April 16, 2015
 

Thai shrimp's fate stalls rise of an Asian food hegemon

 

By F.E. OLIMPO

  
  

Two years of Early Mortality Syndrome (EMS) have taken a heavy toll on Thailand's shrimp industry.  Far more than the estimated US$2 billion to US$3 billion a year in lost income, its most devastating effect has been on the country's national psyche and its dream of building a food-supply empire.

 

Until 2012, Thailand was the globe's leading farmed shrimp exporter, controlling between 30% and 40% of the world market, including that of the United States.

 

But EMS ended that sumptuous reign by shaving more than half of Thailand's 2013 shrimp output to 250,000 tonnes, from 540,000 tonnes in 2012 - and a peak of 640,000 tonnes in 2010 - leaving it with only a 10% share of the global market.

 

It is no longer the number one shrimp supplier to the US - India is.

 

For a country that takes badges and honours very seriously, this was a loss of face. Besides, via its "Kitchen of the World" export push, Thailand nurtures a dream of building a food hegemon. And this loss was a major setback towards that goal.

 

Thai officials have taken the fall so hard that getting the US title back has almost become an obsession, a condition that often blurs the line between reality and wishful thinking.

 

The recent prediction by the country's Department of Fisheries could be a case in point. It said Thailand's cultured shrimp production this year should range from 300,000 to 400,000 tonnes - a 50% to 100% spike from the 2014 level of 200,000 tonnes.

 

Many industry leaders find the forecast too unrealistic, although the government insists it's based on a survey of production capabilities among the country's major shrimp-farming regions. In that survey, estimates provided by shrimp farmers ranged from 89,999 tonnes to 118,531 for the  Eastern region, 44,300 to 60,693 tonnes for the Central region, 76,500 to 102,594tonnes for Upper Southern Thailand, 59,000 to 79,155 tonnes for the Southern to Andaman area, and 30,320 to 39,024 tonnes for the Southern-Gulf of Thailand provinces.

  
  

EMS devastates industry

 

The EMS plague has since bottomed out across the country and shrimp productions have started to recover.  But recovery can't be that quick and easy, as experience of other countries recovering from EMS will show. Farmers overcoming EMS, according to industry insiders, tend to use lower stocking densities and harvest smaller shrimp, making production expansion farfetched, if not impossible.

 

It would be unfair though to just dismiss Thai fisheries officials as being excitable. The Thai Frozen Foods Association (TFFA), an organisation of local shrimp processors and exporters, had also come out with an overly optimistic production estimate of 250,000 to 300,000 tonnes for this year, although it has scaled it down since to just 250,000 tonnes.

 

But there are sober voices in the country that don't expect recovery to be that soon. Thai Union Group, Thailand's largest seafood exporter, says it is going to be slow and gradual. In fact, it doesn't see any significant growth during the first half of 2015 as farmers are going to go slow when stocking their ponds.

 

The growth, which it estimates at about 25%, could come in the second half of 2015, Thai Union says. So, at the most, Thailand's total shrimp output this year could be around 250,000 tonnes.

 

Reviewing the business prospects of Thai agribusiness conglomerate Charoen Pokphand Foods (CPF), another leading shrimp exporter, local brokerage firm Bualuang Securities agrees. It says recovery for CPF's shrimp unit has proven to be weaker than earlier anticipated but expects things to improve from the second quarter toward the first half of the year.

 

While things are expected to improve there's no telling whether Thailand can be number one again. Aside from EMS, there are other factors keeping Thai shrimp production from going back to where it was. 

 

Even if EMS is completely gone - and it is not - there are problems to contend with. Late last year, according to news reports, eastern Thailand was inundated by the whitespot (WSSV) virus even as the EMS, along with microsporidian infection, continued to wreak havoc in some farms.

 

One large farm was reported to have stocked 100 ponds with new postlarvae. Ninety six of the ponds were hit with EMS, while the remaining four were ravaged by WSSV.

 

"This 100% failure on a large, well-run farm is a good indication that things are still very tough in Thailand," writes one industry expert in a blog.

 

And while Thailand's shrimp industry is struggling, competing countries are making hay.

   
   

Competition limits recovery

 

Since 2013, India has replaced Thailand as the world's top producer. But a new disease, called the running mortality syndrome (RMS), has caused Indian shrimp production to slow down lately. RMS has been detected on shrimp farms in Andhra Pradesh and Tamil Nadu, India's major shrimp-producing states.
  

The disease, however, isn't likely to turn India into another Thailand - at least not in the next few years. Although it is expected to cause production problems, RMS is not as destructive as EMS, which means India isn't likely to lose its market dominance anytime soon.

 

All this is very bad news for Thailand. In fact, even if India's situation gets worse, Thailand still has to contend with Indonesia. Among its rivals in the region, Indonesia has the greatest potential to increase production. The country has 1.2 million hectares for shrimp breeding. Thailand has only slightly more than 100,000 hectares.

 

Besides, after some missteps, Indonesia is finally getting its acts together to finally claim its place in the sun. The country's maritime and fishery ministry has launched shrimp industrialisation, which is expected to boost shrimp production by leaps and bounds.

 

This year, Indonesia hopes to nearly double shrimp output to 785,900 tonnes, from 415,703 tonnes in 2012.

 

Harvests have been climbing steadily during the last few years that, according to Indonesian Marine Fisheries Minister Susi Pudjiastuti, the country could emerge as the world's number one shrimp producer beginning this year.

 

Intense as the foreign competition currently is, Thailand could face even more trade challenges in the future. Neighbouring Vietnam's shrimp sector, though backward and with a nasty reputation for using banned substances, is yet another long-term threat.

 

It has already made inroads in Southeast Asian supermarkets. Should Vietnam improve the quality of its shrimp production, its low wages undercut not only Thailand but even those of Indonesia.

 

Alongside all this intense supply-side competition, Thailand is also getting bad news from its largest export market.

 

Despite pleas from the country's shrimp farmers, the European Union is cutting tariff privileges on Thai shrimp beginning this year.

 

The end of the EU's Generalised System of Preferences will see tariffs on Thai shrimp triple from 4% to 12%, making it less competitive in the European market.

 

Even worse, last year's discovery of slave labour on ships supplying fishmeal to Thai aqua feed mills created both a public relations disaster and a long-term market access problem.

 

At the very least, the discovery of slave labour undermines Thai shrimp's attempt to overcome lower-cost Indian and Indonesian competition by going upmarket, or emphasising quality over price.

 

Worse yet, because of such incidents, Thai sea food, shrimp included, face the prospect of being banned in Europe, unless Thailand tackles the problem of illegal fishing to EU's full satisfaction. Somsak Paneetatayasai, president of the Thai Shrimp Association, says the EU is expected to issue a "yellow card" to impose a close watch on Thailand for failing to strictly tackle illegal, unreported and unregulated (IUU) fishing concerning the human rights of fishing labourers.

 

Unless Thailand makes real progress in solving the problem during the first half of 2015, the EU can issue a "red card" to ban fishery products from Thailand altogether.

 

If that happens, Thailand can in fact kiss its dream of building a food hegemon goodbye, particularly with respect to its once unequalled shrimp-farming industry.

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