First Thai Export Growth to US In Years

Last year marked the first time in almost a decade that Thai canners saw growth in the canned tuna volume they sent to buyers in the United States. With 2018 first quarter data also showing strength, it is questioned if this will be sustained, or is only a short-term trend.

Across full year 2017, Thai canners sent nearly 89,300 tons of canned tuna to US buyers, their biggest customers, which accounted for around 18 percent of their total shipments. This increase stood out among losses in other major markets, but also for the fact it marked a turning point in US trade.

US canned tuna sales have declined continuously for over a decade and this has been reflected in imports into the country too. However, during 2017 there were signs of bigger volumes imported by the US, to the benefit of Thai processors most significantly. Less domestic production in the US, and the territory of American Samoa could be a reason for the growth.

The rising trend has continued into this year and the latest statistics show that in the first quarter of 2018, there has been a 27 percent YoY hike in the volume of canned tuna shipped from Thailand to American importers. The first quarter volume totals 25,000 tons, compared to just over 19,500 tons for the same period in 2017.

Again this is the strongest increase seen across all Thai canned tuna shipments, with some losses suffered in other major markets. In the first quarter, US shipments accounted for nearly 25 percent of total exports from Thailand, a stronger proportion.

This much needed solid boost in business with the US comes at a time when overall Thai shipments have taken the opposite trend. Last year, volume slipped by 12 percent YoY, and in this year’s first quarter there has been a lesser five percent drop. By regaining sales with US importers, Thai processors have managed to offset more severe overall losses in their global trade.

But despite a slight drop in export volume, the value of shipments climbed by a slight three percent in Q1 this year, when Thai canners have been focusing on adding more value to their products. The Thai Tuna Industry Association (TTIA) has stressed that the country’s processors must start focusing more on value-added products, allowing exporters to make higher returns, while the volume of raw material being imported into the country has declined.

Across all nations they export to, Thai canners received an average CFR price of USD 4,456 per ton in the first quarter of this year, a slight three percent increase from 2017. As well as the added value of a product, this is obviously impacted by the price of raw material at the time.

Several Thai processors described 2017 as one of the most challenging years yet for the sector, as raw material prices were considerably high for a large chunk of the year. They have therefore frantically been trying to increase the value of their shipments. Sustainability claims on canned tuna or innovative ingredients and packaging formats can be ways of achieving this.

In recent years Thailand has become the biggest processing location for MSC certified tuna, as well as non-certified FAD free and pole and line catch. In addition, major Thai processing firms like Thai Union have invested heavily into research and development to bring new, stand-out products to all markets.

This is one factor that could have spurred the shift in US trade as the American market is one where millennials are seeking innovative and convenient products. Although the increase in US trade has also continued into 2018, there are still questions over how long stronger exports to this market will continue for Thai canners. As well as consumer demand, this will largely depend on the extent of domestic production.

In addition to imports of canned tuna finished product, US market demand is fed by domestic production, on both US soil and in US territories. This is mostly conducted by the Big 3 canned tuna brands in the country, StarKist, Bumble Bee and Chicken of the Sea. The latter two rely on imports of pre-cooked tuna loins for their canned tuna production.

This means that the rise in canned tuna exports from Thailand to the US market does not automatically signal an increase in American consumer demand. It could be that domestic production decreased and more imports were needed to make up for the drop. Total 2017 US market sales figures to be published within a few months, will reveal the true trend.

Nonetheless, the recent hike in volume has been positive for Thai canners, especially as they have seen sharp losses in business in other markets. In 2017, shipments to Egypt were cut in half due to financial crisis in the country, and although they have climbed slightly in this year’s first quarter, they are well below previous volumes.

A stronger nine percent hike was seen in the average CFR price paid for shipments to Egypt however, which could show the first signs of a value-added focus paying off. Sources in the Middle East market have said that value-added tuna products can perform well in countries like Egypt, as buying power increases, and more wealthy consumers look for premium and innovative references.

Cheaper flaked and shredded canned tuna products, however, are still an important source of protein for people with a smaller budget.

Throughout the first three months of 2018, exports from Thailand to Australia, another of its biggest markets, dropped by 13 percent YoY. A notable volume of this carries the MSC logo, with a large proportion of the Australian canned tuna market certified in this way, mainly under leading John West brand.

There was no real increase in CFR prices paid by Australian buyers, but the values gained in this market stand well above the average across all end markets for Thai canners, largely due to the MSC trade. On average importers in Australia paid USD 5,061 per ton on Thai product in the first quarter, while USD 4,465 was paid across the board. As well as certification, the higher price can be credited to exports of many value-added references, with sauces, and in 95g cans.

In some export markets, processors in Thailand have managed to increase volumes recently, but there is still a way to go to strongly lift the value of their shipments. So far there are some positive results, but they are mostly modest.

The US market may have marked a strong turning point so far, but there is still little clarity on how durable this recovery is. Processors in competing exporting nations have said they are not focusing on US trade as demand is “dead” and prices are too low. Instead they concentrate more on the EU, where their exports have duty free trade benefits, and CFR prices paid are commonly higher.

But duty free trade is not open to Thai canners in the EU market, with 24 percent duty actually being levied. This means for Bangkok-based processors the best bet is to focus on adding value in other markets. And if other suppliers do continue to edge away from the US, this major market could be their biggest opportunity. Whether or not they can secure growth with the US in the long-term is not yet known, but concerted efforts are being made to add both volume and value to this market.

As for many markets, this will depend largely on the trade benefits the country’s canners continue to have with the US, and if the current administration in the country will actually move on its plan to add higher import duties on products from countries like Thailand. This and many other factors will ultimately sway the future of Thailand’s tuna export business with its biggest customer.