Charoen Pokphand Foods Plc (CPF) will be the first company to provide a farmers' insurance scheme.
The company is one of 87 farming contractors to be registered under the new Contract Farming Act. The company has vowed to provide the first small-scale contract farmer insurance system.
The hope is it will enhance the sustainability of the over 5,000 contract farmers under CPF.
The company announced completing registration under the law, which demands the registration of all farming contractors with the Agriculture and Agricultural Cooperatives Ministry.
"CPF was the first company to register as a farming contractor, and complete the prospectus as required by law," said Narong Jiemjaibunjong, CPF's senior vice-president.
CPF's contract farming operations include 5,960 chicken and swine farmers. Close to 60% of them have been doing business with CPF for over 10 years.
Aside from complying with the law, CPF is the first livestock company to set the goal of managing risks for income-guaranteed small-scale farmers, whose output is 100% channelled to the company.
"CPF thinks risk insurance will add confidence, stability and sustainability to its business, and will extend its 'insurance' scheme to cover farm structures and equipment in times of disaster," said Mr Narong.
"Farmers operating loans are normally required to insure their structures and equipment for eight years, but most of them do not extend the insurance after the loans are paid off and manage their own risks. CPF is shouldering this risk on their behalf for sustainable stability in farming communities."
The insurance scheme will not cover large-scale farmers that enjoy price guarantees. These farmers, registered as business enterprises, earn high income and are able to shoulder their own risks.
CPF improved its contract farming agreement in line with the UNIDROIT principles of the International Institute for the Unification of Private Law to set best contract farming standards. These principles have as a goal to treat farmers as business partners with the potential to grow with the company.
A review by Chulalongkorn University's Faculty of Law shows the agreement is fair and universal, and has been replicated in several countries by the UN's Food and Agriculture Organization.
CPF initiated the contract farming scheme in 1975 to support small-scale livestock farmers. The scheme guarantees farmers' output and raises their access to finance, resulting in a more stable income.