TUF contracts 185 shrimpers

Thai Union Frozen Products Plc (TUF) yesterday teamed up with 185 shrimp farmers across the country in a contract farming arrangement on an unprecedented scale of 10,000 tonnes, worth about 1.2 billion baht.

Under the deal, Thailand's major producer and exporter of canned and frozen seafood will buy from farmers at specified prices based on production costs plus a level of profit agreed between the farmers and the company.

The contract should help farmers plan what size of shrimp to produce and should cut their market risks from price fluctuations - especially between May and December, when shrimp is normally in abundant supply - said Rittirong Boonmechote, managing director of TUF's shrimp business unit.

"We believe contract farming will help reduce risks for all parties involved, especially for farmers, who will not have to worry about how to sell their shrimp during periods of surplus," he said.

Thai
"With a target of how much shrimp to produce, of what size, and at what price they can be sold, the farmers will be better equipped to plan their production effectively."

TUF stands to benefit from better cost management and steady supplies of raw materials, said Mr Rittirong. Quality control, freshness and food safety are also managed more effectively with contract farming, helping processors like TUF to meet their customers' expectations.

For international buyers, the scheme should ensure punctual delivery of finished products along with better quality and traceability, giving consumers more confidence in safety.
"Traceability and food safety - two issues that our foreign customers are intensely interested in - would be enhanced under the contract farming programme," said Mr Rittirong.

The scheme will also reduce the government's financial burden from its yearly farm price intervention schemes during periods of oversupply, he said.

He insisted the contract did not oblige farmers to buy shrimp feed, prawn larvae or any other products from TUF. Farmers can also decide how much shrimp they commit to selling the company under the scheme.

TUF currently buys about 40,000 tonnes of shrimp from farmers to supply its processing plants. The shrimp business generated about US$180 million for TUF last year, excluding $380-million sales by its American subsidiaries Empress International and Chicken of the Sea Frozen Food.

TUF forecasts sales from its Thai operations will increase by 15% this year and those from subsidiaries, such as Chicken of the Sea, by at least 15%.

TUF and shrimp farmers have been in discussions over contract farming for some time, with a shared goal of collaboration between upstream, midstream and downstream players in the shrimp industry, said Mr Rittirong. Udon Songserm, a farmer from Rayong province, welcomed TUF's initiative, saying the guaranteed prices would reduce farmers' worries over future shrimp prices.