Thai agriculture becoming smart and sustainable

Thomas Hundt

Successful agriculture accepts innovations

The tropical climate and fertile soil in Thailand enable the cultivation of high-yielding crops. Experts certify that the country has made use of this potential over the recent decades and has built a flourishing agricultural economy and an extremely successful food industry that can do more than just supply the population – it even exports large quantities of products.

Thailand is the world’s sixth-largest rice producer, fourth in sugar cane farming, third behind Indonesia and Malaysia among palm oil producers, third in cassava and among the five largest countries that cultivate pineapples and mangoes. Thailand ranks at the top when it comes to the harvest of natural rubber.

About 46 per cent of the country’s land area is used for agriculture. In Germany the proportion is around 50 per cent. However, the agricultural areas are shrinking in Thailand because industrial parks, new settlements and traffic routes are taking up more and more land. Farmers can only expand their land at the expense of nature. If they want to increase their income, they will have to become more productive and innovative.

Exhausted resources

Agriculture consumes about one-third of the total amount of Thailand’s water resources. According to the most recent survey, around 4.8 million hectares of agricultural land were irrigated in 2014. Climate change is having a negative impact through increasingly severe floods and longer periods of drought. In 2019 and 2020, for example, water shortages resulted in lower yields of important crops such as rice and sugar cane.

Thailand’s Ministry of Agriculture has therefore increased its budget for water projects significantly. The increase is allocated to the construction of additional reservoirs, pipelines and canals for irrigation and drainage as well as repairs of the existing systems. The projects are implemented by the Royal Irrigation Department. Provinces, municipalities and agricultural associations are also carrying out their own water projects.

Covid-19 affects the food industry

Total domestic consumption of households is currently shrinking because disposable incomes are falling and income from international tourism has plunged. Gastronomy and retail businesses are selling less food during the current crisis.

Also small-scale farmers quickly get into financial difficulties when demand and agricultural prices fall. However, as part of Covid-19 relief measures, they are receiving direct payments and price subsidies, and can postpone loan payments or take out new low-cost loans.

A second Covid-19 wave then broke out in mid-December at a fish market in the Samut Sakhon province, to the south-west of Bangkok. The province is the centre of the fish and seafood processing industry, which employs many guest workers but Thailand has the spread of the corona virus relatively well under control.

Agriculture and food industry are facing additionally labour shortage. At the end of 2020, the Ministry of Labour counted 170,806 foreign workers in agriculture and forestry as well as 200,769 guest workers who are employed in the processing or wholesale of agricultural products. Because of Covid-19 in some provinces, authorities are now consistently restricting the entry of guest workers, who mainly come from Myanmar.

The agricultural sector is breaking new ground

Thailand has long-term goals. In 2017, the government passed the national development strategy that extends until 2036. The Agriculture and Cooperatives Strategy (2017-2036) shows ways to achieve greater prosperity, sustainability, greater competitiveness and security in the supply of food.

The Office of Agricultural Economics, under the Ministry of Agriculture outlines in detail these goals in the Agriculture and Cooperatives Strategy. The added value of agricultural products should be increased and based on new market trends. The plan aims to improve the quality, safety and nutritional values of agricultural products. The use of the most modern agricultural technology and organic cultivation is to be increased.

The interest in organic farming is also increasing. More and more companies are selling their products under the ‘Organic’ label. In 2019, 44,418 organic farms were licensed to farm a total of 85,000 hectares organically. They have received Participatory Guarantee System (PGS) certificates from IFOAM Organics International or have obtained their certificates through the Foundation of Organic Agriculture Certification Thailand. The Ministry of Agriculture also offers training and subsidies in organic farming.

Support for investments in agro-industry 4.0

The Thailand 4.0 incentive programme from 2017 has identified agriculture, biotechnology and the food industry as core sectors that should attain higher technological levels. The government supports investments as well as research and development activities particularly in these sectors. The Thailand Board of Investment (BOI) lists the eligible activities for domestic and foreign investors.

The BOI can exempt companies that want to manufacture agrochemicals or agricultural products from corporate tax for three to eight years, and can authorise duty-free imports of machinery. Companies that participate in the BOI programme can more easily acquire building plots and obtain work permits for their foreign skilled staff.

The BOI approved 48 foreign projects in the agricultural industry from January to September 2020, the investments totalled around US$ 250 million. Companies from South-East Asia received the most project approvals. Five projects came from companies in the European Union.

Support for intelligent agriculture

The Thai government has been promoting the automation and digitization of the agricultural sector as part of a smart farming programme since 2011. Farmers who invest in smart farming can apply for favourable financing from the state-run Bank for Agriculture and Agricultural Cooperatives.

The Ministry of Agriculture and Total Access Communication PLC (dtac) have also launched a training programme. Farmers learn to get weather information and forecasts, satellite images and information about crops online. The start-up company Ricult provides as well financial information for farmers on its app.

The national research agency NSTDA founded the Agricultural Technology and Innovation Management Institute (AGRITEC) in 2016, which supports agricultural businesses and organizations in the implementation and development of new technologies. NSTDA has developed the information platform Agri-Map with several partners, for example, with which farmers can identify particularly suitable locations for their crops. developed an intelligent system that supports intelligent cultivation methods, especially in small areas. Greenhouses can use it to automatically control their irrigation, fertilisation and greenhouse temperature.

The statistics portal Statista estimated the Thai smart farming market to be US$ 129 million in 2018 and forecasts that it will more than double to US$ 270 million by 2022 as the demand for sensors, information and communication technology and software will increase strongly.

Drones are also tested and used to spread fertilisers and plant protection agents. The drones are produced locally and imported. Companies such as Siam Yamaha Motor Robotics, ATI Technologies, Kaset Gen-Y, Novy and Bug Away offer their own drones, while importers such as SKYVIV bring foreign drone technology into the country.

Strong structure of agriculture

Agriculture, forestry and fishing contributed more than 8 per cent to Thailand’s gross domestic product (GDP) in 2019. In Germany, the sector accounts for less than 1 per cent of economic output. The proportion declined in Thailand in recent years because the agricultural economy grew more slowly than the economy as a whole.

Agriculture is stabilising the economy during the Covid-19 crisis. Total GDP fell by 6.7 per cent in the first nine months of 2020 compared with the same period in the previous year, while the added value of agriculture, forestry and fishing only fell by 5.2 per cent.

Millions of people are employed informally as they work on a self-employed basis without fixed contracts. Many of the freelancers in the cities have lost their jobs due to Covid-19 and due to downturn in the hospitality industry, and they have moved back to the countryside to live with their families.

Every third worker is employed in agriculture, forestry or fisheries. The primary sectors employed around 12.6 million people in the third quarter of 2020, the same number as in the same quarter of the previous year.

Insufficient capital for investments

In January 2021, 9.2 million farmers and 8.1 million agricultural households were registered officially. The farms use an area of 3.9 hectares on average. These smallholder structures make it difficult to invest in the latest agricultural technology and in large-scale cultivation and harvesting methods.

In addition, farm households often lack capital. In 2019, they were in debt at an average of more than US$ 7,100. Some are even living below the poverty line.

According to a last survey in 2014, the farmers themselves only owned 48 per cent of the arable land. In addition, more than a third of their soil was mortgaged. Farmers are also increasingly leasing land.

The State also provides low-income farming families with farmland free of charge. The so-called “Sor Por Kor” programme started in 1975 and distributes degraded forest tracts to poor and landless farmers The Agricultural Land Reform Office has set the agriculture land reform. Yields of important crops and meat (million tons)

Rice is the most important crop

Rice fields account for almost half of the agricultural land. Experts estimate that farmers will reap a harvest of 31 million tons in 2021. Better weather conditions and subsidy payments should support rice cultivation.

Thailand exported around 5.7 million tons of rice in 2020 and was third among the largest rice exporting countries (India 14 million tons; Vietnam 6.3 million tons). Thai rice exports totalled 11.7 million tons in 2017. The Thai Rice Exporters Association attributes the recent decline in exports to the strength of the Thai baht. Thai rice is also not soft enough for the global taste. The main importing countries in 2020 were South Africa and the United States of America.

The sugar cane harvest collapsed by around 40 per cent in 2020 due to a severe drought. Some farmers will switch to other crops in the future after doubling the cropland since 2010 to 1.8 million hectares.

The country’s 57 sugar factories also intensively invested in their facilities during this period. They export most of the raw sugar and white sugar. Beverage manufacturers are buying most of the sugar, but are reducing their demand for the natural sweetener.

Thailand is the largest producer of natural rubber. Most of the plantations are in the south of the country. The production of latex declined in 2020 due to a fungal infestation on the rubber trees and a lack of labour. Production is expected to stabilise in the current year. Most of the rubber is exported to China and used in tyre production.

The oil palm acreage has expanded to 0.9 million hectares in the past 10 years. The government wants to expand cultivation, especially because it wants to secure the supply of biofuels. In 2019, Thailand’s 149 palm oil mills processed around 16 million tons of oil palm fruit into 3 million litres of palm oil. One half of the palm oil is used as biodiesel and the other half is used as an ingredient in food and personal care products.

A highly advanced tapioca industry

According to business associations, the cassava harvest is expected to fall to 25 million tons in 2021 due to the spread of the cassava mosaic virus as well as the drought in the north-eastern region of the country. However, the demand for starch made from dried cassava roots (tapioca) remains high.

More than 300 companies dry and process the roots into chips and other dried varieties, which in turn are used to manufacture animal feed, citric acid and alcohol. Thailand promotes the production and use of ethanol as a fuel. The overall production capacity for ethanol from cassava is around 3 million litres per day and it is being expanded. “Thailand needs more know-how and foreign technologies in order to convert agricultural products or waste into bioplastics, biochemicals and other high-valuable substances for various industrial application.”

More than 100 companies also produce virgin or modified starch from cassava, which is further processed by other local companies into glutamate, sweeteners, cosmetics and a binding agent for pharmaceuticals.

Agricultural and food industries go hand in hand

In 2019, 42,750 factories that process agricultural raw materials, were registered. The Department of Industry also licensed 9,516 food factories.

The food industry is the largest industry in Thailand. Its success is based on the availability of cheap agricultural raw materials. In addition, the food industry focuses on foreign markets and takes up innovation quickly.

The agricultural company Charoen Pokphand Foods (CPF), founded in 1978, has grown into one of the largest corporations in the country. CPF is the world’s largest producer of animal feed. The CP Group is active in several areas of the food industry and in the food trade.

The market research company Ken Research forecasts that the Thai market for agricultural machinery will grow from US$ 1.7 billion to US$ 1.9 billion between 2019 and 2025. In 2019, imports totalled US$ 1.2 billion. Japan supplied around 30 per cent and China 24 per cent of the foreign agricultural machinery.

Small and medium-sized tractors and harvesters are used intensively. However, sales fell in 2020 due to the economic crisis. Production and exports also fell slightly with manufacturers exporting agricultural machinery worth US$ 1.1 billion in 2019.

The competition is very intense among local producers such as Siam Kubota, Kaset Phattana, Yanmar S.P., Talaythong Factory, Tamco as well as the sales offices of international suppliers such as John Deere, Iseki and New Holland. The German agricultural machinery company Class also founded a distribution centre in Bangkok in 2012, which is responsible for sales in Thailand and all of South-East Asia.

Strong competition in agrochemicals

Poultry, pig production, 2,425 -10 food, pet food The total Thai fertiliser market is around 5 million tons annually, most of which is applied to rice fields. Thailand imports fertilisers (nitrogen, phosphorus and potassium) that are mixed locally. Traders also market readyto-use complex fertilisers. Total fertiliser imports in 2019 were US$ 1.6 billion.

Thai Central Chemical PCL. describes itself as the country’s largest manufacturer and distributor of fertilisers. The Department of Internal Trade of the Ministry of Commerce sets price limits on certain fertilisers. Organic fertilisers are becoming more popular because of the trend towards organic farming.

In 2019, traders imported around 131,000 tons of pesticides worth around US$ 680 million. Pesticide use is particularly high in the cultivation of high-value crops such as vegetables and fruit.

International manufacturers of agrochemicals such as Adama (Israel), UPL (India), Dupont (United States), Yara (Norway) and Syngenta (Switzerland) as well as BASF and Bayer have set up local sales and training branches.

The German Development Cooperation (GIZ) also supports farmers who want to use pesticides more responsibly, by providing training on alternative, biological pesticides. GIZ and its partners also advise rice farmers and small-scale palm oil farmers who want to be certified according to an internationally recognised standard.

Restrictions for foreigners

The Foreign Business Act of 1999 prohibits foreigners and foreign companies from doing business in the fields of agriculture, plantations, rice cultivation and animal husbandry. According to the Agricultural Land Reform Act, foreigners are also not allowed to acquire agricultural land.

However, they can lease land for up to 30 years for certain activities, for example, to carry out research and development activities in the agricultural sector. Foreign companies wishing to get involved in the agricultural sector should therefore obtain legal advice in advance.

Farm price guarantees fall below guaranteed purchase prices, the state-owned Bank for Agriculture and Agricultural Cooperatives compensates the difference.

The minimum prices for rice from October 2020 to May 2021 is US$ 330 to US$ 495 per ton, depending on the variety. The budget of the rice guarantee programme for this timeframe is US $ 1.7 billion. For 2021, the government has also set guaranteed prices and budgets for natural rubber, cassava and corn.

Controversial pesticides banned

The governmental Committee on National Hazardous Substances banned the use of the herbicide Paraquat and the insecticide Chlorpyrifos on 1 June 2020. Both pesticides are classified as hazardous to health.

The use of the herbicide Glyphosate remains in the category subject to approval and has not been banned. Agricultural products that contain Glyphosate and which comply with maximum residue levels may also continue to be imported into Thailand, according to the United States Department of Agriculture.

All fertilisers and pesticides require approval from the Department of Agriculture. The Department of Livestock Development (DLD) is responsible for importing and keeping livestock, while the Food and Drug Administration (FDA) of the Ministry of Health provides information on the approval and licensing of food products.

Contact details: Thomas Hundt Director Thailand, Cambodia, Myanmar, Laos GERMANY TRADE & INVEST. www.gtai.com