Process Management

News last update:6 Aug 2012

Feed crisis raises Thai food prices

Food prices in Thailand are expected to rise with 5-10% in the coming years, according to CP Intertrade CEO Pornslip Patcharintanakul. This price increase is needed because the price of animal feed raw materials such as corn, soybean and tapioca are expected to rise with 20% in 2008.

Because of the uncertain costs of animal feed, CP, Thailand's largest chicken and shrimp exporter, will raise export prices for its chicken products and not take orders for more than three months in advance, seeing this, he says, as the beginning of the conflict that will intensify between the food and energy sectors over those crops that can be turned into energy.

"Fortunately, the higher costs are being experienced equally everywhere in the world and to maintain their share of international markets animal farmers and exporters most control other costs by introducing new technology" he says, adding that the situation will intensify if Thailand does not have a clear policy of controlling agricultural output for food and energy.

Use neighbouring countries
One recommendation, Pornslip says, would be if Thai companies were able to contract crop production to farmers in neighboring countries. At present Thailand imports about 100,000 tons per year from Laos, Cambodia and Burma, though the import volume of soybeans remains small.

However, such contract farming carries a risk, he said; "When oil prices climb further, what if the neighboring countries introduced a requirement that crop output must be converted into ethanol before being exported to Thailand, so as to reap additional benefits? That would mean even fewer raw materials for animal feed!"

2008 will be tough
Ultimately, the higher food costs will make 2008 a tough year for Thailand's food exports which not should grow much above 2007's level of Baht 600 billion and with the expected increase in food prices, adds Pornslip, there is the danger of a "drop in consumption".

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