Bangkok--7 May--Thai Union Frozen
TUF, Thailand’s major producer and exporter of canned and frozen seafood products, together with a business ally, Marine Gold Products, have joined forces with 185 shrimp farmers from all over the country in a contract farming arrangement with price guarantee for 10,000 tons of shrimp. The company believes that the so-called “3 Win + 1” strategy will propel its shrimp business growth to 15%.
Mr Rittirong Boonmechote, the managing director of the shrimp business unit at Thai Union Frozen Products PLC (TUF), revealed the details of the company’s “3 Win + 1” contract farming strategy. Three parties are the key beneficiaries from the business arrangement, namely, shrimp farmers, seafood processors, and seafood buyers overseas, while the “+ 1” refers to the Thai government and Thailand as a whole, who would also benefit from the program. This concept of shrimp contract farming arrangement, giving a price guarantee to shrimp raw materials on specified amount of shrimp, has attracted 185 shrimp farmers based in various regions of Thailand. The overall size of the contract, 10,000 tons, is unprecedented for the country.
The first “win” is for the shrimp farmers. Contract farming assures the farmers that there will be a buyer for their products at a specified price and allowing them to know ahead of time what size of shrimp they should produce. This arrangement eliminates any market risk for the shrimp farmers.
The second “win” goes to the processors, such as TUF, who will benefit from better cost management and steady supplies of raw materials. Quality control, freshness, and food safety issues are managed more effectively with contract farming, allowing the processors to meet their customer’s expectations, to expand their market bases and to grow their business on a sustainable basis.
The third “win” refers to seafood buyers in the international markets. Contract farming will assure timely delivery of finished products, better quality, and traceability, giving the consumers more confidence in the safety of their shrimp.
The “+ 1” is the role that contract farming plays in reducing the government’s burden in issuing a price guarantee during periods of oversupply. The scheme will enhance price stability and eliminate the need for government intervention in the market, which may lead to wasteful and ineffective spending. The company believes that contract farming will reduce risks for all parties involved, especially for farmers who will not have to worry about how to sell their shrimps during periods of surplus. With a target of how much shrimp to raise, to what size, and at what price they can be sold, the farmers will be better equipped to plan their production effectively. The company also believes that by forming strong and transparent and mutually beneficial alliance, this arrangement will help the farmers, processors, and buyers, grow their businesses together over the long run.
Mr. Rittirong added that now is the most appropriate time for the company to pursue this strategy. “The contract will cover the period from May to December of this year, which is normally when shrimps are in abundant supply and raw material prices are low. Despite of this, we are determined to roll out the program now to help Thai shrimp farmers, who have played a key role in fuelling our success. We are determined to set up contract prices that are sufficient to the farmers while keeping our costs at a competitive level. We fully believe that shrimp farmers and processors can achieve a mutually beneficial relationship. Our philosophy is that we cannot succeed without first making our farmers succeed,” said Mr. Rittirong.
The company and shrimp farmers have been discussing about contract farming for quite some time, and all parties have shown strong interests in seeing the plan realized, as such a program would be a positive signal of collaboration among various players in the shrimp industry, from upstream, midstream, to downstream. Mr Rittirong commented, “Traceability and food safety, two issues that our foreign customers are intensely interested in, would be enhanced. We would like our contract farming program to serve as a model for other seafood processors with the potential to undertake a similar arrangement.”
Currently, shrimp farmers are facing a shrimp price crisis. Shrimp output is expected to surge from June onward, pushing down prices while costs of raising shrimps are rising. The global economic downturn has also driven down demand for shrimp consumption in restaurants. However, the shift toward dining at home has resulted in higher demand for retail shrimp products sold in supermarkets. Therefore, the company is confident that there is still potential growth in the demand for shrimp products overall. Mr. Rittirong concluded that, “all players in the shrimp industry, shrimp farmers, seafood processors, as well as the government, must pay great attention to new development and work together to withstand the current crisis and to be able to increase Thai shrimp exports on a sustainable basis.”
For more information please contact:
Corporate Communications Department
Thai Union Frozen Products PCL.
Tel: (662) 298-0024 ext. 675 — 678
www.thaiuniongroup.com