Siam Canadian’s Gulkin: Thai shrimp output could be 450,000t by 2018 : September 25, 2015
Tom Seaman – Undercurrent News
Thai shrimp production looks to be on the road to recovery and could hit as much as 450,000 metric tons in next two to three years, said Jim Gulkin, founder and managing director of Siam Canadian Group.
After being hit by early mortality syndrome (EMS) in 2012, Thai shrimp production dived to around 200,000t in the last two years, from a peak of 640,000t.
Farmers are finding ways to deal with EMS, however, leading to improved harvests.
“I believe Thailand will continue to recover…Thailand will continue to increase production until it finds its new comfort level, which I would venture would be somewhere between 400,000-450,000t.” Gulkin, who’s business is based in the Thai capital Bangkok, told Undercurrent News.”I think this process will take two to three years,”
In the shorter term, Gulkin feels the progress in overcoming EMS and other disease problems means output of 240,000t-250,000t for 2015 is achievable.
Gulkin’s comments came soon after Thai Union Frozen Products announced a shrimp price guarantee scheme, supposedly to assist in bolstering production to hit 250,000t in 2015. In addition to an improvement in production, demand is also picking up for Thai producers from the US market.
As Thailand’s production dived, Siam Canadian has relied more and more on its other offices in Vietnam, India, Indonesia, China and Myanmar.
In India, vannamei shrimp production has risen dramatically since Thailand’s fall from grace, as farmers switched over from black tiger.
Indian production continues to grow, as does its importance in the world marketplace.
“So far, India has not hit any major bumps in terms of disease and we certainly hope that continues” Gulkin said. “India production will continue to increase, barring any major disease problems.”
For Vietnam, where Siam Canadian set up its second office in 1992, lower prices in Q2 have discouraged some farmers from re-seeding, he said. “We may see a slight drop in total production compared to last year. Imports from India for further processing have been robust this year, but now [are] starting to slow.”
A for the outlook in Vietnam for 2016, production is “always a mystery and an unknown”, said Gulkin. “I expect low production in Q1 [next year] in Vietnam. Farmers have not been generally happy with prices and seeding will be less. If prices are high enough, will see improvement in the second 2016.”
In Indonesia, farmers have had some disease issues, particularly white spot and white feces, and that has had some impact on production, which has been “enough to keep raw material prices on the high side, higher than India and that has made it tougher for Indonesia to compete in certain markets, such as the US.” he said.
The rupiah has devalued against the dollar, which should be helping, as it is helping Thailand, but apparently this is not enough, he said.
As for next year, “Indonesia production will increase if it can, as raw material prices have been high enough to incentivize farmers”, said Gulkin.
In China, production continues to be hampered by EMS and other diseases.
“The Chinese aquaculture business is too fragmented and many players in the farming and hatchery side of the business are smaller operators and perhaps not sophisticated enough to take a long-term view,” said Gulkin.
“Substandard brood stock, poor hatchery management, poor farm management have meant Chinese production continues to drop,” he said
The general consensus is that China production for 2015 is somewhere between 25-40% below that of 2014, said Gulkin. “And 2014 was significantly lower than 2013. China is heavily dependent on imports from India for further processing and imports from India, Ecuador and other countries for domestic consumption. This will continue until China improves its own production.”
Chinese production will continue to be problematic next year, he said. “There simply is not yet enough will or cohesiveness to heal the industry.”
$500m sales target
Siam Canadian is looking to expand over the next five to seven years, with Gulkin hoping for $400 million to $500m in turnover.
“Having said that, the total sales value is often so skewed by raw material prices, either up or down, that it is not necessarily a good indicator of the health of one’s business. We are much more focused on the bottom line and will continue to be so,” he said.
The drivers of growth will be expansion of their customer base, increased sales in existing markets and further penetration into some of the newer markets, such as Asia, Central and South America and Africa.
The company hopes its import business will also play an important role in growth.
“Imports are still a small percentage of our overall business. However this is something I see as growing and we are working towards this, diversifying our product range and expanding our customer base. Thailand is our first import operation but we expect to expand to other offices as we go forward. We are learning the business step by step,” said Gulkin.
Siam Canadian is focused around offering six services: procurement, quality assurance, logistics management, new product development, and printing and packaging inventory management.
“I cannot say I am ‘happy’ with our role as one must constantly strive to improve and re-invent. More of the same is not always a recipe for growth,” he said. “However, I must admit that I have come to really appreciate our business model.”
The company’s approach has “proven to be resilient to major changes and upheavals in the market. We… can move quickly in different directions as market conditions necessitate”, said Gulkin.
Demand and prices in 2015 for shrimp has been down, meaning Siam Canadian will not exceed $320m, he said.
There are several reasons for this lower demand, he said. Firstly, the devaluation against the US dollar of many currencies, including Australian dollar, Canadian dollar, euro, Mexican peso, Russian ruble, and many others.
“The rapid drop in shrimp prices resulted in many importers and end users holding higher priced, difficult-to-sell inventory which has plugged up the system and slowed demand,” he said.
Also, weaker economies in Europe, Russia, Canada, Australia and other countries have impacted consumption, said Gulkin. “Uncertainty or more accurately, concern that prices would drop further has made many buyers hesitant to commit forward to larger orders.”
This has seen much more “hand-to-mouth” buying this year, he said.
Demand has recently improved, however. “We are seeing more orders being placed recently, particularly from the US. The UK has picked up to some degree. Europe is still sluggish. Australia still sluggish, Canada slightly improved,” is how Gulkin summed up the market picture.
“Shrimp has always been the single largest item that we sell and I don’t see that changing, although the broad range of products we offer enables us to take advantage of opportunities that present themselves in the market,” he said.