THA:75:008:80/WP/17
THAI FRESHWATER PRAWN AND BRINE SHRIMP FARMING
REPORT ON A STUDY OF ECONOMICS, MARKETING AND PROCESSING REQUIREMENTS
REPORT ON A STUDY OF ECONOMICS, MARKETING AND PROCESSING REQUIREMENTS
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THA:75:008:80/WP/17 THAI FRESHWATER PRAWN AND BRINE SHRIMP FARMING REPORT ON A STUDY OF ECONOMICS, MARKETING AND PROCESSING REQUIREMENTS |
by
Department of Fisheries, Ministry of Agriculture
and Cooperatives, Thailand
and
UNDP/FAO Programme for the Expansion of Freshwater
Prawn Farming in Thailand
(THA/75/008)
Bangpagong, Chacheongsao
Thailand
1980
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This electronic document has been scanned using optical character recognition (OCR) software. FAO declines all responsibility for any discrepancies that may exist between the present document and its original printed version.
2. ECONOMIC STATUS OF PRAWN FARMING
2.4 COST/BENEFIT OF STOCKING NATURAL WATERS
3. MARKETING AND PROCESSING OF PRAWNS
3.2 DOMESTIC MARKETING AND SALES
3.3.2 Fundamentals for Prawn Export Marketing
3.3.6 Standards for Export Quality Prawns
3.4 PROCESSING OF MACROBRACHIUM ROSENBERGII IN THAILAND
3.5 RECOMMENDATIONS FOR UPDATING MARKETING STUDIES
4. PRODUCTION, PROCESSING AND MARKETING OF ARTEMIA
4.2 WORLD DEMAND/SUPPLY AND PRODUCT CHARACTERISTICS
4.5 CYST PROCESSING RECOMMENDATIONS
4.7 FEASIBILITY OF ARTEMIA FARMING FOR SUPLLEMENTARY INCOME TO SALT PRODUCTION
4.8 ARTEMIA CYST SELF SUFFICIENCY
1 Distribution Channel for Freshwater Prawns in Thailand
2 Singapore/Hong Kong Distribution Channel for Prawns
3 Japanese Distribution Channel for Prawns
1 Summary of Current Prawn Consumption in Markets Investigated
2 World Demand for Artemia Cysts, 1980
3 World Supply of Artemia Cysts in Metric Tons, 1979
4 Artemia Cyst Feature Appraisal by Priority of Perceived Importance
5 Comparison of the Current Pricing Structure and An Export Structure of Cysts
7 Estimated Cyst Requirement for Thailand, 1981–1985
3 Annual Catch of Freshwater Prawn from Natural Waters in Thailand, 1971–1978
4 Economic Survey of Freshwater Prawn Culture in Thailand - Hatchery
5 Economic Survey of Freshwater Prawn Culture in Thailand - Farm
7 Estimated Average Costs and Returns of Freshwater Prawn Hatchery Operation by Size
8 Costs and Returns of An Integrated Freshwater Prawn Hatchery and Farm Production
9 Estimated Number of Farms and Area in Freshwater Prawn Production in Thailand, 1978–1980
10 Estimated Average Costs and Returns per Rai of Freshwater Prawn Production by Farm Size
11 Estimated Break-even Production per Rai by Farm Size, Given Production Costs and Farm Prices
12 Prawn Export Marketing Research Contacts
13 Domestic Freshwater Prawn Marketing Survey
14 Summary Tables from Domestic Marketing Survey
16 Air Distribution Capacities to Singapore, Hong Kong and Japan
17 Tables and Specifications for the Standard for Shrimp/Prawn Used in Japan for Importation
18 Processing and Packaging Specifications
19 Ratio of Prawn and Packing Media and Quality of Prawn in Experiment 1
20 Ratio of Prawn and Packing Media and Quality of Prawn in Experiment 2
21 The Relationship between Changes in Time and Temperature
22 History of the Brine Shrimp Industry
23 Artemia Cysts Inspection and Hatch Evaluation Methodology
25 Alternative Cost Matrix per Productive Rai (in Baht)
28 Adaptation of Flow Through System to an Existing Salt Evaporation Pond
29 Incremental Processing Costs for Three-fold Expansion at Chacheongsao Fisheries Station
30 Current Pricing Structure of Brine Shrimp Cyst Available in Thailand
31 Alternative Production/Revenue Matrix per Productive Rai
33 Persons (in addition to marketing section) Contacted or Interviewed
A. ECONOMIC STATUS OF PRAWN FARMING
Freshwater prawn (Macrobrachium rosenbergil) farming is a rapidly expanding industry in Thailand. The production of both post-larvae and marketable prawn increased about 80 percent between 1979 and 1980. Currently the industry consists of 59 hatcheries and at least 455 farms utilizing approximately 2,346 rai (375 hectares) of land. Current hatchery production exceeds 25 million post-larvae per year with a potential production of over 100 million. The total production of marketable prawn in 1980 is estimated to be about 350 tons with a total retail value of nearly 70 million Baht ($3.5 million). Thailand is already a leader in terms of total land used for freshwater prawn production including Hawaii.
Since culture technology is not expected to be a limiting factor for expansion, the future development of this industry depends mainly on its economic viability and the market potential for locally produced prawn. The economic viability of this industry was evaluated mainly based on the data collected from a field survey. The production efficiency of both hatchery and grow–out farm operations in Thailand is relatively low. The productivity per unit of Artemia (the most important food for juvenile prawn) used in the hatchery is only about half that in Hawaii, and the production of marketable prawn per unit of pond area is only one-third. However, despite the low productivities, all of the hatcheries and farms interviewed are currently making a good profit mainly because of the relatively low cost of inputs and the prevailing high price of prawn. The average rate of return to initial investment is high for both hatchery and grow-out farm operations. In most cases, the initial investment can be paid off within the second year of operation. However, this situation will change if the production exceeds the demand resulting in a lower price for prawn and hence lower profit. Therefore, our economic evaluation should be up–dated as necessary, to reflect the actual status of the industry.
The high profitability of the investment in hatcheries and grow–out farms will further stimulate the expansion of this industry. Based on the expected increase in post-larvae production, it is estimated that the industry will grow at about 35 percent annually for the next few years if suitable production resources, such as land, labor, water and capital, are available at reasonable prices and if a large market (domestic and/or export) exists for locally produced prawn. Land and labor resources are abundant in Thailand and are not expected to be in short supply for freshwater prawn farming. The shortage of water during the dry season and water pollution create some problems for those farms relying on natural waters. Capital does not appear to be a significant constraint for development at the present time but to cope with the future expansion of this industry, adequate financial support from the government agencies are needed in the form of providing credit to small farm owners, free or cheap post-larvae from government hatcheries with a well defined distribution policy favorable to small farms and new beginners in prawn farming, more qualified extension workers with intensified extension and training services, and applied researches to improve the production efficiency of hatchery and farm operations. All of these aspects should be considered in the future aquaculture development plan.
B. MARKETING AND PROCESSING OF PRAWNS
Realizing the growing potential for Macrobrachium production in Thailand, market research studies were inititated to determine domestic distribution and sales characteristics, export market potential, and processing and packaging techniques of maintaining quality standards for export grade. Findings presented in this report exposed elements of human and business behavior which are involved in the purchasing decision of freshwater prawns. Understanding this purchasing process will aid governmental assistance and guidance for proper development in the expansion of Thailand's Macrobrachium industry.
Domestically, producers, importers, wholesalers, retailers, and consumers were surveyed to determine key attributes of freshwater prawn consumption. In general, prawns (or ‘khung’) are largely undifferentiated with sea prawns at the consumer level, unless purchased or prepared with heads-on. There is a preference of local establishments however, to utilize Macrobrachium for menu preparation, with substitution of sea varieties seldom occurring unless supplies are impacted by shortages. Freshwater prawns are prized in the larger sizes and manitain the highest premiums in the live form. Distribution, harvesting, and preservation techniques are currently most economical however, in channelling a majority of local supplies to market in the fresh-chilled form. Supplies are supplemented by imprts, in the frozen form, from Burma and Singapore and are estimated to exceed 150 metric tons per year. Imports are generally of larger sized prawns, a demand characteristic which has been ignored by the home industry. Most supplies from cultivated sources are of small and medium size, a classification which is most vulnerable to price competition among farmers as well as from imports. Overall market demand is largely unfulfilled. As a result, yearly price increases have exceeded 20% and are typical of short supply situations. Current supplies are dispensed at fixed prices by the producers since little inventory of excess product exists, especially in the larger sized live and fresh-chilled forms. This situation has short-term benefits in that it presents economic opportunities and incentive for developing the industry. In the long term, industry growth will be impacted by hyperactive competition from importers and farmers both vying for a decreasing home demand.
Internationally, three markets were selected for study; Singapore, Hong Kong and Japan. Export potential was determined to be highly dependent on product form, an attribute arising from transportation considerations between production source and market. The market potential for Singapore was found to be poor for live, fresh-chilled, or frozen forms due to competing supplies of wild caught Macrobrachium in Malaysia and Indonesia. In addition, over abundance of sea prawns and acute consumer differentiation of freshwater prawn characteristics dampens the prospect for mass introduction of the product. Singapore currently has found market potential for Macrobrachium as a re-export, mainly to Europe and the United States.
Hong Kong possesses excellent potential for live forms of freshwater prawns. Efforts to develop a home industry have been experimental, with overall constraints of land and climate working against development of a high yield industry. Hong Kong is another market engaging in heavy reexports of Macrobrachium, mainly of frozen forms to the United States. Fres-chilled prawns are classified similarly as a frozen product and hold little potential as a large market entrant in the light of abundant substitute sea varieties. Macrobrachium is largely undifferentiated with sea prawns in the frozen form, and market placement is likely to be price determined.
Japan offers the greatest potential as an export market for all three forms. While public exposure to Macrobrachium has been limited, the species is largely differentiated even in the frozen form. Current consumption by Japan is estimated to exceed 50 metric tons, all forms, supplied from Hawaii, Indonesia and Singapore. Japan presents easy market entry providing product attributes, quality, and price are accepted by trading companies controlling most freshwater prawn shipments into the country. Inhouse promotion in Thailand, to these brokers, may expedite market placement in Japan for future production.
Establishment of quality control standards, for an export grade product, is essential for accessing all overseas markets. Product rejection due to substandard sanitary or grading considerations will depress export momentum and further efforts to develop the industry for trade purposes. Recommendations are made for the adoption of standards similar to those incorporated by Japan for shrimp and prawns.
Processing and packaging techniques involving product in the fresh–chilled form were investigated to establish guidelines for the industry. Experiments and results formed the nuclei for further study involving all forms of processing and packaging for shipment to market. Future studies are recommended to include cost–benefit studies assessing packaging type and refrigerant trade-offs in contributing to overall transportation costs.
Finally, the benefit of this report for Thailand, is to provide general directions for its constituents in developing consolidated national plans to assure longevity for the freshwater prawn industry. Understanding economic and marketing elements of competition is critical for the planning stage and should be monitored as well as updated with the growth of the industry.
C. PRODUCTION, PROCESSING AND MARKETING OF ARTEMIA
Artemia production, processing, and marketing techniques used in Thailand are evluated for feasibility of industry development. In 1980, thirty five rai, modified for Artemia culture, produced 300 kgs finished product, which was sold in the home market. This quantity represented 20% of Thailand's total requirements. It is estimated that 125 rai will be in various stages of production during 1981. Due to general aquaculture growth however, domestic demand will not be met by home production until 1983.
Recommendations to improve production efficiencies, processing techniques, and marketing aspects were given to expendite self sufficiency for Artemia requirements. Two alternative pond layout designs are presented to increase production by 15 and 40 % respectively over the currently incorporated design. Cost analyses were conducted to implement these modifications and compared against revenue generation for the farmer. Results indicate that on a per productive rai basis, a salt farmer can earn supplemental income equal to or greater than the revenue currently received from salt production.
Current pricing and marketing elements are misaligned when comparing Thai produced cysts with other world production. If export quantities are achieved, production cost, processing, and marketing/sales margins will have to adopt a more competitive structure for both the home and export supply. This structure would represent reductions in overall cost and profit margins by about 50%. Two factors working against easy market entry for Thai cysts are: 1) there is no shortage of cysts on the world market today, and 2) most of the major production sights currently supplying world demand are lower cost systems.
Future potential for Thai cysts however look bright. Worldwide growth of aquaculture suggest supply requirements within 3–4 years from new production sources. Competitively, Thai producers must have the financial capability to inventory the product until demand catches up with supply. Finally, investment opportunities must also be assessed against developments of Artemia supplements or substitutes in the form of microencapsulation technology.
Early during my term as co-manager of this programme, I identified the need for a study of the marketing, processing and economics of freshwater prawn farming in Thailand (New, 1979). I thought it necessary to provide background information to help the Royal Thai Government determine its policy and role in this nascent industry. A study of these topics would help to prepare the industry for the time when production of farmed prawns satiates the home market.
The commissioning of this study was supported by representatives of UNDP, Bangkok and of the South China Sea Fisheries Development and Coordinating Programme at a tripartite project meeting in August 1979 (England, 1979). Freshwater prawn farming has continued to grow to what is already at least a US$ 3 million per year industry at farm gate prices (Singholka at al., 1980) and in mid 1980, government authorities agreed that a marketing, processing and economic study was now timely. Meanwhile, developments in a related field had taken place, namely in cyst production of Artemia.
The possibility of raising Artemia salina (a larval food not only for Macrobrachium rosenbergii) but also for many species of marine prawns and fish) in salt farms in Thailand received early project encouragement. This took the form of training for project staff (in Belgium and through a consultancy in Thailand) and the provision of an associate expert. A breakthrough was made by Thai project staff in 1979 (Tunsutapanich, 1980) who showed that it was possible to produces over 40 kg/ha (dry weight) of Artemia cysts in a modified salt evaporation pond in a 45 day period. One kg of Artemia cysts is currently worth US$30-US$50 in the world market. Following this development, the Department of Fisheries indicated that it did not, for the moment, need further technical assistance from UNDP/FAO on Artemia culture (England, 1979). The Thai technological breakthrough has resulted in several salt farms growing Artemia commercially, and development of this new industry is scheduled to receive support from ADB Aquaculture Development Project in the Kingdom of Thailand. This, and governmental encouragement to the ailing salt industry in Thailand to utilise their land for shrimp and Artemia culture (Anon, 1980), means that the supply of Thai produced Artemia cysts may soon exceed local demand. There is therefore a parallel situation to that in freshwater prawn farming-both new industries face an unknown export market. Knowledge of these international and competitive markets, and their requirements in terms of processing and quality, is therefore of paramount important.
In the study which these notes preface, an examination of the marketing, processing and economics of Macrobrachium rosenbergii farming in Thailand has therefore been coupled with a contribution to the further development of Thai Artemia farming in the field of cyst processing and marketing Terms of reference (Annex 1) for this study were drawn up in Thailand during 1980 and international consultants were recruited by FAO Rome. The study commenced in September, 1980 and was carried out by a team consisting of the following Thai and international staff:-
| Study Staff1 | |
| Economics: | Dr. Yung C. Shang (Team Leader) |
| Mr. Kachornsak Wetchagarun | |
| Prawn Marketing: | Mr. Leland L. Lai |
| Miss. Somying Rientrairut | |
| Prawn Processing: | Mrs. Bung-orn Saisithi |
| Miss. Attaya Kungsuwan | |
| Artemia Processing | Mr. Bud Insalata |
| Mr. Anand Tunsutapanich | |
| Artemia Marketing: | Mr. Leland L. Lai |
| Mr. Bud Insalata | |
| Logistic Support: | Mr. Somsuk Singholka |
| Mr. Michael B. New | |
I trust that the report which follows will be of significant importance to the further development of Macrobrachium and Artemia farming in Thailand. Thailand is already a leader in these young industries and I am honoured to have had the opportunity of participating in their history.
1 Full titles and addresses of team members are given in Annex 2.
The team members wish to express their gratitude to the many officials and individuals who contributed to this study in different ways. Special thanks are due to the following, who gave continuous support to the team during its stay in the country:-
Commander Swarng Chareonphol RTN., Director General, Fisheries Department, Ministry of Agriculture and Cooperatives, Royal Thai Government
Mr. Robert England, Assistant Regional Representative, UNDP Bangkok
Mr. Ariya Sidthimunka, Deputy Director General, Fisheries Department, Ministry of Agriculture and Cooperatives, Royal Thai Government
Khun Ratana Tanchavalit, Assistant to the Senior Agricultural Adviser/ FAO Country Representative, UNDP, Bangkok.
Thanks are also due to Mr. Paiboon Vorasayan of the Chacheongsao Fisheries Station, Miss Sunanta Chansomvong, Mr. Pongpat Boonchoowong, Mr. Pisit Uraironk and Miss Panipa Hanvivatanakit of the Department of Fisheries for the assistance in field surveys, and to Miss Wantanee Kate–Pasook for typing the report.
Lists of contacts for prawn marketing are given in Annex 12, while trade lists for Singapore, Hong Kong and Japan are given in Annex 15. A list of other people contacted or interviewed in Thailand is given in Annex 33.