Shrimp processing overcapacity in Thailand keeps prices solid for farmer and is likely to drive future increases in output.
The abundance of shrimp processing plants in Thailand keeps prices solid for farmer – even in times of slow markets – and is likely to drive future increases in production, said the managing director of Siam Canadian Foods, a frozen seafood supplier.
There is an overcapacity of processing plants in Thailand and this means processors have to keep buying from farmers, to keep the plants running, said Jim Gulkin group managing director of Siam Canadian.
Despite considerable consolidation in the Thai business – which has gone from around 80 factories 20 years ago, to around 10 now controlling 80 percent of the trade – there is still an overcapacity, said Gulkin.
“I Think Thailand will continue to grow,” he told IntraFish. “There are too many factories for the amount of raw material available – this is one of the reasons that Thai raw material prices don’t go down, even when the markets tend to weaken, as companies need products to though their facilities and will take lower margins to keep things operating.”
As long as there is a need shrimp, the farms will keep prices as high they can, he said.
This means the Thai farmers are likely to continue to increase shrimp output, as much is necessary while keeping within government limits.
“I think there is incentive in Thailand for production to increase – so I think it will increase,” said Gulkin.
There will always be disease problems and natural disasters, such as the flooding which wiped out a large chunk of the Thai production at the start of the year.
The Thai shrimp farms are under threat from flooding again this week.
Siam Canadian, which is based in the Thai capital of Bangkok, also has offices in India, China, Myanmar, Indonesia and Vietnam for sourcing shrimp and other seafood.
The Thai business has plenty of plus factors, said Gulkin.
“Thailand has very good industry. It has large plants, good production and a reputation of delivering, whatever is happening in the market,” he said.
Companies in Thailand also have a reputation for reliability, said Gulkin. “Players in other countries can be less reliable – if they are about to lose money, they might run away from the contract.
This makes Thailand a strong partner for retail supplier looking to buy 200 or 300 containers for program business, he said.