VIII. COMPANY INFORMATION
3. Production Process
MSI has started its pesticide production in May 2005. The following table shows the pesticide production outputs for the last 2 years:
(In ton)
No Description 2005 2006
1 Pesticides 1,301 2,729
Capacity 6,750 6,750
3. PRODUCTION PROCESS
(iv) The harvested crops coming from breed foundation seeds are processed to become commercial seeds and are ready for special packaging.
The Company has cooperation agreement with Monsanto Company ("Monsanto"), company based in United States of America noted for developing corn seeds whereas Monsanto shall perform research for producing superior seeds. Consequently, the Company pays royalty fee from sales of various breeder seeds developed by Monsanto.
The process of cross-breeding and genetically-engineered breeding techniques is the most significant and highest value-added process in the whole production process. Therefore, the Company has hired skilled and experienced employees. The Company also hired several foreign employees that have intensive expertise and experiences on certain plant species.
The Company has various cooperation agreements with farmers for corn or vegetable seed productions, where by the Company sells breeder seeds to be planted by the farmers. In addition, the Company gives technical advice and monitors the production process. The farmers shoulder all the production costs. The Company will buy the harvest crops from farmers as stated on the agreement. The cooperation agreements are valid for one planting period.
The following table shows the development of total farmers and total areas that have agreements with the Company in supplying seeds until 2006:
Total Farmers
Type of Seeds 2006 2005 2004 2003 2002
Corn Seed 23,736 21,140 12,987 9,184 12,442
Vegetable Seed 7,649 5,266 4,138 7,116 2,804
31,385 26,406 17,125 16,300 15,246 Total Area
(In hectare)
Type of Seeds 2006 2005 2004 2003 2002
Corn Seed 7,121 6,765 4,156 3,031 4,096
Vegetable Seed 1,729 1,524 1,688 2,003 838
8,850 8,289 5,844 5,034 4,934
Before being commenced, first of all the commercial seed will enter the selection process, grains from shell, drying and packaging which is intended to maintain resistance and quality of the corn seed. During the first stage, grains from shell of corncob, second stage is the drying process of corn seed through two processes to maintain the resistance of the seed. The final stage is packaging of corn seed to be distributed to the customers.
The diagram on the process from the corn seeds received coming from farmer’s harvested crops until the packaging is shown below:
The production of breeder seeds for corn produced by Monsanto Company ("Monsanto") is stated based on the terms and condition for a Letter of Agreement between Bangkok Seed Industry Co.
Ltd. ("BSI"), Monsanto and the Company dated June 10, 2007, which was the amended version of Letter of Agreement dated July 5, 2006 ("Agreement of Monsanto").
This cooperation agreement is the implementing guidelines of Seed Supply Agreement between BSI and Monsanto dated July 8, 2001. Based on this Agreement, Monsanto agreed through Monsanto Seed Thailand Ltd. ("MST") to:
(i) grant certain license for hybrid seed production to BSIprovide several seed materials to BSI;
(ii) grant a license to BSI to produce exclusively in Thailand and Indonesia also exclusively selling several varieties of certain varieties of conventional hybrid field corn seed which is developed by MST in the Island of Timor, Cambodia, Indonesia, Laos, Myanmar, Singapore, Thailand and Vietnam ("Market Area"); and
(iii) produce certain varieties of conventional hybrid field corn seeds that are developed by MST in certain circumstances which is in accordance with the agreement.
In relation to the Seed Supply Agreement, the Company, Monsanto and BSI entered into an agreement wherein Monsanto has granted a license to the Company to produce hybrid field corn seeds in Indonesia and to sell these seeds to certain market areas as stated in the agreement. As compensation, the Company has agreed to pay royalty fee to Monsanto which is calculated based on total metric ton products sold at specific rate per metric ton, which are US$200 (equivalent to Rp1.85 million) per metric ton, US$200.64 (equivalent to Rp1.75 million) per metric ton and US$177.8 (equivalent to Rp1.6 million) per metric ton for 2006, 2005 and 2004, respectively.
Vegetable Seeds
Vegetable seeds traded by TSP represent 30% imported seeds from Thailand and China and 70%
FarmerÌs harvesting crops
Selection Process
Treatment of Pesticides Drying Process
Grains from Shell
Drying Process
Packaging Process
Vegetable seeds produced by the Company are: chili, cucumber, eggplant, tomato, pumpkin, cabbage, china-cabbage, "paria", water spinach, long bean, spinach, honeydew, watermelon and others.
Pesticides and Fertilizers
The Company, through MSI, a subsidiary, has produced pesticides, specifically herbicide products.
MSI started its production on May 10, 2005, with a total production of 1,301 tons and 2,729 tons in 2005 and 2006, respectively. The main raw materials in the pesticide production are glyphosate, paraquat dichlorine and geronol. Most of these materials are imported from China by MSI through its several supplier companies.
The following diagram shows the production process of pesticides:
Firstly, the raw materials are mixed with other supporting materials, and are measured to prepare the intended pesticide’s formula. Subsequently, the produced formulas are examined for its quality.
If it meets the quality standard, the products are produced in commercial quantity and are kept in storage tanks for further packing in different sizes. Then the packaged products are ready for sale in the market.
Fertilizer products that are sold to the Company through its subsidiary, TSP, are mostly finished products that are imported from China.
The following table shows the inventories for the last 5 years:
(In ton)
December 31,
Products 2006 2005 2004 2003 2002
Corn Seed 13,318 12,305 4,653 6,332 5,195
Vegetable Seed 1,353 1,926 586 1,068 990
Pesticide 16 9 - - -
Raw Materials Weighing
Mixing/Processing Foundation Materials
Other Materials
Quality Inspection
Storage and Packaging Finished Goods
4. QUALITY MONITORING AND CONTROLLING