds, is 256 percent for fattened pigs and 386.5 percent for piglets. The small-scale and the large-scale farms tend to have higher gross margins than the middle-scale farms (see Table 6.26).

Surprisingly, the price-guarantee contract farms have higher gross margins than the independent farms. The higher margins are attributed both to the higher prices of pigs and piglets and lower feed prices enjoyed by the contract farms (see Table 6.26).

6.1.9 Environmental Management

The majority of pig farms still have access to low cost water for farm uses. Almost 53 percent of farms use water from their own artesian wells; 25 percent use water from the public waterways and 15 percent use rain water. Only 6 percent use the more expensive pipe water or treated water (Table 6.27).

Surprisingly, less than 17 percent of farms discharge the waste water directly onto the public waterways or neighboring lands. Almost 41 percent of farmers have water treatment ponds and bio-gas digester. However, the majority of farms (92 farms) discharge waste water into the simple holding ponds before discharging it into the public waterway. Such practice can result in the deterioration of quality of underground water in the long run. Moreover, the use of underground water has also contributed significantly to the landslide.

Most of the farms (75 percent) get rid of the pig manure by selling them (both in dry and wet manure) or giving them to their workers and neighbor (Table 6.27). Only six percent of the farms use the manure for their bio-gas digester and 4 percent use manure as fish feeds. However, there are still 12 farms (7 percent) admitting that they discharge the manure directly only the public waterways and another 24 farms discharging the wet manure into their bio gas ponds.

Almost all of the farms (95 percent), regardless of their farm size, has received complaints about the smell from their farms. The main methods to reduce to smell are to frequently get rid of manure (61.5 percent), to wash their pens more frequently, (42.5 percent) and to use disinfectant (27 percent) (see Table 6.27). About 50-55 percent of the farmers report that they clean their gestation pens and weanling pens every day, and the other one third clean the pens weekly. The fattening pens are not cleaned as often as the gestation and weanling pens (see Table 6.27).

With regards to the flies problems, most farmers (66 percent) do nothing to tackle the problem. Almost 19 percent of farmers frequently get rid of manure and 15 percent use flies disinfectant, micro-organism and other simple methods.

Only 53 farms report that they invest in water treatment ponds and another 20 farms invest in bio-gas digester ponds (Table 6.28). The average investment is 817,600 baht for water treatment ponds and 112,000 baht for the bio-gas digester. All of those farms have received government subsidies for their investment. The subsidies are 67 percent of the investment in water treatment ponds and 37 percent of investment in the bio-gas ponds. The Department of Livestock is the major government agency providing the subsidy for water treatment, while there are three government agencies providing the subsidy for bio-gas investment, namely the Department of Agricultural Extension, the Department of Agriculture and the National Energy Policy Office. (See Table 6.29).

In addition to the density of pigs per pen as shown by the problem of pigs biting each other, many farms have to use some kinds of transportation means to move the cullings from gestation houses to the weanling houses and to move piglets from the weanling houses to the fattening houses (Table 6.30). This is because those houses are separated in a distance. But most farmers (50 percent) hand-carry the piglets to the fattening pens and 39 percent hand-carry the cullings to the weanling pens. Only 7 percent of farms do not have to transfer the piglets. Although a large number of cullings and piglets are transferred by transportation modes, the farmers have incentive to take good care of them to avoid unnecessarily high death rates.