Siam Canadian: Rising Thai shrimp prices risk more market share loss : July 2, 2015
Tom Seaman – UNDERCURRENT NEWS
Prices for shrimp in Thailand are going in the opposite direction to India, which has emerged as a benchmark in the world of vannamei production.
In Thailand, prices for raw material for the week June 22-27 were up between THB 10-THB 15 per kilogram.
Prices for 60 count per kilogram raw material were THB 165-175/kg, up from THB 155-165/kg; prices for 70 count at THB 160-165/kg, up from THB 150-160/kg; and 80 count up to THB 150-155/kg, from THB 145-150/kg.
Meanwhile, prices in India are falling. Prices in Indonesia have also been low, although are now said to be firming, because of the Ramadan religious holiday for Muslims.
“Thailand is the only country that is moving into the opposite direction, because of poor landing,” Satasap Viriyanantawanit, general manager for Thailand with Siam Canadian Group, a Bangkok-based, pan-Asian frozen seafood supplier, told Undercurrent News.
The very long summer; droughts; and low shrimp prices, which meant farmers were losing money over the last three to four months, are all factors impacting supply, he said.
“It is expected that supply in Thailand will be tight through end July at least. Unfortunately, the majority of current pending orders in Thailand are required to go between June and July. Therefore, we expect that Thailand price will remain firm and high until at least the end July,” said Viriyanantawanit.
“We are afraid Thailand will be losing more businesses to other countries, due to higher prices over the next five-six weeks,” he said.
There are some buyers who may prefer “product of Thailand”, said Viriyanantawanit. “Now, with only a small difference, most buyers are ready to switch their source immediately.”
Some US buyers are negotiating new contracts, but they have yet to make a final decision, he said. “Those that have already bought seem to be breaking up their quantities and only buying hand-to-mouth, for now.”
Buyers seemed to be spreading out their orders among Thailand, Vietnam, India and Indonesia. “Apparently, demand is not strong enough to shake the markets,” said Viriyanantawanit.
US buyers are sitting back on making a “big buy”, due to the falling prices.
Lack of raw material
The lack of raw material is bad news for Thailand, which is aiming to increase production from around a low of 200,000 metric tons in 2014, due to the impact of early mortality syndrome (EMS).
Before EMS, Thailand was producing between 600,000t-650,000t a year.
Rittirong Boonmechote, president of Thai Union’s global shrimp business unit, told Undercurrent in May he hoped a recovery in raw material volumes in 2015 would offset low prices.
“I think we have hit the bottom in 2014,” he told Undercurrent, at the time.
But even an increase to 270,000t from the level of around 200,000t-210,000t in 2014, which is the top end of what Boonmechote sees as the likely outcome, will be a long way off the processing capacity.
“In the past, in Thailand, the production capacity was one million tons. That is why every time the farmers increased production, up to 650,000t, we have no problem in terms of market and capability to process. At that time, we had no problem with supply and demand,” Boonmechote said.
A lot of Thailand’s shrimp processors have switched to more fish and squid, as well as other things. “They change their business. The people who are still in the business are also downsizing the capacity,” said Boonmechote.
Capacity is around 500,000t now, “but the raw material is still not enough”, he said.
More downsizing or consolidation should not be the focus however, “the first thing Thailand needs to do is improve the production”, said Boonmechote.
“Since EMS, our total production dropped a lot. While we dropped, the other countries have increased production. The world is more balanced now,” as Thailand has been overhauled by India, where Thai Union plans to invest, Indonesia, Ecuador and Vietnam.
“Sooner or later, if Thailand can come back to 400,000t-500,000t, we can have a lot of openings to serve more markets and customers,” he said.
Choopong Lueskprasert, managing director of Marine Gold Products, another large Thai shrimp processor, said 350,000t is the minimum level of raw material Thailand needs to be competitive on the world market.
Boonmechote errs at the high end of this scale, stating 2014 production was 210,000t.
“This year we expect 250,000t-270,000t,” he said. There are several reasons Boonmechote gives for this increase.
Firstly, the Thai farmers have learned a lot in the last two years, in which EMS saw production dive.
Farmers have adjusted methods to deal with EMS, he said.
“The quality of broodstock and post larvae is better. Also, the government, the Department of Fisheries, is very serious in working with the private sector to improve Thai production,” he said.
It takes time to see the impact of the improved situation in farming, however.
“We are not going to go back to 650,000t. We should see some improvement, but we are not going to go from 200,000t to 400,000t, it will be step-by-step,” Boonmechote said.