Annex XIV
POTENTIAL TRADE OF SHELLFISH IN THAILAND

Panipa Hanvivatanakit

Department of Fisheries

I. INTRODUCTION

An important problem of Thai fisheries is the deterioration of aquatic animal resources caused by excessive fishing as a result of the rapid increase in number of trawlers. Another problem, besides the lack of resource conservation measures, is low prices. The marketing system is ineffective and fishermen are usually poorly paid. Fish prices increase at a slow rate compared to production costs and this is a problem for small-scale fishermen who made a sale-contract with dealers by loan-credits to purchase fishing equipment.

To improve the socio-economic status of small-scale fishermen, the government has set up measures to improve public utility finance and production techniques as well as coastal aquaculture to increase marine products. For the development of coastal aquaculture, species of economic value which are promoted are namely shrimp, sea bass and several species of shellfish.

In 1987, production of shellfish was 217,785 MT, valued at Baht 934 millions (US $ 37,371,000) or 8.4% in quantity and 4% in value of the total catch of marine product. Of this, 76% was consumed fresh, 17% processed and the remaining 7% was for animal feed. Major species of shellfish organisms are green mussel (Perna viridis); short-necked clam (Paphia undulata); cockle (Anadara granosa); and oysters (Crassostrea spp.). Short-necked clam can only be collected from natural beds while the other species can also be cultured.

The area for shellfish culture in 1987 was some 20,707 rais (3,313 hectares). The Department of Fisheries estimated its potential at 428,847 rais (68,615 hectares). The promotion of production of shellfish will effect the income of farmers themselves as well as related people i.e. traders and processors. It is essential to support the effective distribution by studying the marketing system of the product.

II. MARKETING SYSTEM

2.1 Marketing structure

2.1.1 Shellfish traders.

There are 4 types of shellfish traders:
1) Commissioner or agent -- those who collect products from shellfish farmers in the quantity, prices and date fixed by collectors. Agents may be responsible for delivery of shellfish to collectors, though sometimes collectors may transport it themselves, and then receive a fixed amount of payment. Agents are necessary for this business in order to provide convenience in business contacts between collectors and farmers.

2) Collector or assembler -- a trader who collects or purchases shellfish directly from fishermen or from local commissioners and agents assigned by collectors to assist them. Collectors are found in shellfish habitats or found buying shellfish at the landing ports. Shellfish, then, will be normally sold to wholesalers, retailers and hawkers at the port or delivered to wholesalers, retailers and processors who are regular customers in the production site. Collectors can be categorized into 2 types, local collectors and collectors from provincial districts.

3) Wholesalers are purchasers of most shellfish sold by collectors for resale to retailers. Wholesalers may buy shellfish from the fishermen directly, in addition to buying from collectors. Moreover, some wholesalers may also trade by retail but in small quantity compared to the wholesale volume. Wholesalers are found to be first and second wholesalers. First wholesalers are those who buy shellfish from collectors to resell to second wholesalers and retailers. Second wholesalers are those who buy shellfish from first wholesalers then sell to retailers; sometimes they do the retailing themselves.

4) Retailers are a type of traders who will buy shellfish from wholesalers or collectors depending on retailers' trading site.

Most retailers sell shellfish together with other crustaceans. Only a few traders sell a particular kind of shellfish alone. At this level shellfish will be prepared by size classification, cleaning or primary processing for some kind of shellfish, that is, shucked-fresh or made to look appetizing by packing them with some ingredients used for cooking them. In retailing to regular restaurant customers, an amount of shellfish will be specially prepared prior to reselling to consumers.

Most traders in each level usually sell more than one kind of shellfish at a time except for oyster. The final level traders usually have a great variety of shellfish to sell.

The reasons are to reduce risk and increase service to the customers. Apart from retailers, it was found that other levels are oligopsony and they usually have regular contractors in buying and selling.

2.1.2 Product differentiation.

Product differentiation can be determined from freshness and sizes of commodities if these are clearly noticeable. Additionally, services are also accounted; for example credit provided for purchasing, preparation of supply according to market orders and transportation services. There are times when the seller does not have enough supply to deliver, in which case he will buy commodities from other sellers to resell. This is often the case with collectors and first wholesalers, particularly if they have big regular customers who have an urgent demand.

2.1.3 Barriers of entry into the business.

There are many factors that serve as barriers to entry into the shellfish marketing business. These include experience in conducting this business, financial capital, knowledge of the commodities, and trading sites. Shellfish trading business requires high investment capital which can be an obstacle for getting into the business. Knowledge of the commodities and trading sites are factors influencing profit and loss since most shellfish are domestically sold shell-on which easily deteriorate. One must have experience in determining freshness of the commodities, sizes of commodities, suitable buying prices and selling techniques. An external factor is the trading influence of the new traders and existing ones; it is not easy for new traders to overcome the confidence that old customers have in their existing traders.

III. PRODUCTS DISTRIBUTION

The central market of shellfish products is Market Pak Nam in Samut Prakarn province with many big wholesalers. The major species for trading are green mussel, cockles and clam.

3.1 Green mussel

Green mussels are sold mostly fresh shell-on. About 32% of green mussel are sent to consumers or restaurants in fresh on-shell, 38% are processed in various forms i.e. shucked meat, dried meat, pickled meat and boiled meat. Only 2% are sent to cold storage and 24% is weight loss (Fig. 1).

Figure 1. Marketing channels of green mussel.

Wholesalers at Pak Nam Market have a wide scope of work. Collectors wander from their business sites to collect mussels in provincial areas. It was found that 98% of total on-shell mussels are sold through collectors, mostly local collectors. Generally, they will sell their products to first wholesalers mostly in the shell-on form at 28.95%. This amount will go to the Central Market, retailers and restaurants. It was also found that part of the product is processed in this level. At the collectors level there is a loss in shellfish weight caused by the elimination of adulterates and dead shellfish as well as through preservation process; weight loss is as high as 17.83%.

3.2 Clam

Short necked clams are normally collected by shell-rake trawlers from natural grounds near coastal areas of the Gulf of Thailand. Landing ports are varied and according to the limits of trawlers.

Trade of short-necked clams is in two forms: clams sold shell-on for direct consumption and canned and frozen for export. Market channels of clam in Figure 2 shows that 80% are sold to boiling factories, of which 69% are bought directly from fishermen; 59% of boiled meat are processed and distributed to canneries and 21% to cold storage.

Boiling factories are located near landing ports for convenience in transportation and quality preservation. They generally make agreement with 5–15 fishermen. Nature of buying may change according to the demand of canneries and cold storages which determine price and quality according to the requirements of importing countries.

The 20% of clam from fishermen are sold shell-on. The loss of weight in trading process is about 3%, 14% is sold to consumer and 3% to restaurants. The Central Market is at Pak Nam in Samut Prakarn province.

3.3 Cockle

Cockle or arkshell are collected from natural ground as well as cultured in many provinces of Lower-Central Region. In addition, some are imported from Malaysia. In the East, cockles are also collected from the natural ground but only in small amount which is not enough for local consumption so that the area has to import some from Pak Nam Market, Samut Prakarn. The Pak Nam market cockles come from the Lower-Central Region and the South. Samut Prakarn province is the central market of cockles in the Lower-Central region due to the existing production area, Chumporn province is the central market of cockles in the South, while Songkhla imports cockles from Malaysia.

Marketing channel in Figure 3 shows that most cockles are sold shell-on and account for 79% of total cockle production; 11% are sold to restaurants and 4% are processed. The processed cockle are mostly pickled, shucked and boiled. Weight loss is 6% and less than 1% is sold to cold storages. Some 3% of the cockles traded in the South are imported for resale to first wholesalers. It is noted that, due to the cockle culture in the South and rather large scale business, fishermen play an important role in trading as well. Only 42% of cockles from producing areas are sold through collectors, the rest are sold to first wholesalers who have direct trade-contract with large-scale fishermen.

Figure 2. Marketing channels of short-necked clam.

Figure 3. Marketing channels of blood cockles.

3.4 Oysters

Oysters are sold differently from other kinds of shellfish; the small oysters (Saccostrea commercialis) are also sold differently from the large ones (Crassostrea becheri). For small size, traders (from collectors up the marketing levels) will shuck the meat. Large oysters are usually sold on-shell. Both sizes of oysters are usually not for processing. The marketing channels shown in Figure 4 focus on both sizes of oysters without classification because they are all considered fresh oyster selling. Fishermen sell 84% to agents, 15% are sold to collectors and very little to retailers. Oysters bought by agents are sent to wholesalers (61%) and retailers (23%).

Chonburi province is the main production area for small oysters and Surat Thani province for the large species. There are other provinces producing oysters but in small quantities. The collectors must have some local agents to pre-collect the products. The amount of oysters which pass through retailer's hands is 91% which indicates that most of the oysters are small in size. There is no export of oyster at present.

IV. MARKETING CONDUCT

4.1 Price determination

Purchasing and buying prices are determined by the big first wholesalers in Central Market. They have the advantage of obtaining information on prices and supply movement because they run a big business with a wide scope of work. However price negotiation is done at every trading level. In the case of processed clam for export, the local trading price depends on demand and the prices indicated by importing countries.

4.2 Product quality

There is no particular standard for shellfish products but the “standards” depend on experience and expertise of traders. Only clam has size grading (pieces per kilogram) due to processing requirement for its export. Shellfish consumed locally have no quality grading. The set product quality depends on traders' decision.

Figure 4. Marketing channels of oyster.

V. UTILIZATION

Apart from being consumed fresh, shellfish are processed into many forms to respond to various demands. Some processed products are for domestic consumption i.e. boiled meat, pickled meat; some are for export i.e. frozen meat, canned meat and dried meat. The processing extends shelf life of shellfish, answers the demand of consumers and increases the marginal utility of the product. It also increases the demand for shellfish by being able to respond to the production development.

5.1 Green mussel

Among the various forms of processed green mussel, frozen green mussel gives the highest value since it is for export. Although green mussel has the highest production among shellfish, very little amount of frozen green mussel has been produced because of its limited import demand which has been less than 10 MT/year during the last 5 years. There has been a big change in importing countries due to quality problems and uncertainty of production. If these problems are solved new export markets for green mussel could be opened i.e. Japan, Brunel, Australia and Western Europe. Pickled meat and shucked meat are two other forms of processed green mussel which give reasonable value. The boiled meat provides the highest net profit to processors; 1 kilogram of fresh green mussel earns a net profit of 34% of cost. However, except frozen meat, in terms of value of profit, pickled meat earns the highest profit (Baht 2.72/kg) but there is a limit to demand for consumption. Boiled-dried meat and split-dried meat are both for domestic consumption and for export, mainly to Hong Kong.

Fresh shell-on green mussel is generally consumed locally. Many kinds of dishes can be cooked by using green mussel. These are often served in restaurants. Compare to other species of shellfish, green mussel has the most number of uses locally.

5.2 Short-necked clam

The quantity of exported clam is relatively high compared to its production. There is no clam culture at the moment, therefore the supply of clam is uncertain which creates problem of raw material shortage to processors. Boiled-clam factories usually face losses in operating profit when they can not run the operation for the whole year due to an irregular supply. There are too many boiled-clam factories compared to available quantity of raw material. Furthermore, the harvested clam are relatively small, making the value of processed clam only Baht 7.64/kg of fresh shell-on green mussel. The processors get only Baht 0.94/kg of shell-on green mussel. The shortage of raw material also makes export price of frozen clam higher than those of other exporting countries like China and Korea. The existing export market is still limited.

Canned clam has a better potential than frozen clam. The net margin received by processors is Baht 3.09/kg of shell-on clam. However, due to the shortage of raw material the processing factories have to buy and accumulate small amounts of clam for many days and process when the quantity is enough to cover the operating cost. This causes low quality of product since clam has been kept too long. The major importing countries for canned clam are Japan, U.S.A. and Australia.

Domestic consumption of clam could still expand. The only problem is supply. Therefore the clam industry has no problem with demand or marketing, only of supply. The price of fresh clam has been increasing rapidly.

5.3 Cockle

The average price of fresh shell-on cockle bought in processing factories is Baht 3.26/kg. Frozen meat gives the highest value per kilogram of on-shell cockle. Although frozen cockle is for export, its production is small because of two constraints: limitation of market and shortage of raw material. Cockle is the only shellfish which supply is less than domestic demand so that some quantity (including cockle seed) has to be imported from Malaysia. The extension of cockle culture faces problem of lack of natural seed. Culture has been done at a large scale of operation by small number of farmers. These farmers have better trade bargaining power than other shellfish farmers. Overall, the problem of the cockle industry is not on marketing but supply.

5.4 Oyster

At present production of both small and large size oysters is small compared with the other shellfish. This may be one reason why the oyster has not been exported. The Department of Fisheries reports that in 1987 the area under oyster culture was 6.424 rais (1,028 hectares) producing 1,483 MT of fresh oyster. The Department estimates that the culture area can be expanded to 82,400 rais (13,184 hectares) or 12 times the area in 1987. Expansion of oyster market should also be considered in order to respond to the increasing production.

Expansion of the oysters market is possible for both domestic and export. For the domestic market, expansion has started. Large oyster is not sold in the retail markets since it is sent directly to restaurants. Large oyster is considered a luxury food. Small oyster is always sold in the form of shucked meat and has a central market in Chonburi province (East Coast). It is sent directly to the restaurants in Bangkok. Shucked meat of small oyster almost does not exist in the retail markets due to the difficulty of preserving. It has to be kept in a refrigerator or ice box for 2–6 days. There are very few traders in oyster trading and they are quite competitive or tend towards monopoly. The oyster culture extension should be done together with the improvement of market efficiency. Another approach to develop the oyster industry is the opening up of new export markets.

Margin from shellfish processing.

* No margin for shell-on trader since processor buys directly from the fishermen.
** No margin for shell-on trader since processing factory buys directly from the fishermen,therefore margin of processor composed of margin of boiled factory and margin of frozen factory.