Published:03 October 2012
Liyana Low

Thai shrimp is slowly losing market share in the United States, as competitors turn up the heat and are ramping up production.
Thai shrimp exporters are losing its market share in the US market.

Industry figures show that in the past five months, The volume of Thai shrimp exports to the United States has dropped 22 percent to 48,000 metric tons. During the same period shrimp exports to the United States from Ecuador rose 27 percent to 35,000 metric tons.

Average farmed shrimp prices from Thailand are 10 to 20 percent higher than its competitors, said Paka-on Thpayatanadaja, head of microeconomic research at Kasikorn Securities.

US customers have tightened their spending and turned to cheaper shrimp imports from India, Vietnam and Indonesia, said Thai National Shippers’ Council (TNSC) Chairman Paiboon Ponsuwanna in a Bangkok Post report.

Thailand’s main competitors, Ecuador and Indonesia, have slowly recovered from white spot disease over the past two years, and India started producing much more vannamei shrimp this year, which has contributed to the fall in market share, a Bangkok-based analyst who declined to be named told IntraFish.

Ecuador is also geographically closer to the United States, which makes it cheaper for shrimp to be shipped, the analyst said.

But the analyst also said that while Thailand focuses on farmed shrimp, countries such as Ecuador also export wild-caught shrimp, and this serves a different market in the United States.

In addition, US importers have bought more shrimp earlier in the year; they still have stocks left over from then, so sales have slowed down as well, a spokesperson from Thai Frozen Foods Association (TFFA) told IntraFish.

Vietnam: a customer and a competitor

There is also the “problem” of Vietnam, said Thpayatanadaja.

Because of the country’s recent early mortality disease problem, there has been a surge in shrimp exports to Vietnam from Thailand. And the shrimp is re-processed in Vietnam and competes with Thailand to be sold to the United States, she said.

Some exporters are worried, and they don’t know what to do about it, she told IntraFish.

Minimum wage issues

There have been complaints of how a recently-implemented minimum wage policy has affected the competitiveness of Thai shrimp, but it seems like a small factor that is not significant enough to affect margins.

For a shrimp processor, raw material will take up about 80 percent of production costs, while labor takes up about 7 to 8 percent, so the rise in labor costs will not reflect much on a company’s margins, said Jakkapun Pornpunnarath, an analyst from JP Morgan.

“Simply stating that labor costs have made Thai shrimp more expensive is not accurate,” said Jim Gulkin, group managing director of Siam Canadian.

While the implementation of a minimum wage has added extra costs to processors, there are many other factors that make Thai shrimp more expensive than its competitors, he said.

In addition, some analysts IntraFish spoke to said that such rises in labor costs usually affect exporters selling commodity shrimp. Big companies that are slowly moving away from commodity shrimp exports and are selling value-added shrimp products are more or less shielded from such rise in costs, said Pornpunnarath.

Some companies selling commodity shrimp are still doing better than what industry figures suggest because they have certain customers that have a more specialized quality of product, and this has created a niche for such exporters, said Gulkin.

Despite the drop in market share, Thailand still remains the top shrimp exporter to the United States, followed by Ecuador, Indonesia, India and Vietnam.

“What is happening now in Thailand is normal. The country has enjoyed high shrimp prices for the past two to three years, and now that other countries are increasing production, it is time for others to compete with Thailand again,” said the Bangkok-based analyst.

A lower market share will be the norm for Thailand in the next two to three years, the analyst said.

Thailand overall is still competitive, but its cycles are now more closely tied to output from its competitors than before, said Gulkin.

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