Southern Thai Shrimp Farmers Upset
Over Plummeting Prices for Exports

Cold storage capacity is tapped out as demand slows in major foreign markets in the throes of economic recession. Farmers and exporters favor pledging program to absorb surplus.

Shrimp farmers in southern Thailand have threatened to stage road blockades again if the government fails to take effective measures to shore up shrimp prices.

About 500 farmers from eight provinces in the south blocked the main road near the Tinsulanonda bridge in Songkhla in June, demanding the government establish a price-intervention program as shrimp prices have fallen steadily since March.

The protest ended after the government assigned the Farmers Assistance Policy Committee to spend money to absorb about 10,000 metric tons of vannamei shrimp from the market over the next three months. The farmers became dissatisfied after learning there was no concrete decision on longer-term assistance.

Kanchit Hemarak, chairman of an association of shrimp farmers in eight southern provinces, warned that plans should be announced quickly or farmers might have to take action again to pressure the government further. Domestic shrimp prices have been declining since early this year as a result of slow exports. The industry has revised its 2009 shrimp export forecast down to 396,000 tons, compared to 495,000 in 2008.

June and July are the peak seasons for shrimp harvesting, but prices have been falling. Prices of 50-count shrimp per kilogram were down to 112 baht ($3.28), compared with 130-140 baht ($3.81-$4.10) early this year. A kilogram of 70-count shrimp was even lower at 100 baht ($2.94). Ekapoj Yodpinit, president of the Surat Thani Shrimp Farmers Club, urged the government to make a quick move to prevent further price declines.

“There are more than 200 containers of shrimp entering the market each day, far higher than the capacity of 20 cold storage facilities, [which can handle] 180 to 200 maximum. This affects the price slump significantly,” Ekapoj said. “Any delays would cause farmers to suffer while benefiting exporters since they could obtain cheap products.”

Exporters in the Thai Frozen Foods Association support a proposal to use a pledging program, the same as the one applied every year to buy shrimp from farmers. One minor change the association suggests is for the government to accept headless shrimp only, and pack and freeze them in four-pound packages ready for export.

The government prefers to earmark 1.4 billion baht ($411 million) to back interest-free loans for one year for cold storage operators and exporters to buy shrimp from farmers at a price set by the government. It said it believes the measure would produce fewer losses for the government while exporters could make a profit if shrimp prices rise.

Kanchit said he favored the pledging program as an effective way to absorb a surplus, adding that the government should authorize the Public Warehouse Organization to run the pledging program. It should also set aside a budget for shrimp raising cooperatives to buy from their members at agreed prices.

Intervention prices agreed early in June would pay farmers based on the size of the shrimp. For instance, 40-count shrimp would fetch 155 baht ($4.54) and 50-count 135 baht ($3.96). Current respective market prices are 125-130 baht ($3.66-$3.88), and 110-140 baht ($3.23-$3.35).

Reason for Long Term Optimism

A key factor that could bode well for an uptick in exports later this year is the United States’ decision to abide by a World Trade Organization (WTO) ruling that changes the rate calculation for its anti-dumping duty on Thai shrimp exports. The US is the main export market for Thai shrimp, valued at 43.17 billion baht last year, representing almost half of the total export of 85 billion baht in 2008.

“It is an undeniable fact that the global economic crisis has had a significant effect on the overall performance of Thailand’s export sector,” said Thai Frozen Foods Association President Poj Aramwattananont. “However, it is also important to note that, as far as food-related products are concerned, there is still room for export growth, simply because food is one of life’s necessities that we just can’t do without.”

Poj added that the seafood industry last year generated about 200 billion baht of export value. Of that total, product worth as much as 150 billion baht was transported to destination markets by sea.