Thai Union signs shrimp farm contracts

Thai Union Frozen Products (TUF) announced on Thursday that it has price-guarantee contracts with 185 Thai shrimp farmers, a strategy it says will boost its shrimp sales by 15 percent.

Rittirong Boonmechote, managing director of shrimp business unit at TUF, said the company's "3 Win + 1" contract farming strategy, in conjunction with its business ally Marine Gold Products, benefits not only farmers, processors and overseas seafood buyers but the Thai people. According to TUF,  the total shrimp supply under contract totals 10,000 metric tons worth THB 1.2 billion (USD 34.6 million, EUR 25.8 million).

Under the arrangement, shrimp farmers will have a buyer for their products at a specified price, allowing them to know ahead of time what size they should produce. This eliminates any market risk for the shrimp farmers, said TUF.

Processors like TUF will benefit from enhanced cost management and steady supplies of raw materials. TUF said quality control, freshness and food safety issues are managed more effectively with contract farming, allowing processors to meet their customers' expectations, expand market bases and grow their business sustainably.

Seafood buyers globally will get timely delivery of finished products, better quality and traceability, giving the consumers more confidence in the safety of their shrimp.

The "+ 1" refers to the Thai government and the nation as a whole. TUF says contract farming reduces the government's burden in issuing a price guarantee during periods of oversupply.

"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," said Rittirong. "Despite 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."

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