TUF guarantees price of shrimp for farmers

TUF guarantees price of shrimp for farmers

Scheme aimed at blocking competition

Workers clean shrimp on a processing line at TUF's factory in tambon Mahachai of Samut Sakhon province. The company yesterday launched a six-month scheme to buy shrimp from groups of farmers at guaranteed prices.Bloomberg
Workers clean shrimp on a processing line at TUF's factory in tambon Mahachai of Samut Sakhon province. The company yesterday launched a six-month scheme to buy shrimp from groups of farmers at guaranteed prices.Bloomberg

SET-listed Thai Union Frozen Products Plc (TUF) has introduced a six-month price-guarantee scheme for shrimp farmers and expects to buy 1.5 billion baht worth of the crustacean.

Rittirong Boonmechote, president of TUF's global shrimp business, said Thailand's shrimp exports had declined significantly amid weakening purchasing power in the large economies.

The Thai frozen shrimp industry has also faced a supply shortage and low global prices due to an outbreak of early mortality syndrome.

Mr Rittirong said this was a major risk for exporters. If the low-price situation lingers, buyers may delay their orders, depressing the price further.

"The lack of supply for export will prompt buyers to consider our rivals instead. That means we will have pushed them to place their orders with our rivals," he said. "Even the weaker baht, which normally would help us with shipment orders, now has no effect at all since our competitors are stronger than before."

Some foreign buyers have switched to Vietnam after the EU signed a free trade agreement with the neighbouring country.

Thai shrimp exports dropped to 210,000 tonnes last year. Mr Rittirong expects a figure of 250,000 tonnes this year, an increase of 19%.

"We hope the six-month shrimp price guarantee scheme for farmers can boost the market price and ensure shrimp farmers stay in business," he said.

The guaranteed prices are set at a higher-than-average cost of shrimp farming for each size -- for example, a size of 100 shrimps to the kilogramme is set at 120 baht, while the bigger size of 70 per kg is 150 baht.

The company expects 12,000 tonnes of shrimps or an average of 2,000 tonnes a month from the 1,600 shrimp farmers participating. Under the six-month scheme, farmers can decide to sell their shrimps to TUF at the guaranteed price or to other companies when the market price is higher.

The price guarantee is more beneficial than contract farming since it allows farmers the freedom to choose the buyers themselves, Mr Rittirong said.

Participants have until Oct 7 to register, and the scheme will run from Oct 1 to March 31.

Mr Rittirong said all output from the scheme will be processed at its three shrimp processing units for export.

The scheme will provide the company a sufficient supply for shipment, which will entice buyers back to Thai exporters, he said.

Mr Rittirong is more concerned about the strong competition than he is the EU's yellow card imposed for illegal unreported and unregulated fishing and the US keeping Thailand on its bottom Tier 3 ranking for human trafficking.

"So far, our buyers have remained confident in our product quality. The problem is more about not having enough supply to serve their demand, which opens chances for our rivals," Mr Rittirong said.

"And we can prove the Thai fishing fleet is now 'clean'."

However, he suggests the government seek a neutral third party to help investigate the matter, as the party could confirm Thailand's fishing fleet is now legitimate instead of just allowing the EU and US to make their own reports without anyone reviewing their inspection process.

TUF shares closed yesterday on the SET at 18.80 baht, up 20 satang, in trade worth 94.1 million baht.

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