Industry Profie:Poultry Farm in Indonesia

MARKET INTELLIGENCE REPORT ON

DEVELOPMENT OF POULTRY FARMS IN INDONESIA

August 2009

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Chicken farms in West Java the largest

Large scale chicken farms have expanded to 15 provinces in Indonesia. West Java is the largest producer of pure bred broiler final stock with production reaching 445.1 million in 2004 up to 490.1 million in 2006. In 2007, the production fell to 429.4 million chickens.

East Java, which is known as the center of animal feed industry, has large livestock farms including poultry farms. East Java has 15 big animal feed factories, 52 animal feed cottage industries, 4 milk processing factories, 201 livestock markets, 99 TPA, 8 RPA, 1 RPH-A, 33 RPH-C and 49 RPH-D. It also has 11 processed meat companies, 50 units of dairy rural cooperatives and a Artificial Insemination Center (BBIB) in Singosari.

Chicken farms in East Java consist of broiler chicken farms mainly in Jombang, Malang, Gresik and Mojokerto. Free range chickens are raised by small farmers in rural areas mainly in Lamongan, Malang, Blitar, Probolinggo, Tulungagung and Trenggalek.

In other regions outside Java, centers for chicken farms are located in North Sumatra with production of pure bred broiler Final Stock reaching 86.9 million in 2007.

West Java is the largest producer of layer chickens with production reaching 15.5 million in 2007. The production fell from 25 million chicken in 2004.

The second largest producer is East Java with production of layer chickens totaled 11.6 million in 2007. Production centers in that provinces are Malang, Blitar, Kediri, Pasuruan and Mojokerto. East Java has an advantage with the availability of corn production in abundance needed by animal feed industry. One of the corn production center in that region is Kediri , which has harvest area of 22,354 hectares in 2005. Its corn production averages 3.3 million quintals.

Main players

Charoen Popkhand Indonesia Tbk

Charoen Popkhand Indonesia Tbk (CPI), which was established in 1972 has animal feed factories, poultry farms, and chicken processing factories. The foreign investment company is jointly owned by PT. Central Proteinaprima, Royal Bank of Canada (Asia) Ltd., UBS AG Singapore and the public.

Currently CPI has a production capacity of 2.6 million tons of animal feed a year with factories in Mojokerto, Jakarta and Medan. In 2006, CPI and subsidiary CP Jaya Farm acquired 100% of PT. Centralavian Pertiwi at a price of Rp 30 billion. Centralavian Pertiwi operates in the production of parent stock DICs with farms located in Subang, Bogor and Lampung.

Charoen Popkhnad Group produces processed chicken meat by its subsidiary PT. Primafood International. Its entire production of processed chicken meat is packed with the brand name of Fiesta.

Currently CPI has 8 animal feed factories located in Medan, Bandar Lampung, Ancol (Jakarta), Balaraja, Semarang, Krian (Sidoarjo), Sepanjang (Sidoarjo), and Makassar. CPI also has four factories processing chicken meat (chicken slaughter houses) in Cikande, Salatiga, Medan and Surabaya. It plans to build a new one in Bandung.

Currently it has a total production capacity of 4 million ton animal feed a year from 7 factories. Its production capacity for DOCs is 607 million a year and its slaughterhouses have a total production capacity of 105,000 tons a year. CPI has a market share of 72% in modern markets and 91% share of traditional market. PT Charoen Phokphand has a Daily Old Chicken (DOC) production facility built with an investment of Rp 75 billion.

Japfa Comfeed

Japfa Comfeed (JC) was established in 1971 to produce animal feed. Currently its shareholders include Pacific Focus Enterprises Ltd. (28.94%), JP Morgan Chase Bank (9.65%), and Coutts Bank Von Ernst. Ltd. (9.15%), Rangi Management Ltd (8.57%), BNP Paribas Private Bank Singapore (6.63%) and investing public (37.06%).

JC ‘s animal feed factories have an annual production capacity 1.73 million ton . Its subsidiary PT Multibreeder Adirama Tbk raises parent stock and PT Suri Tani Pemuka operates business in aqua culture . Its animal feed factories are located in various areas in Lampung, Cirebon (West Java), Sidoarjo (East Java) and Tangerang.

In 2007, Japfa built two new animal feed plants with an investment of Rp 50 billion in Cikupa and Padang.

Cheil Jedang Feed Indonesia

CJ Feed Indonesia is a subsidiary of South Korea Cheil Jedang. It started business in Indonesia in 1989. CJFI operates two feed mills PT. CJ Superfeed , which was established in 1996 and PT. CJ Feed Jombang which was established in 2004. The two animal feed plants are located in Serang, Banten and Jombang, East Java with a total production capacity of 750,000 tons per year.

The types of feed produced by CJ Feed include feed for broilers, layers, breeders, pigs, quails, and shrimp and concentrate for supply in West Java, Greater Jakarta areas, Sumatra and Kalimantan. Its uses the brand of Superfeed for its feed.

PT. Super Unggas Jaya

In 1997, PT Cheil Jedang Feed Indonesia, which operates in chicken feed manufacturing industry with the brand of Superfeed, established PT. Super Unggas Jaya (PT. SUJ). PT. SUJ operates in animal husbandry industry producing DOCs with an annual capacity of 20 million a year. Its farm is located in Tutur, East Java. Its brand for its DOCs is Superchicks. SUJ expanded business later by building nine more units of chicken farms in various areas West Java and East Kalimantan bringing its production capacity for DOCs to 54 million DOCs a year.

Malindo Feedmill

The company was originally known with the name of PT. Gymtech Feedmill Indonesia established in 1998. The name was changed later with Malindo Feedmill. Malindo is owned by the Lau family from Malaysia

Malindo produces animal feed with an annual production capacity 438,000 tons. Malindo also operates DOC farms and distribute DOCs both broiler and layer DOCs. Its subsidiary PT Bibit Indonesia has a 6% share of DOC market in Indonesia. Currently its production capacity for DOCs is 100 million a year.

In 2006 Malindo launched Initial Public Offering (IPO) selling 18% of its shares through the Jakarta Stock Exchange, now Indonesian Stock Exchange. Around 70% or Rp53.7 billion of the fund raised from the IPO were used to finance business expansion by building new chicken farms and the rest for working capital. Currently its shareholders include Dragon Amity Ltd (81,6%), Lai Hup Heng (0,4%) and investing public (18%).

Malindo built chicken farms with a capacity to produce 18 million DOCs a year in Pasuruan and Surabaya consisting of breeding farms and a hatchery that started operation in 2007

Sierad Produce Tbk

Sierad Produce was established in 1985 with the name of PT Betara Darma Ekspor Impor, which was a merger of four companies in 2001 - PT Anwar Sierad Tbk, PT Sierad Produce Tbk, PT Sierad Feedmill and PT Sierad Grains.

Sierad Produce (SP) was established in 1985 and operates chicken farms raising parent stock to produce final stock. It also has chicken slaughter houses, integrated chicken processing plant, and a cold storage. It also has animal feed factories, cord drying plant, animal medicines and vitamin factories. Its chicken farms and processing factories are located in various areas Tangerang, Bogor, Sukabumi, Lampung and Sidoarjo. Currently SP is one of the largest producers of animal feed in Southeast Asia.

The company, which started business as an egg retailer in Jatinegara in East Jakarta expanded later to become an operator of chicken slaughter house in Jabaon, West Java , the largest in Indonesia, with a slaughtering capacity of 8,000 chickens an hour . Its chicken meat products are known with the brand of Delfarm, sold in various supermarkets in Indonesia.

Its animal feed production units are located in Sidoarjo (East Java). Tangerang (West Java) with a total production capacity of 540,000 tons a year. Its main product is poultry feed complete or in concentrate. The company imports up to 100,000 tons of corn a year to feed its animal feed factories as supply from local producers is not enough.

In 2006, for reason of efficiency its sold subsidiary PT Biotek Indonesia, which produces medicines and vitamins and Wendy's Restaurant and Hartz Chicken Buffet Restaurant. SP raised around Rp 50 billion from the asset sales. Revenues form the sales of its chicken slaughtering house and breeding farm in Lampung totaled Rp 70.5 billion.

In 2007, SP secured a loan of Rp 225 billion from BNI, and Rp 200 billion of which were used to expand its production capacity for animal feed and the remaining Rp 25 billion for working capital.

In 2008, SP built three new factories in Magelang, Central Java to be operational early 2009. After the operation of the three factories it planned to increase its chicken production capacity from420,000 per week to 2 million per week. Its production of layers was expected to reach 300,000 a week.

Chicken population grows 6.78% per year

The chicken population, including purebred chickens and free range chickens, in the country grows 6.78% annually on the average . Free range chickens are still more dominant in number as almost rural households raised free range chickens.

In 2004, the chicken population totaled around 1.2 billion up to 1.23 billion in 2007 and to around 1.49 billion in 2008.

In order to keep price stability, large farmers generally control the population of their chickens to meet the market requirement. The population is controlled through supply of DOCs . Under the cooperation between large farms and plasma farms, generally the large farms as the nucleus companies provide DOCs, medicines, and feed. ....

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