BROILER CONTRACT GROWING Achieving Better Profitability Through Modernization

DR. VICENTE C. MANALO, JR, EMBA Bounty Fresh Food Inc Contract Growing- Controlled Environment Systems Department BFFI- CG CES

OUR COMPANY
Bounty Fresh Food Inc (BFFI), together with its sister company Bounty Agro ventures (BAVI), is the second biggest broiler integrator in the Philippines. A fully integrated broiler operations, will produce 140M in 2010. The two companies operate in 19 branches nationwide. 80% of companys income come from broilers. Only company in the Philippines that continue to invest on company owned facilities (broiler farms, GP and PS breeder farms, hatcheries, feedmills). Company is in Hog breeders, slaughter hogs, colored broilers, day-old chick sales, commercial layers, layer DOPs and RTL pullets.

 Recipient of ASIAN LIVESTOCK INDUSTRY AWARD 2009, given last October 2009 in Malaysia. First and only Philippine Agricultural company to receive the award. Previous awardees include:
Charoen Phokpand (CP) (Thailand 2001) Leong Hup Berhad (Malaysia, 2003) PT Japfa Comfeeds (Indonesia, 2005) Suguna Poultry (India, 2007)

OUR COMPANY

Kuala Lumpur

Malacanan Palace

Bounty Agro Ventures Inc

North Luzon ( Ilocos) (Ilocos) North Eastern Luzon (Isabela ) Isabela) Talisay Bicol region (Naga) Southern Tagalog Calbayog Tacloban Roxas Ilo Ilo Bacolod Butuan Cagayan De Oro Pagadian Davao General Santos Ormoc Cebu Western Luzon (Pangasinan) Pangasinan)

Zamboanga

PER CAPITA CONSUMPTION OF MEAT IN SELECTED COUNTRIES, in kilos, 2008

BROILER UAE US Kuwait Malaysia Brazil Saudi Hong Kong Argentina Canada Mexico Taiwan EU - 27
Source: USDA FAS, Livestock and Poultry Outlook, Oct 2008

PORK 28.3

BEEF 41.2

66.2 45.1 59.7 38.7 38.5 37.1 36.8 32.5 30.5 29.0 28.8 15.9 8.1 23.7 14.5 40.5 39.3 13.9 69.8 16.2 69.3 32.2 24.1 4.6 16.0 4.0 12.1 37.2

Philippines

INTEGRATED POULTRY OPERATIONS

GRAND PARENT FARMS PARENT STOCK FARMS BROILER FARMS

FEEDMILLS

HATCHERIES

ANIMAL HEALTH GROUP

QUALITY ASSURANCE PROCESSING PLANTS

PRODUCT DEVELOPMENT

SALES & MARKETING

Challenges
High cost of production
High cost of feed inputs High cost of importation

Poor productivity of broiler farmers

Housing Mycotoxins Diseases

Effect of environment
Third quarter syndrome Heat Stress, El Nino, La Nina

Imports and High farm gate prices AFTA

MODERNIZATION
Continuous investment on new technologies all through-out the production chain.

Grand Parent/ Parent Farms

(Controlled Environment)

Broiler Hatcheries
(Additional 20 machines in 2010

MODERNIZATION

Bulacan Feed Mill

Inoza Feed Mill, Tarlac

Subic Grain Terminal

100k MT grain capacity

Premium quality compliant facilities BFFI - Pulilan :

products

from

NMIS

National Winner- Search for best meat Establishment 2005, 2006, 2007, 2008 PDP AAA category. ISO 9001:2000 (Quality Management System) ISO 22000:2005 (Food Safety MS) ISO 14001:2004 (Environmental MS & OHSAS) ISO 18001:2007 (Occupational Health &Safety MS) Halal Certified / HACCP-GMP Accredited to serve the export market

MODERNIZATION IN BROILER GROWING

To produce better quality broilers throughout the year To have consistent efficiency in broiler performance To cope up with the new technology in growing high quality broiler To have a better income and offset high production cost Improve environment of broilers through use of modern equipments. Ensure good return on investments for business partners.

What is Tunnel Ventilation ?

Tunnel ventilation is a system where exhaust fans are located at one end of the house and two large openings are installed at the opposite end. Air is drawn through these openings, down the house, and out the fans, like a wind tunnel. A ventilation system alone can never reduce inside temperatures to levels below temperatures outside the building. If lower temperatures are desired, then a Cooling System must be utilized

Evaporative Cooling System

aporative cooling refers to the cooling effect produced when water evaporates. The energy used to evaporate water is taken from the air, cooling the air as energy is removed.

aporative cooling is the most inexpensive way to cool air. The pumps and fans needed for evaporative cooling are less expensive to buy and much less expensive to operate than conventional air conditioning that uses refrigerants and compressors.

Advantages vs. Open Side Systems

Can grow more birds per square foot / can load up to 45% more broilers No problem with environmental stresses especially heat stress can grow big birds even during summer Birds grow faster and more uniform Better broiler efficiency More cycle per year Better income

Disadvantages
Higher capital outlay Needs highly trained personnel.

Advantages with BFFI

We have 4 company owned broiler complexes. We recommend based on our experience to reduce / minimize learning curve. We have competent technical serviceman knowledgeable about the system.

INTERNAL BROILER COMPLEX

ORANGE FARM, 2002
Bgy. Kawili- wili, Capas, Bgy. Kawili- wili, Capas , Tarlac

PAPAYA FARM, 2003

Bgy. Bgy. Sapang Tagalog., Tarlac City Tagalog.,

MANGA FARM, 2004

Bgy Sto Nino, Concepcion, Tarlac

AVOCADO FARM, 2005

Bamban, Bamban, Tarlac

BLUEBERRY FARM, 2010

Bamban, Bamban, Tarlac

Contract Growers- Cool Cell

the first contract grower in the Philippines with pre-fabricated buildings, the first double deck building designed with a wind load of 200 km/hour in Asia

 Pre-fabricated house.

Double deck, solid wall panels, insulated ceiling and walls.

Date Harvest 3/31/2010 2/14/2010 12/31/2009 11/16/2009 9/30/2009 8/18/2009 7/6/2009 5/19/2009 3/31/2009 DOC 117,679 116,824 121,145 115,743 113,062 119,480 113,601 105,578 103,709 Age 29.51 29.23 29.11 29.05 30.16 26.70 29.77 26.80 27.85 HR 95.93 95.97 95.05 95.24 94.00 95.06 96.41 95.53 96.24 ALW 1.61 1.51 1.60 1.49 1.27 1.39 1.61 1.45 1.40 FCR 1.52 1.57 1.55 1.54 1.79 1.47 1.54 1.43 1.48 BPI net P/bird Amount Net Sq ft/b Per Hse 345 19.00 2,144,622 0.54 29,420 315 17.57 1,969,499 0.55 29,206 339 17.81 2,051,272 0.53 30,286 317 17.91 1,973,766 0.55 28,936 221 13.12 1,393,890 0.57 28,266 335 19.13 2,172,512 0.54 29,870 340 20.34 2,227,707 0.56 28,400 362 19.21 1,937,487 0.61 26,395 327 18.35 1,831,846 0.62 25,927

First 2 cycles, BFFI put a technician to supervise.

Single Deck Pre Fab

House ft/deck Floor Area ft2 Density (ft/bird) House L xw (m) Floor Area m2 Birds/m2 Population/cycle 40 x 400 16,000 0.55 1,487 19.56 29,091

Growers OPEX per Cycle (Prefab)

Timing from Chick-in Light, water and power monthly LPG -7 Labor / Food monthly Litter Material -4 Med/Vac 52 Repair & Maintenance 52 Others 52 Income from Manure Income from Sacks Cool Cell 1.00 0.60 1.75 0.50 0.50 0.15 0.25 -0.50 -0.25 4.00 Amount 30,189 18,113 52,830 15,094 15,094 4,528 7,547 (15,094) (7,547) 120,755

Income from manure is for cool cell farms with slats. Cost of LWP and LPG is lower with prefab as compared to regular cool cell since prefab is well insulated & without leaks.

ROI
Assume P 14 growers fee less P 4.00 OPEX, 7 cycles per year Assume 0.55 ft2/bird Assume P 10M total house cost (pre-fabricated building and equipment), 70% loan, 10% pa (loan payable in 5 years). ROI of 20%
Five-Year Loan Gross Income Less OPEX Net Income Less Loan Amortization Net Income Net Income Per Bird Year 1 2,840,151 (811,472) 2,028,679 1,569,595 459,084 2.26 Year 2 2,840,151 (811,472) 2,028,679 1,569,595 459,084 2.26 Year 3 2,840,151 (811,472) 2,028,679 1,569,595 459,084 2.26 Year 4 2,840,151 (811,472) 2,028,679 1,569,595 459,084 2.26 Year 5 2,840,151 (811,472) 2,028,679 1,569,595 459,084 2.26

Contract Growers- Cool Cell

Own Construction

B
Own construction, double deck
Date 3/23/2010 2/5/2010 12/23/2009 11/5/2009 9/12/2009 8/3/2009 6/17/2009 5/4/2009 3/15/2009 1/29/2009 12/18/2008 10/29/2008 9/4/2008 7/11/2008 5/15/2008 3/28/2008 2/6/2008 12/15/2007 DOC 240,438 239,251 244,141 245,541 225,838 243,836 246,418 245,479 208,209 250,593 241,673 239,399 234,279 206,223 201,549 217,055 228,690 219,071 Tonnage 348126.55 314156.41 371000.96 365741.97 291677.36 347863.05 333604.81 325111.56 276202.69 359785.73 408833.8 388611.01 361137.1 309772.77 328706.22 328143.54 337359.06 321788.1 Age 30.84 28.85 31.49 31.07 28.94 32.29 30.61 28.77 30.89 29.82 33.43 35.24 33.90 36.08 35.48 33.07 30.58 29.79 HR ALW FCR 95.01 1.52 1.53 95.11 1.38 1.51 94.65 1.61 1.57 95.06 1.57 1.54 95.00 1.36 1.61 96.51 1.48 1.72 95.98 1.41 1.61 95.00 1.39 1.46 95.02 1.40 1.72 96.04 1.49 1.60 96.09 1.76 1.61 96.20 1.69 1.72 95.11 1.62 1.67 96.17 1.56 1.83 96.98 1.68 1.75 96.88 1.56 1.62 97.02 1.52 1.54 96.40 1.52 1.51 BPI net P/bird Amount Net 307 17.82 4,070,741 301 18.04 4,104,167 307 18.04 4,168,210 311 18.12 4,228,971 277 16.02 3,437,864 257 16.42 3,864,410 274 17.00 4,020,592 315 19.11 4,457,492 250 15.29 3,025,764 301 17.30 4,164,290 315 20.01 4,646,057 267 18.50 4,260,993 272 19.13 4,262,606 228 16.01 3,175,212 263 17.05 3,332,913 283 18.02 3,790,280 314 19.02 4,219,748 327 19.00 4,012,496

Financing
Company has made similar presentations to different banks (Landbank, Security Bank, Planters Bank, etc.). Funding from ACEF (interest free, 30-40% equity).

Design / Specification
Three important points for effective ventilation East West orientation Insulation Tightness

REQUIREMENTS FOR NEW FARMS

Site for Inspection
minimum area of one (1) hectare within the agricultural zone of the community one (1) km away from residential area one (1) km away from nearest poultry or piggery farms with reliable source of electricity and adequate potable water All-weather road leading to and within the farm, passable to 10-wheeler truck