Thai gov't not providing financial support in shrimp packer, farmer contract scheme : June 1, 2018
Tom Seaman: UndercurrentNews
BANGKOK, Thailand — A big Thai shrimp exporter said the country’s government is not providing any financial support in a scheme designed to increase process for farmers.
Undercurrent News first reported the scheme, which will see processors agree to buy 10,000 metric tons in total volume at price levels around 20% over the current state of affairs over the next 60 days, on Thursday. Then, Adisorn Promdee, director general of the department of fisheries (DOF), confirmed the government has partnered with the Thai Frozen Foods Association (TFFA) to set a bottom level for shrimp farmed in the country.
Processors and farmers met on Wednesday, as the TFFA celebrated its 50th anniversary, and will meet again on June 4 and June 6, sources said.
Poj Aramwattananont, TFFA president, who packers have praised for his role in the deal and also his leadership of the sector, has not yet responded to request for comment from Undercurrent.
One packer, however, grumbled to Undercurrent during the Thaifex show that the processing sector is carrying the financial burden here, with no help from the government.
“This seems like a win for the farmers. What about a win-win, for the packers and farmers?” he said.
However, government financial assistance would not be seen favorably in the US, in terms of countervailing duties (CVD).
“Packers do not expect the government to help in the first place, as it will be too risky for US CVD,” Satasap Viriyanantawanit, general manager of Siam Canadian Group’s Thai business, told Undercurrent. “Basically, it is individual farming contract between farmer and packer at Thai DOF’s suggested price. The government does not provide any further support.”
The scheme, according to Viriyanantawanit’s understanding, works as follows.
“It should be called “farming contract” instead of minimum price. The Thai DOF has been studying and learnt about real farming cost throughout Thailand. They suggest what levels farmers should be able to survive on those particular sizes,” he said.
“Each farmer can register their farm and sign farming contract with one packer. Then that packer is going to support that farmer to buy at Thai DOF’s suggested price levels for up to 10t from each farm,” he said.
In conversations with packers during the show, several executives from the processing sector expressed irritation at the system, which will push Thai raw material prices up even higher. However, for the most part, it seems they accept the need to do something.
“The farmed prices might go higher, but we are already too high compared with India and Indonesia,” a director of one large firm, who did not want to be quoted by name, told Undercurrent.
Undercurrent’s prices portal does not have Indonesian shrimp on it, but for week 21, 60 count Thai raw material prices are THB 120, which is $3.75/kg. For India, the same size in week 21 is at INR 220, which is only $3.28.
As Thailand is “already more expensive than other countries, this program will definitely hurt our sales even further”, Viriyanantawanit, who has previously said the sector is suffering the worst sales slump in its history, told Undercurrent.
“But, it is the only option to aid farmers,” he said. “If farmers do not stock, we will have no shrimp, which will be a real disaster. They [packers] may not be too happy for taking further loss but they really have to do what they have to do in order to reduce the heat from the farmers and also when they show this kind of support, they are expecting that farmers will be appreciated that.”
According to official statements published in the Thai media, registration to participate in the program ran from May 14-18 and the target volume is 10,000t, as previously reported by Undercurrent. The plan runs from May 25 until July 23.
The agreed prices are:
- THB 170/kg per 40 pieces
- THB 160/kg per 50 pieces
- THB 145/kg per 60 pieces
- THB 135/kg per 70 pieces
- THB 130/kg per 80 pieces
- THB 125/kg per 90 pieces
- THB 125/kg per 100 pieces
This is a premium of around 20% on the current level.
For May 21-26, prices edged up slightly, to THB 120/kg for 60 pieces per kilogram; THB 117-118/kg for 70/kg; and THB 113-115/kg for 80/kg for May 21-26.
However, prices at the start of the year were THB 180-185/kg (60/kg), 170-180/kg (70/kg) and THB 165/kg (80/kg), before falling off a cliff.
“Prices in Thailand have started to move up. Some farmers are holding back as they want to sell their targeted size to their contracted packer at those prices,” said Viriyanantawanit.