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Thailand's shrimp culture growing.

Pond cultivation of black tiger prawns, Penaeus monodon, has brought sweeping economic change over the last 2 years to the coastal areas of Songkhla and Nakhon Si Thammarat on the Malaysian Peninsula. Large, vertically integrated aquaculture companies and small-scale rice farmers alike have invested heavily in the transformation of paddy fields into semi-intensive ponds for shrimp raising. They have also developed an impressive infrastructure of electrical and water supplies, feeder roads, shrimp hatcheries, shrimp nurseries, feed mills, cold storage, and processing plants. Located within an hour's drive of Songkhla's new deep-water port, the burgeoning shrimp industry will have direct access to international markets. Despite a price slump since May 1989, expansion on all fronts-Production, processing and marketing-continues at a feverish pace. However, the industry faces significant problems, mostly related to the cost/price equation. Continued low prices over several years could eliminate all but the most efficient Thai shrimp producers.

This report focuses on the recent boom in black tiger prawn culture along the Songkhla-Nakhon Si Thammarat littoral region and details the experiences of three of the largest firms operating in the Songkhla area. Songkhla's National Institute of Coastal Aquaculture (NICA) has provided the technological foundation for the establishment of shrimp culture in this area. Since 1982, NICA has operated a large shrimp hatchery where wild brood stock are reared on high-quality feeds in optimum water temperature and salinity conditions. The initial buyers of NICA's shrimp postlarvae (pl) were small-scale shrimp farmers surrounding Songkhla Lake.


Thailand's shrimp culture industry is the fastest growing in Southeast Asia. In only 5 years, Thailand has outstripped its competitors to become the region's number one producer. Thai shrimp harvests in 1988 reached 55,000 metric tons (t), a 320 percent increase over the 13,000 t produced in 1984. Indonesian and Philippine harvests rose by only 62 percent and 51 percent, respectively, over the same time period. Thailand's 1989 farmed shrimp production is expected to nearly double, surpassing 100,000 t.

Thailand's rapid advance into commercial shrimp culture appears all the more remarkable given its late start. Thai farmers have long been adept at using traditional extensive shrimp farming methods. They diked off estuarine and coastal mangrove areas to trap brackish-water marine life, which they harvested after a 45-to 60-day growth period. This simple system gave an annual shrimp yield of about 40 kg per rai (6.25 rais equal 1 ha). Semi-intensive shrimp cultivation, a comparatively recent phenomenon, involves raising hatchery-produced pl on commercial feeds in growout ponds. This system yields from 500-1,000 kg/rai (3,100-6,300 kg/ha) per year. However, the system demands a measure of sophistication in fry and feed production and in pond maintenance. The intensive culture system employs extremely high stocking densities to boost production to 800-2,000 kg/rai (5,000-12,500 kg/ha), but there is the risk of shrimp losses from poor water quality, stress from overcrowding, and resultant diseases. One such disease, monodon baclovirus (MBV), virtually wiped out Taiwan's tiger prawn industry and opened lucrative international markets to new competitors, such as Thailand.

The explosive growth of the Thai cultured shrimp industry has been accompanied by the rapid expansion of shrimp hatcheries and feed mills. In 1985, Thailand had one shrimp feed mill and a market demand of 6,000 t. Three years later, there were 15 shrimp feedmills and a market demand of 100,000 t. Supplies of shrimp pl are obtained from government hatcheries, about 1,500 family-owned backyard hatchery operations, and large-scale agro-industrial concerns.

The Songkhla Pioneer

In 1985, Aquastar[1], an American-owned consortium bought 64 ha of rice paddies adjacent to the sea in Songkhla's Ranod District. Aquastar's plan was novel: Expand shrimp cultivation beyond the confines of estuarine and mangrove regions to paddy land, which had a long history of indifferent success growing rice.

[1] Mention of trade names or commercial firm does not imply endorsement by the National Marine Fisheries Service, NOAA.

Aquastar stocked 24 demonstration ponds, each of 1 ha, in January 1988 with shrimp pl from its nurseries, using an intensive culture density scheme to impress local farmers with the profit potential. Initial trials yielded harvests of 6 t/ha, gradually increasing to 7-8 t/ha. However, in practice, Aquastar is committed to a semi-intensive mode of shrimp culture: 15 to 20 shrimp/m, resulting in a 3-4 t/ha harvest.

Having proved the potential for shrimp culture, Aquastar began negotiations with local landowners to convert marginally profitable rice paddies into shrimp ponds. Within 1 year, it had contracted with 293 landowners in 7 locations, for a total of 310ha of ponds. In the process, Aquastar standardized irregularly-shaped plots into 1-ha ponds. Most importantly, owners retained title to their plots and were encouraged to personally manage the new shrimp farms-a cooperative concept designed to maximize profits for both farm owners and the parent company.

Following the surveying and reorganization of land ownership, Aquastar provided training for pond owners in shrimp cultivation while constructing the ponds. Groups of 40 farmers were given a 20-day training course at company headquarters-half in classroom instruction, half in practical field work. Aquastar currently provides only transportation to the training center, but plans to build a dormitory and dining hall.

A critical factor in shrimp culture is the salinity of the pond water. Originally, Aquastar mixed fresh well water with sea water. The resultant brackish water had optimum salinity (25-26 0/00) for stimulating rapid shrimp growth. However, when neighboring farmers complained that water levels in their wells were dropping, Aquastar shut down its own wells and used sea water, with a salinity of 33-35 0/00 (31-33 0/00 during monsoons). While salt water culture results in a slower growth rate (11 days on the average), it has the advantage over fresh water of not harboring bacteria and disease. Moreover, brakish water ponds must be harvested before the monsoon season, as too much rain water subjects the shrimp to stress and inhibits growth. This is not true of salt water ponds, since a moderate admixture of rainwater will only stimulate growth.

Aquastar's ponds are uniformly constructed. Each farmer owns about 1.3 ha; 1.0 ha of pond area and 0.3 ha of dikes, drainage and intake canals, roads, and caretaker huts. A concrete outer wall-15 cm higher than the local roadbed-encloses each of the groups of ponds and provides flood protection. The 1988 floods had no effect on Aquastar's ponds, though many nearby farmers' ponds were ruined. Each pond group is provided with intake canals on its outer border and discharge canals on the inner rim. Aquastar owns and operates each pond's intake pumping station and backup generators. Electricity is essential for the pond's aeration floats (eight per pond), which maintain a healthy flow of oxygen to the water.

Ponds are stocked from Aquastar's shrimp hatchery, which obtains brood stock from the Andaman Sea. The 10-tank hatchery produces 30 million fry per month, running continuous batches over a 6-day period before transferring them into a nursery for 15-18 days. From the nursery the shrimp are moved to grow-out ponds, where they are fed five times a day with pelleted feed from Aquastar's own mill (a capacity of 1,000 t, with planned expansion as more ponds go into production). Individual pond owners, assisted by company extension agents, manage the shrimp for the 4 months remaining until harvest. The first of Aquastar's seven groups harvested its first shrimp in mid-September. The remaining five groups completed pond construction in late August and September.

Aquastar transports the harvested shrimp to cold storage. The company is currently renting cold storage facilities on the Songkhla-Hat Yai road, but has begun construction of its own cold storage and processing plant on a 12-ha site in Singha Nakhon, 25 km from Songkhla's new deep-water port. The processing plant will have a capacity of 50 t per day when construction is finished at the end of January 1990. Processed shrimp will be packed in containers for shipment from Songkhla's deep-water port. Currently, Aquastar's markets are in Japan, but the company intends to expand to the United States in 1990 and to Europe in 1991. Thus, from egg to processed product for international markets, Aquastar functions as a vertically-integrated enterprise.

With phase one virtually complete, Aquastar is now beginning phase two-the development of 500-600 ponds. It plans to expand the size of its pond groups. While the first groups ranged from 26-30 ponds per group, 50 ponds is now the average and is much more cost-effective. The company hopes to organize future groups of 200-300 ponds. Bechtel Corporation is currently bidding to undertake all future pond construction for Aquastar, freeing it to concentrate on production and marketing. Aquastar continues to hold a significant advantage over other shrimp-growing companies in that, as a cooperative venture with local farmers, it is spared onerous land purchase costs and protracted negotiations.

Taiwanese Competition

Following Aquastar's success, other large shriinp-rearing companies targeted the Ranod-Hua Sai area. However, prime shrimp-growing areas are limited. North of Hua Sai, shrimp farming is generally carried out by traditional methods in mangrove areas from the Pakpanang District of Nakhon Si Thammarat through Surat Thani Province. South of Ranod, in Satingpla District, soils are too sandy and large parcels too small. As middle and large-sized shrimp companies sought to invest in the prime Ranod-Hua Sai area, land prices began to skyrocket.

In January 1988, Ting Thai, a Taiwanese-Thai joint venture, became Aquastar's first major competitor in the area. Land prices proved so prohibitive, and negotiations so torturous, that Ting Thai purchased only a 32-ha site in Hua Sai, preferring to buy 4 other sites of 56, 32, 32, and 5 ha, respectively, on the eastern shore of Songkhla Lake because the land was comparatively cheap and available in large parcels. Construction of a large hatchery and nursery was completed in May 1989 and Ting Thai began producing pl the following month. Ting Thai's feed mill, 12 km north of Hat Yai, came on-line at about the same time. A cold storage and processing plant will be located nearby, with the first stage of construction to be completed in 16 months. Further expansion is scheduled over a 3-year period.

Despite progress in the development of a vertically-integrated infrastructure, Ting Thai's selection of the four lakeside ponds has caused it major problems. The lake sites are salt-marsh peat and clay, and are highly acidic. Such soils call for periodic liming and special pond construction techniques. The ponds must be created by building dike walls. However, ponds built in this way require pumping intake and drainage water in and out of the ponds at extra cost. (Aquastar's ponds rely on a simple gravity flow system for drainage.) More seriously, the brackish water from the lake used in the ponds is of inferior quality. The area is one of intense aquaculture use, especially around the island of Koh Yoh, where local farmers have set up hundreds of sea bass and shrimp cages. In addition, there is minimal tidal flow, allowing insufficient drainage and the danger of the spread of diseases.

Given the severe water quality problems, Ting Thai lowered its stocking density from 25-30 pl/[m.sup.3] to 20. It stocked three ponds with pl in July 1989; two other ponds are still under construction. The company plans to harvest in November in the hope of beating the onset of the northeast monsoons, which will slow shrimp growth. Until Ting Thai's own processing plant is in operation, it has contracted with the Seahorse Packing Company in Songkhla to wash, chlorinate, head, and grade its first harvests. Ting Thai's goal is to purchase a total of 640 ha of ponds, preferably in the area of Hua Sai, although this will be an expensive and time-consuming operation, and will depend on the results of the initial harvests.

P. Charoen Phan Group

The P. Charoen Phan Group (CP), a Bangkok-based agro-industrial conglomerate formed in 1923, is a major producer of shrimp, pigs, ducks, and chickens, as well as tropical fruits, corn, soybeans, and sorghum. CP is the world's fifth largest producer of animal feeds and employs 12,000 people in Thailand, Malaysia, Singapore, Indonesia, Hong Kong, Taiwan, Belgium, China, and the United States. The company's gross annual turnover is estimated at $2 billion. Recently, CP arranged for a $60 million 5-year revolving credit loan through a consortium of Japanese banks. Given CP's interests and financial resources, it was a logical step for CP to move into the profitable shrimp farming industry. In one year, CP purchased large tracts of paddy land in Hua Sai to convert to shrimp ponds.

CP is currently involved in two shrimp farming projects: One is a joint venture with Mitsubishi of Japan and the other is CP-owned. Construction on both projects began in January 1989. The hatchery at CP/Mitsubishi was scheduled to be completed by the end of September, with a capacity of 10 million pl per month. A nursery was to be ready to begin operations shortly thereafter and CP/Mitsubishi planned to stock 80 ha of grow-out ponds. The CP-owned project's grow-out ponds will total 96 ha in the first stage of development, with another 80 ha to come on-line in the second stage. Both projects will use 100 percent sea water. While this is the company's first venture into seawater-irrigated ponds, results of an earlier 80-ha project in a Pattaya estuary site convinced the company to revert to pure sea water. At a 34 0/00 salinity level, seawater shrimp matured only 2 weeks later than shrimp in brackish water and proved to have a superior taste. Both projects in the Hua Sai area will be supplied by the CP feed mill in Hat Yai. CP plans to use intensive cultivation methods, stocking 30 shrimp/[m.sup.3] and harvesting 6 t/ha from 2-ha ponds. Its first harvest from 10 ponds was expected in February 1990.

CP's cold storage and processing plant was scheduled for completion in early March 1990. CP estimates that it will produce 30,000-40,000 t annually once it becomes fully operational. The company will emphasize quality control and plans to ship fully processed shrimp-headless, boiled, peeled, breaded, etc. in containers from Songkhla. CP/Mitsubishi intends to obtain Japanese registration of its processing plant to avoid port inspection delays of its product in Japan.

Both CP and CP/Mitsubishi plan to try intensive shrimp culture, but have decided not to expand their own pond area for the present. In the future, they will contract with local shrimp farmers, with CP providing pl for stocking, feed, and marketing services and the local farmers providing the ponds and labor. As pond farming is labor-intensive, the CP view (like that of Aquastar) is that individual farmers will manage their shrimp more conscientiously than will hired help. The exact form the relationship between CP and local farmers will take-contracts, cooperatives, etc.-is still open, however. In any case, the potential for growth is enormous as CP's newly installed pumping system can move 4 [m.sup.3] of sea water per second-plenty to share with cooperating private farmers in the future.

Overdevelopment Problems

The three large companies profiled above have been joined in the Ranod-Hua Sai area by at least 10 mid-sized companies with holdings of 16-32 ha, plus countless numbers of small-scale pond owners. The greatest problem that all face is the plummeting price of shrimp in the wake of a world-wide supply glut.

When Aquastar harvested its first crops in July 1988, shrimp prices stood at 250 baht/kg ($10.00/kg at the conversion rate of 25 baht=$1). By January 1989, the price had fallen to 150 baht ($6.00)/kg. Even at this price, Aquastar cooperative farmers were still making substantial profits. As there are two harvests per year, farmers could take in a gross income of 430,000 baht ($17,200) per year. Subtracting construction costs and bank loan repayments leaves individual net income at about 300,000 baht ($12,000) per year. After 3 1/2 years, the farmer should be able to clear startup debts and begin to accrue all profits. Even during the repayment stage, the net income for the shrimp farmer of 300,000 baht far exceeds the 20,000 baht per ha he would have received from his former rice crop.

Unfortunately these equations were upset in May 1989, as Japanese importers-who buy 70 percent of Thailand's shrimp exports-stopped taking new orders. Japan's domestic shrimp supplies soared to a 5-month inventory, as opposed to the normal 3 months. The Thai market price suddenly dropped to only 96 baht ($3.84)/kg. This crisis provoked protest demonstrations by shrimp farmers in Bangkok and, ultimately, a government investigation into the problems plaguing the overheated shrimp industry. These included the following items.

High Feed Costs

Feed accounts for 60 percent of production costs. A Parliament Minister from a southern Thai province accused the CP Company, which controls 70 percent of Thailand's shrimp feed market, of keeping feed prices artificially high in order to drive out small-scale farmers and buy up their ponds. CP responded that, unlike the Philippines, which imports cheap American soybeans, Thailand protects its nascent soybean industry, which is geared to human consumption, by restricting importation of soybeans (including the lower grade soybeans used in shrimp feed). CP and other feed companies are also forced to use low-quality Thai fish meal, below 65 percent-protein content, because they are prohibited from utilizing high-protein imported fish meal. Finally, the shrimp culture industry's huge demands for fish meal caused the fishmeal price to soar. In July, Thailand's Commerce Ministry approved the importation of 10,000t of high quality fishmeal to stabilize the market.

Electricity Costs

Shrimp farmers must pay higher domestic rates for electricity, rather than industrial rates. Thailand's Fisheries Department has recommended a reduction in these rates.

Shortage of Cold Storage

The shrimp industry must be able to preserve its production in order to weather periodic price slumps. On 21 June 1989, Thailand's Board of Investment decided to open its promotional privileges to investors in order to spur the rapid expansion of cold storage facilities.

Environmental Problems

The heavy concentration of shrimp farms near the cities of Samut Prakan, Samut Sakorn, and Samut Songkhram (near Bangkok) has already led to severe water quality problems and the threat of another disease disaster similar to the one in Taiwan. So far, in Ranod and Hua Sai, water quality has remained good. Shrimp ponds are disease-free and are cleaned after each harvest. Longer-term environmental effects, however, have yet to be addressed. Among these are the changing depth and salinity of Songkhla Lake, the drawing off of the Ranod-Hua Sai aquifer by well pumps, and the discharge of shrimp wastes into the sea. Bechtel Corporation has offered to do an environmental impact study prior to its proposed pond construction program for Aquastar. The primary concern at the moment is the adoption of flood prevention measures to prevent a repeat of the November 1988 disaster in southern Thailand in which 12,500 ha of shrimp ponds were flooded and 24 million shrimp lost.

Overdependence on the Japanese Market

Japan has been glutted with supplies from the booming shrimp culture industries of Thailand, the Philippines, and Indonesia. Producers recognize that, as long as Japan remains the primary market for these exporters, prices are unlikely to rise, and they are searching for other markets. The U.S. market, which imports primarily Ecuadorian shrimp and purchases only about 7 percent of Thailand's shrimp exports, has been growing by only 1 percent per year. The European market, however, has been growing at 5 percent per year and recently, according to CP executives, has registered sharp increases over last year's demand, perhaps because of lower prices. If such demand continues to increase, long-term prices might stabilize at around 150 baht ($6.00)/kg.

In the short term, however, the outlook is bleak. Between May and August 1989, prices fluctuated between 120-150 baht ($4.80-$6.00)/kg, but fell again in September to 95-100 baht ($3.80-$4.00). Large shrimp growers, with vertically integrated systems, can remain solvent even at these prices. Aquastar estimates that its current production costs range between 80-100 baht ($3.20-$4.00)/kg, with the prospect of a future decline to 70 baht ($2.80). At the moment, low local prices do not concern the company or its participating members because they are operating on long-term purchase contracts of 146 baht ($5.85)/kg (30 pieces). Initial harvests averaged 4.3 t per pond-well above the expected 3.5 tons. In a move to diversify its foreign markets, Aquastar has already shipped 20 t to Spain, with a second order destined for Canada. Ting Thai, with its relatively cheap land purchases, estimates its costs at about 80 baht ($3.20)/kg. The company is contemplating a switch to fish production should shrimp prices dip lower. CP's costs, which include expensive land purchases, and construction and labor costs, are between 95-100 baht ($3.80-$4.00)/kg. CP is concentrating on mastering intensive shrimp culture technology. The economic picture is more ominous for small-scale growers who must pay higher prices for feed and post-larvae. Mali Boonyaratpalin, Director of NICA, estimates costs for small farmers at 110-117 baht ($4.40-$4.68). With few financial resources, such farmers will not survive long under prolonged low market prices. While some small farmers who own their own land and provide their own labor may be able to scrimp by, mid-level farmers, with higher land and labor costs, may be hit particularly hard. If low shrimp prices prevail over the next few years, high-tech shrimp farms with high production costs may be saying good-bye to their investments. (Source: IFR-89/ 95, prepared by Paul E. Niemeier, Foreign Affairs Specialist, Office of International Affairs, NMFS, NOAA, 1335 East-West Highway, Silver Spring, MD 20910.
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Publication:Marine Fisheries Review
Date:Mar 22, 1990
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