A spike in the fruit trade

Driving around Chanthaburi, it's almost impossible not to notice ubiquitous warehouse-like structures lining the roads in the eastern province.

The structures, known as long in Mandarin, are essentially places where large volumes of fruit are purchased from growers for the export market.

Usually empty during this time of year, longs spring back to life between March and June when the fruit season arrives, with lorries carrying fresh produce from farms around the province making their way in and out of the structures all season long.

Chanthaburi province, one of the most fertile areas in eastern Thailand, is the nation's hub of fruit and crop production.

Among the huge number of fruits grown in the province, nothing is bigger than the durian.

The yellow fruit dubbed "the king of fruit" -- loved by many but shunned by others due to its distinct smell -- is the new favourite on the Chinese market.

Covered in spikes, the unappealing appearance of the durian gives the impression that the fruit is trying to protect itself from predators -- an endeavour that fails miserably, since their spikes can hardly protect their treasured interior from being devoured in vast amounts each season.

The emergence of longs has pushed Thailand's fruit market to a new level by transforming already valuable fruits, especially durian and mangosteen, to premium, export-level products which have helped boost the economy in unprecedented ways.

The long business practice was introduced to Thailand's North when Chinese buyers became obsessed with longan. Traders from the Middle Kingdom quickly dominated the market.

Since then, the practice has spread to other fruits and other provinces in Thailand, most notably the durian market in Chanthaburi.

Before the advent of the long, the Thai durian market suffered from oversupply and over- production during the high season.

Now that Thai durian have gained in popularity in the international market, especially in China, durian producers no longer face oversupply and prices are on the rise.

In Chanthaburi, the higher price has led growers to cut down production of their usual fruit output and shift to durian in the hope of grabbing a slice of the market.

Before the proliferation of long, growers sold their produce to middlemen who distributed the fruit on the domestic market.

Chinese buyers have replaced the middlemen by buying the fruit wholesale from the growers at the long, then exporting them to their home country.

Once the long business practice started to gain momentum, durian prices surged, much to the growers' delight.

According to the Department of Agriculture, under the Ministry of Agriculture, 70-80% of durian produced in Chanthaburi province is bound for export, with China taking in the lion's share.

Data from the Commerce Ministry shows that each year Thailand rakes in serious money from durian exports. Last year, from January to November, durian accounted for US$616 million, or 26.4%, of the country's $2.32 billion worth of fruit and vegetable exports.

In 2016, the spiky fruit raked in a dazzling $503 million. Meanwhile, longan pulled in $554 million, followed by mangosteen at $217 million.

The volume of durian exports has risen consistently over the years. Fresh fruit accounts for 90% of durian exports, with frozen and dried fruit accounting for the remainder.

China is the biggest market for Thai fruits in general with durian the stellar performer among them.

However, there are concerns about the benefits of the long, since many argue that this business model chiefly benefits Chinese buyers, especially those who do business by using Thai nominees, since only Thai nationals can register as long operators.

In the short term, longs have raised the status of durian and Thai fruit in general by helping to introduce the fruit to foreign markets and often generating a fortune for the growers, making the fruit market more competitive as well as raising the price of durian and helping to fix the issue of overproduction.

But with the longs on the brink of dominating durian production from start to finish, it is feared that the lack of regulation will let the local fruit market fall under the domination of the Chinese, who usually have far greater resources than their Thai counterparts.

Chinese domination of the supply chain will leave no other option for growers and therefore create total dependency on the longs.

Furthermore, since there is no authority to standardise prices, long can set whatever price they choose.

The business practice of long has raised concerns among policymakers and locals alike. Most of them worry that dependency on longs will enable Chinese buyers to monopolise the Thai durian industry.

According to the Department of Agriculture, around 80 durian longs in Chanthaburi have been certified Good Manufacturing Practice (GMP). An official at the department claims that nearly half of such businesses are owned by Chinese who use Thais as their nominees.

Kompisit Ninvilai, an entrepreneur who works with a Chinese buyer, said the process at long starts when a buyer receives an order from a company which sets the desired amount of fruit. After receiving the order, the buyer will rent and operate one of the long.

"To source fruit for a long, a buyer needs the help of experienced Thai growers or sellers since partaking in such an enterprise needs expertise and knowledge of the local fruit market," he said.

Once the fruits are sourced and packed, they are shipped to China by one of three routes -- by sea via Laem Chabang harbour, or by road through Nakhon Phanom or Mukdahan provinces through Vietnam.

He said durian are sometimes transported by air to other destinations. But the most cost-effective way is by road.

Due to strict import regulations, Thai exporters find it very difficult to export durian directly to China.

Prior to joining the World Trade Organisation, >> >> China implemented a regulation requiring fruit exporters to have an import licence. The policy made exporting durian directly to China complicated and therefore made selling the fruit to Chinese buyers in Thailand inevitable.

The proliferation of longs has caused concern that they will spread to the southern provinces.

Last November, a farmer's council in Songkhla called on the government to formulate a policy to regulate foreign investors using Thai nominees from dominating the agricultural sector.

They believe the Chinese, operating through Thai nominees, dominate the domestic fruit market.

The charge is not baseless, since the same practice caused problems in the longan market in northern Thailand in previous years.

Without government controls, it is feared the Chinese will soon dominate the fresh fruit and vegetable market in Thailand.

The export of fresh durian is regulated by the Department of Foreign Trade and the Department of Agriculture, but only to ensure the quality of durian exports.

To export durians to China, an operator must register through the two state agencies who ensure that the operator operates under their rules and regulations.

Fruits for export must come from a farm or a long with a Good Agricultural Practice licence issued by the Department of Agriculture.

Naruemol Meemak, the owner of Meemak Long in Chanthaburi, explained how long operates.

"Basically we just rent out our place to buyers who usually are from China," she said.

"Once a year they come and rent our place to operate the processing."

Last year, Ms Naruemol said 48 containers each holding 19 tonnes of durian were sent to China from her long. She said she and her husband earned 10,000 baht for each container.

"We made 480,000 baht from 48 containers plus 300,000 baht from rent," she said.

Each container carries 900 boxes of durian.

She said Chinese buyers bring in their own employees who will work in the long for the entire season.

"If they have their own staff we don't have to do anything. If they don't, we sort it out for them."

Long owners do not get involved with the process, she said.

"We know the growers and farms and sometimes we take the Chinese buyers to those farms, that's all."

The buyers stay at the longs from start to the finish, since they also provide accommodation for the Chinese buyers and workers.

Regarding the price of durian, Ms Naruemol said it depends on how the buyers perceive the quality of the durian shipped.

"The price depends on the destination. If they see that the produce is good then the price rises, if not then the price drops. They [Chinese buyers] set the price. Each day they will call each other and ask what is the price for that day.

She said the Chinese buyers cooperate with each other in setting the price.

"They talk to each other and determine together what they think the price should be but who gets what amount is up to them."

Because of that, the price fluctuates daily and the growers call to check on the price each day.

For Ms Naruemol, Thais growers do not cooperate to set a price that is acceptable for them.

"I think Thais should cooperate like the Chinese by not selling when the price is too low or unfair," she said.

The perceived grade of the fruit is determined by its size and ripeness.

"Durian rated as good usually weighs around 3-7kg, while 70-75% ripeness is suitable for shipping to China, while for Taiwan it is 80%," Ms Naruemol said.

She added that usually the price is high early in the season. "It could go up to 100 baht per kg," she said.

Therein lies the root of the problem. Ms Naruemol said harvesting the fruit prematurely can affect the price.

However, the issue has been partially solved. Provincial agricultural authorities assess the quality of durian at the long.

"Officials randomly test the produce to check the quality. Growers are afraid of them since they could face fines for not complying with regulations," she said.

However, she brushed off worries saying that although the domestic market usually gets fruit that didn't make the cut for export, the fruits are still good.

Rattanawalee Prompianpong, a senior researcher at the Department of Agriculture office in Chanthaburi, said there are approximately 80 longs which specialise in durian, of which more than half are "likely owned" by the Chinese.

Ms Rattanawalee said during the season, the biggest long exports close to 100 tonnes of durian a day.

"Roughly 90% of durian in Chanthaburi is exported each year, which means locals rarely get to enjoy the fruit," she said.

She said that while the longs do not worry her in the short term, she is concerned about Thai growers' dependence on this business practice.

"I think in the long term it's going to have an adverse effect on our market. We are really dependent on the Chinese since we rely on them from start to finish."

She fears that the Thai market lacks sustainability and might not be able to operate on its own.

"We are unable to set our own price," she added.

She said there is no central agency with the authority to set a standard price for durian.

"The problem usually arises when there are too much supply. No matter what the price is, growers have to sell," said Ms Rattanawalee.

Despite her concerns, however, she said she has not seen the negative affect of longs so far. "I think growers are enjoying it since they are well rewarded."

Ms Naruemol said demand and supply still reign and are the factors determining the price.

Ms Rattanawalee concurs with the long operator that premature harvesting is the main problem.

However, compared to the number of longs, she said the issue is not much of a concern since her agency only receives 20 to 30 complaints each year.

Higher prices at the beginning of the season leads growers to rush the harvest, affecting the price later on.

"At the beginning of the season, the price could go up to 200 baht per kg. When there is news of premature harvesting, however, the price could drop as low as 20 baht per kg," she said.

Another issue that concerns her is sustainability. When growers see a price surge in durian, they stop growing other fruits and replace them with durian.

She added that growers should focus more on domestic demand rather than reserving most of the harvest for the overseas market.

"I think 80% of growers are like this, since it is very convenient for them -- their job is just to grow the fruits and then wait for the Chinese to come along and harvest their produce and pay them."

However, she said there are some growers who feel obliged to reserve some of the produce in order to meet domestic demand.

For Ms Rattanawalee, long benefit the growers in the short term, but if not regulated it will have an adverse affect on Thailand's fruit industry.

Many of the concerns about longs are, however, not baseless, since there was an instance when the Chinese dominion of fruit market causes problems.

In the North, when longan was under the thumb of the Chinese and the price was low, the government tried to implement a policy to raise the price of the fruit.

However, since 80% of longs were owned by the Chinese, they simply stopped buying longan, thwarting the government's effort.

In the future, the government might not be able to implement necessary policies to help growers when the time comes.

The government, however, is not being indifferent towards the issue.

The Prayut administration has continually been working to resolve it, but many are voicing their concern that perhaps the government is not doing enough.

In 2015, the National Legislative Assembly commissioned the standing committee on Commerce, Industry and Labour to investigate the issue.

The committee published a comprehensive study to no avail, since three years after the report, no plan nor policy had been formulated to cope with the issue.

In short, what needs to be done is for the government to finish what it started by introducing proper rules and regulations to address the issue effectively.

The question remains, then, since the presence of longs presents both opportunities and threats, as to how the government will be able to effectively regulate this business practice without hurting the market.

At the same time, local small and medium-sized enterprises must be trained to compete with Chinese buyers, to break the export barrier and to eventually become exporters of durian themselves.