BROILER CONTRACT GROWING Achieving Better Profitability ...

BROILER CONTRACT GROWINGAchieving Better ProfitabilityThrough ModernizationDR. VICENTE C. MANALO, JR, EMBABounty Fresh Food IncContract Growing- Controlled Environment Systems DepartmentBFFI- CG CES

OUR COMPANY‣ Bounty Fresh Food Inc (BFFI), together with its sistercompany Bounty Agro ventures (BAVI), is the secondbiggest broiler integrator in the Philippines.‣ A fully integrated broiler operations, will produce140M in 2010.‣ The two companies operate in 19 branches nationwide.‣ 80% of company’s s income come from broilers.‣ Only company in the Philippines that continue to investon company owned facilities (broiler farms, GP and PSbreeder farms, hatcheries, feedmills).‣ Company is in Hog breeders, slaughter hogs, coloredbroilers, day-old chick sales, commercial layers, layerDOPs and RTL pullets.

OUR COMPANY‣ Recipient of “ASIAN LIVESTOCK INDUSTRY AWARD2009, given last October 2009 in Malaysia.‣ First and only Philippine Agricultural company toreceive the award.‣ Previous awardees include:‣ Charoen Phokpand (CP) – (Thailand 2001)‣ Leong Hup Berhad (Malaysia, 2003)‣ PT Japfa Comfeeds (Indonesia, 2005)‣ Suguna Poultry (India, 2007)Kuala LumpurMalacanan Palace

North Luzon (Ilocos)Western Luzon(Pangasinan)Bounty Agro Ventures IncNorth Eastern Luzon(Isabela)TalisayBicol region (Naga)SouthernTagalogRoxasIlo IloBacolodPagadianZamboangaCalbayogTaclobanOrmocCebuButuanCagayan De OroDavaoGeneral Santos

PER CAPITA CONSUMPTION OF MEAT INSELECTED COUNTRIES, in kilos, 2008Source: USDA – FAS, Livestockand Poultry Outlook, Oct 2008BROILERUAE 66.2PORKBEEFUS 45.1 28.3 41.2Kuwait 59.7Malaysia 38.7Brazil 38.5 12.1 37.2Saudi 37.1Hong Kong 36.8 69.8 16.2Argentina 32.5 69.3Canada 30.5 23.7 32.2Mexico 29.0 14.5 24.1Taiwan 28.8 40.5 4.6EU - 27 15.9 39.3 16.0Philippines 8.1 13.9 4.0

INTEGRATED POULTRY OPERATIONSGRAND PARENT FARMS PARENT STOCK FARMS BROILER FARMSFEEDMILLS HATCHERIES ANIMAL HEALTH GROUPQUALITY ASSURANCEPROCESSINGPLANTSPRODUCTDEVELOPMENTSALES &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 technologiesall through-out out the production chain.Grand Parent/ Parent Farms(Controlled Environment)Broiler Hatcheries(Additional 20 machines in 2010

MODERNIZATIONBulacan Feed MillInoza Feed Mill, TarlacSubic Grain Terminal100k MT grain capacity

Premium quality products from NMIS –compliant facilities• BFFI - Pulilan :•National Winner- Search for best meatEstablishment 2005, 2006, 2007, 2008 PDP AAAcategory.•ISO 9001:2000 (Quality Management System)•ISO 22000:2005 (Food Safety MS)•ISO 14001:2004 (Environmental MS & OHSAS)•ISO 18001:2007 (Occupational Health &SafetyMS)•HalalCertified / HACCP-GMP•Accredited to serve the export market

MODERNIZATION INBROILER GROWING• To produce better quality broilers throughoutthe year• To have consistent efficiency in broilerperformance• To cope up with the new technology in growinghigh quality broiler• To have a better income and offset highproduction cost• Improve environment of broilers through use ofmodern equipments.• Ensure good return on investments for businesspartners.

What is Tunnel Ventilation ?Tunnel ventilation is a system where exhaust fans arelocated at one end of the house and two large openingsare installed at the opposite end. Air is drawn throughthese openings, down the house, and out the fans, like awind tunnel.A ventilation system alone can never reduce insidetemperatures to levels below temperatures outside thebuilding. If lower temperatures are desired, then aCooling System must be utilized

Evaporative Cooling Systemporative cooling refers to the cooling effect produced whenwater evaporates. The energy used to evaporate wateris taken from the air, cooling the air as energy isremoved.porative cooling is the most inexpensive way to cool air.The pumps and fans needed for evaporative coolingare less expensive to buy and much less expensive tooperate than conventional air conditioning that usesrefrigerants and compressors.

Advantages vs. Open Side Systems• Can grow more birds per square foot / canload up to 45% more broilers• No problem with environmental stressesespecially heat stress – can grow big birdseven 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 broilercomplexes.• We recommend based on our experienceto reduce / minimize learning curve.• We have competent technical servicemanknowledgeable about the system.

INTERNAL BROILER COMPLEXORANGE FARM, 2002Bgy. Kawili-wili, Capas, TarlacPAPAYA FARM, 2003Bgy. Sapang Tagalog.,Tarlac CityMANGA FARM, 2004Bgy Sto Nino, Concepcion, TarlacAVOCADO FARM, 2005Bamban, TarlacBLUEBERRY FARM, 2010Bamban, 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 inAsia

A• Pre-fabricated house.• Double deck, solid wall panels, insulated ceilingand walls.Date Harvest DOC Age HR ALW FCR BPI net P/bird Amount Net Sq ft/b Per Hse3/31/2010 117,679 29.51 95.93 1.61 1.52 345 19.00 2,144,622 0.54 29,4202/14/2010 116,824 29.23 95.97 1.51 1.57 315 17.57 1,969,499 0.55 29,20612/31/2009 121,145 29.11 95.05 1.60 1.55 339 17.81 2,051,272 0.53 30,28611/16/2009 115,743 29.05 95.24 1.49 1.54 317 17.91 1,973,766 0.55 28,9369/30/2009 113,062 30.16 94.00 1.27 1.79 221 13.12 1,393,890 0.57 28,2668/18/2009 119,480 26.70 95.06 1.39 1.47 335 19.13 2,172,512 0.54 29,8707/6/2009 113,601 29.77 96.41 1.61 1.54 340 20.34 2,227,707 0.56 28,4005/19/2009 105,578 26.80 95.53 1.45 1.43 362 19.21 1,937,487 0.61 26,3953/31/2009 103,709 27.85 96.24 1.40 1.48 327 18.35 1,831,846 0.62 25,927• First 2 cycles, BFFI put a technician to supervise.

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

Grower’s s OPEX per Cycle (Prefab)Timing fromChick-in Cool Cell AmountLight, water and power monthly 1.00 30,189LPG -7 0.60 18,113Labor / Food monthly 1.75 52,830Litter Material -4 0.50 15,094Med/Vac 52 0.50 15,094Repair & Maintenance 52 0.15 4,528Others 52 0.25 7,547Income from Manure -0.50 (15,094)Income from Sacks -0.25 (7,547)4.00 120,755• Income from manure is for cool cell farms with slats.•Cost of LWP and LPG is lower with prefab as compared toregular cool cell since prefab is well insulated & without leaks.

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

Contract Growers- Cool CellOwn Construction

B• Own construction, double deckDate DOC Tonnage Age HR ALW FCR BPI net P/bird Amount Net3/23/2010 240,438 348126.55 30.84 95.01 1.52 1.53 307 17.82 4,070,7412/5/2010 239,251 314156.41 28.85 95.11 1.38 1.51 301 18.04 4,104,16712/23/2009 244,141 371000.96 31.49 94.65 1.61 1.57 307 18.04 4,168,21011/5/2009 245,541 365741.97 31.07 95.06 1.57 1.54 311 18.12 4,228,9719/12/2009 225,838 291677.36 28.94 95.00 1.36 1.61 277 16.02 3,437,8648/3/2009 243,836 347863.05 32.29 96.51 1.48 1.72 257 16.42 3,864,4106/17/2009 246,418 333604.81 30.61 95.98 1.41 1.61 274 17.00 4,020,5925/4/2009 245,479 325111.56 28.77 95.00 1.39 1.46 315 19.11 4,457,4923/15/2009 208,209 276202.69 30.89 95.02 1.40 1.72 250 15.29 3,025,7641/29/2009 250,593 359785.73 29.82 96.04 1.49 1.60 301 17.30 4,164,29012/18/2008 241,673 408833.8 33.43 96.09 1.76 1.61 315 20.01 4,646,05710/29/2008 239,399 388611.01 35.24 96.20 1.69 1.72 267 18.50 4,260,9939/4/2008 234,279 361137.1 33.90 95.11 1.62 1.67 272 19.13 4,262,6067/11/2008 206,223 309772.77 36.08 96.17 1.56 1.83 228 16.01 3,175,2125/15/2008 201,549 328706.22 35.48 96.98 1.68 1.75 263 17.05 3,332,9133/28/2008 217,055 328143.54 33.07 96.88 1.56 1.62 283 18.02 3,790,2802/6/2008 228,690 337359.06 30.58 97.02 1.52 1.54 314 19.02 4,219,74812/15/2007 219,071 321788.1 29.79 96.40 1.52 1.51 327 19.00 4,012,496

Financing• Company has made similar presentations todifferent banks (Landbank(Landbank, , Security Bank,Planter’s s Bank, etc.).• Funding from ACEF (interest free, 30-40%equity).

Design / SpecificationThree important points for effective ventilation• East – West orientation• Insulation• Tightness

REQUIREMENTS FOR NEW FARMSSite for Inspection• minimum area of one (1) hectare• within the agricultural zone of thecommunity• one (1) km away from residential area• one (1) km away from nearest poultry orpiggery farms• with reliable source of electricity andadequate potable water• All-weather road leading to and within thefarm, passable to 10-wheeler truck