CP Group ramps up investment in rubber

Charoen Pokphand Group, which has 3,000 rai (480 hectares) of orchards, is turning 2,000 rai of that land into rubber plantations because it foresees great business opportunities in rubber production in the near future.

The business plan has been drawn up to serve the group's rubber seedling and liquid-rubber production, not only for domestic markets, but also to supply other Asean markets.

The group's moves are part of a wide trend. Rising rubber prices and government incentives are prompting farmers in many parts of the country to turn their land from other crops to rubber, to gain sustainable incomes.

This has brought a sense of urgency to CP's intention to launch a rubber-tapping machine in near future.

CP's Crop Integration Business Group has assumed responsibility for its rubber business, from upstream through downstream, in the expectation of becoming an integrated rubber manufacturer. At present, CP has become a major supplier of rubber seedlings, a rubber trader, a machine manufacturer for the rubber industry and a rubber bar producer. Soon, it will be a rubber exporter.

The group's total area under rubber plantation is presently only 300 rai, in Kamphaeng Phet province. However, its business expansion does not set out to compete with farmers, but to support its research and development of innovative seedling production, products and machines. In addition, the group manages 2,000 rai in Chon Buri and Ratchaburi provinces for contract farming.

The president of CP's Crop Integration Business Group, Montri Congtrakultien, said the rubber plan had left the group with mango and pomelo as its only other tree crops. They were still generating attractive income as well as having great export opportunities.

"Our cross-bred rubber seedlings, JVP 80, are popular among growers and our production has not yet reached market demand, so we have developed a new technique to increase our production," Montri said.

On average, rubber trees of a general type yield about 300 kilograms per rai. However, CP's successful JVP 80 cross-breed seedlings yield an average of 500kg/rai.

To increase its seedling production, the group implemented a new closed-door growing technique. The seedlings grow better in the indoor environment, and they develop a higher resistance to plant disease and insect attack. The time in which the seedlings are nurtured in hatcheries is shortened from two to six months to just 35 days, and the output of seedlings has risen from 60 to 65 per cent of those planted in an outdoor environment to between 75 and 80 per cent of those planted indoors.

The group is also planning to increase its rubber-budding production, from the current 600,000 to 3 million buds next year. The increase will help the company to increase its number of seedlings to meet market demand.

Montri said the expansion plan had prompted the group to invest more in new closed-door planting houses in Chiang Rai, Buri Ram, Kamphaeng Phet and Loei. The plan is to serve the rapidly expanding area being committed to rubber plantations in the Northeast.

Previously, the group transported seedlings to the Northeast from Trang in the South, taking about a day in transit. The distance reduced the seedling quality and lowered the survival rate. The new closed-door plants will offer upgraded seedling quality.

Because of rapidly increasing demand, the price of seedlings has jumped from Bt35 per plant over the past three to four years to Bt120. The price is expected to go up again next year, to Bt150 per plant, due to higher production costs.

"We have a long queue of farmers waiting for our seedlings, but we have to control our quality standards," Montri said. The government's 800,000-rai rubber project, aimed at opening new rubber-production areas around the country, was approved in April this year. It will demand 16 million seedlings.

The CP group has invested Bt200 million in rubber-production research and development since 2004. Its innovative rubber-tapping machine, soon to be launched, will prevent damage to young rubber trees when they are first tapped. The machine will allow farmers to harvest high-quality natural rubber from individual trees for as long as 35 or 36 years. The group plans to invest a further Bt40 million in research and development next year.

The company's first rubber-bar production plant in Loei province is expected to be completed in March or April next year, with test runs beginning in May. The plant has cost Bt200 million, excluding the cost of the 100-rai of land on which it stands. It aims to support the government's expansion plans for rubber production, with a capacity of 20,000 tonnes per day.

The new plant is also designed as a learning centre for farmers in the Northeast, especially in Loei, Udon Thani and Bueng Kan, Montri said.

The group plans to set up two rubber-bar manufacturing plants in Loei, with another one to be built in the province's Wang Saphung district. This project hopes to create a pool of "intelligent farmers" to ensure sustainable development.

Montri said that villagers in Loei wanted to expand their area planted to rubber, but could not do so because land prices had escalated from Bt20,000 to Bt70,000 per rai. As a result, they will have to care for their existing trees to ensure high yields throughout their life cycle.

High demand for rubber seedlings is not confined to Thailand, Malaysia and Indonesia. Demand is also growing in Laos, where Apollo, an Indian company, has won a concession from the Laotian government to grow rubber on 60,000 rai. This development will require 3 million seedlings within three years.