China's takeover of Thai fruit industry

Chinese traders now control most fruit shipments to China raising fears of future market dominance & control.

AGRICULTURAL & FOREIGN BUSINESS

China's takeover of Thai fruit industry

10/02/2016
Phusadee Arunmas

Fruit traders from China are more and more dealing with Thai fruit farmers directly, handling their own exports rather than going through Thai brokers and middlemen, slowly gaining control over the Thai fruit industry.

Thailand exported 12.6 billion baht worth of fruit to China in 2014 after only 4.42 billion in 2007.

Durian is the favourite Thai imported fruit in China, making up 41% of fruit exports to China in 2014, this is followed by longan at 21% and mangosteen 12%.

A fruit-trading source said Chinese traders now control most of the fruit shipments to China, with roughly 1,000 Chinese traders doing business in Thailand.

There are fears that the Chinese will soon dominate Thailand's fruit market, driving prices down.

In response to this trend, the government is set to tighten controls on fruit trading.

SHORT TERM GAINS, LONG-TERM DANGERS

Many Chinese traders now negotiate directly with Thai farmers at their orchards and then export directly to China, particularly in Chumphon, Chanthaburi, Rayong and Trat provinces, say experts.

Entry of Chinese traders into the Thai fruit market creates more competition among middlemen or brokers, which eventually benefits farmers with better deals for them.

But over the long-term this practice could actually have a negative effect on Thai farmers and small local traders, if Chinese trading expands and dominates the fruit market, gaining the ability to control prices in the market.

The Commerce Ministry has a plan to require Chinese traders to register and use standardised purchase contracts.

The ministry will also propose that the Central Commission on Prices of Goods and Services include wheat, longan, mangosteen and durian on the government’s price control list.

MEASURES TO ENSURE FAIR TREATMENT OF FARMERS

Chinese traders have for years bought fruit for export using futures contracts.

There have been cases when Chinese traders breach their futures contracts, refusing to buy all the fruit, such as longans, from farmers at agreed-upon prices if the quality drops.

It has been proposed that the government supervise purchase contracts to ensure fair treatment for farmers and that the government prepare a database of fruit traders in each province based on types of fruits and nationality of the traders.

If the fruit market is dominated by a single country, China, this could become dangerous if China later refuses to make purchases.

http://www.bangkokpost.com/business/news/857736/fruit-brokers-raise-chinese-concerns

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Writer: Jon Fernquest
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