Thai food exports are choked by exorbitant transportation costs, including rice or canned seafood. Rice export to USA is about to become negative, with $500 transportation cost exceeding the cost of buying rice from farmers. Exported canned foods retail prices have to be raised by some 20% to cover freight. Export grew by 4.78% in Jan – Apr, but Q3 export goals may not be reached because of freight rates and severe shortage of empty containers. Thai exporters have no other choice except to raise the price, and many foreign importers just can’t afford it.
Many buyers of Thai food products are asking to delay shipments, hoping that the freight rates will stabilize and start to decrease. Overall, as of now, freight rates are growing faster than export volumes.
Producers of canned food, in their turn, are hit by rising costs of cans, also the consequence of rising freight, which hikes the cost of imported steel sheets, necessary for making cans.
Two biggest markets for Thai ready-made foods were and are USA and Europe, but these products costs already jumped up by some 50%. No wonder, when 20-foot container US bound freight rates skyrocketed from $3,000-4,000 to $10,000; EU bound rates rose from $1,200-1,300 to $4,000.
Thailand rice export in first 4 months 2021 was just 1.45 mill ton, a plunge of 31%. Some special brands of rice are among the main items of Thai food export to USA and the EU, but as of now, freight rates exceed the cost of production.
Thailand food exports are still suffering from skyrocketing freight rates, which jumped in some directions, up to 300%. Last year’s food exports decreased by 4.1% , lowering Thailand’s ranking from 11 to 13 position among world’s biggest food export countries. Thailand official bodies responsible for agriculture and food exports, hope to regain nation’s export volumes in 2021, but the main obstacles on the road to recovery are still here, and they’re the same: a severe shortage of empty containers and exorbitant freight rates. Food exporters are very sensitive to freight rates because, in general, the costs of their products are much lower than the costs of manufactured goods like cars or electronics, to such an extent that sometimes too high freight might de-value the product and make export itself senseless. Historically, Thai food exporters sell their goods on FOB terms, but with hyped freight rates, such trade has become problematic, with buyers unwilling or incapable, to cover freight rates. Least affected are those who export their products to Asian countries, because freight rates in the region didn’t increase as dramatically, as rates in American and European routes.
Thai government amended docking regulations, allowing cargo ships 300-400 metres long to dock in Thailand for up to two years without special case-to-case permission, attracting more ships to Thai ports and with them, more empty containers and more opportunities for exporters to ship the goods directly to countries of destination, skipping transshipment hubs like Singapore. Exporters ask government to prolong regime of reduced tax on inbound empty containers, which came into force and was valid during Jan-Mar 2021, till the end of the year.
Source: fleetmon