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December 18, 2015

India

Should Processing Plants Own Farms?

 

Shrimp processors in Andhra Pradesh face fierce competition and rapidly-rising prices as supplies from shrimp farms decrease.  Through the first half of 2015, farm-gate prices were low—below break-even for a time—so many farmers decided not to stock their ponds for the second half of the year or they lowered their stocking densities to reduce costs.   Heavy rains and flooding in southeastern India have also reduced shrimp supplies.

 

G. Pawan Kumar, managing director of Sprint Exports’ seafood division, said, “Stability of supply is needed; we want to set up a position where farmers are guaranteed a minimum price, so that they know how much shrimp they need to stock, and that they will not lose money when they do.”  He suggested that aside from a price floor, there could be bonuses granted if or when the shrimp prices moved higher.  “We think this is fairly inevitable....  [If] the big five or ten packers...adopt it...the rest will follow suit.”

 

Most exporters, however, seem to be unwilling to move directly into owning their own shrimp farms.  Nonetheless, some processors think that’s the only way to guarantee consistent shrimp supplies.  Visag-based Coastal Corporation is looking into expanding the number of farms it owns, according to managing director T. Valsaraj, who said, “It’s important to guarantee more access to raw material—there’s definitely a minimum quantity per year we’d like to secure.”  Currently, Coastal Corporation doesn’t offer contracts to farmers, but it has worked with some for 15 years or more, so has a close, cooperative relationship.

 

Another processor, Sandhya Marines, wants to increase the amount of contract farming with the shrimp farms in close proximity to its plants.   At the moment it has contracts with six or seven farms, and owns a smaller number directly.  “Our plans with contract farms started small, but they grow each year,” said director K. Arun Kumar.  “We have our own hatchery from which we supply an increasing number of contract farms, and the plan is to increase involvement with farms which are larger.”  Larger holdings—50 or 100 acres—mean good volumes of shrimp while dealing with far fewer people, he explained.

 

Y. Mahendra, director of Devi Fisheries, said, “Really, the only way to meet your orders with big buyers is to have a close cooperation with the farmers.  Over the last year or two exporters have worked closer with their farmers, we’ve seen a rapid transformation.  Getting closer to the exporter brings better value for the farmers, and that in turn means they listen when the exporter wants to guide them on technique, quality, and so on.”  Mahendra said there have been some, limited, examples of exporters financially supporting farms, but that it has not been common practice.

 

Source: Undercurrent News [eight free news reads every month].  Editor, Tom Seaman (undercurrent@undercurrentnews.com).  Indian Shrimp Exporters Make Upstream Plans as Volumes Dwindle.  Neil Ramsden (neil.ramsden@undercurrentnews.com).  December 18, 2015.

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