Domestic shrimp supply in Thailand is predicted to remain short until late May or June, said canned tuna and shrimp processor Thai Union Frozen Products in its quarterly report.
The Thai firm, which saw its fourth quarter profit plummet by 60% due to a combination of early mortality syndrome (EMS) and tuna price volatility, added that prices for shrimp raw materials would remain high until the EMS problem began to ease.
The company has seen the benefit of its US-based shrimp trading operations, Chicken of the Sea Frozen Foods, which have remained separated from Thailand's disease issues thanks to a global sourcing network. The strong performance of this side of the business meant that gross profit margins for frozen shrimp did not drop too significantly – 0.4% year on year.
EMS-related increases in raw material prices caused Thai Union's profit margin to fall from 12.8% to 12.1% in 2012.
Data sent to Undercurrent News shows that the most recent price Thai shrimp raw material prices are THB 164 - 168 ($5.5 - 5.6)/ kg for 60 pieces per kg head-on, THB 155 - 160 for 70 pieces and 145 - 151 for 80 pieces.
You can see how this fits into recent trends at our prices portal.
Tuna prices stabilizing
Thai Union's tuna business mirrored the volatile prices in 2012, with sales increasing year on year by 7.5%, though dropping by 14.3% in Q4 through a combination of seasonal factors and lower selling prices.
The sharp drop in tuna raw material prices in Q4 2012 saw profit margins fall, as buffer stocks carried over from the third quarter, and bought at a higher price, were sold on at the lower prices.
However, Q4 might have marked the low point, and Thai Union expects to see an improvement in tuna business in the first quarter of 2013 as tuna prices steadily rise, allowing the company to better match raw material cost and selling prices, it said.
Tuna raw material prices should remain high thanks to precautionary conservative fishing regulations, despite healthy stocks of skipjack, the company noted.
Record sales, plunging profits
Thai Union's overall sales for 2012 reached a record high of THB 106.7bn ($3.5bn), while its gross profit margin plunged to 15.3% year on year due to the fall in tuna prices in Q4, as well as intense price competition in the US market, it said.
The company expects the US canned tuna market to become "more rational" in 2013, leading to improving operations for its Chicken of the Sea brand.