Offering security in fraught times

Global uncertainty from geopolitical tensions, rising energy costs and potential disruptions to critical infrastructure could create opportunities for Thailand's agriculture and food industries as countries seek to strengthen food security and build up emergency reserves.

However, industry leaders warn that higher demand may not translate into immediate gains as rising production and logistics costs, tight liquidity and existing inventories continue to weigh on business prospects.

FOOD SECTOR BENEFIT

Visit Limlurcha, vice-chairman of the Thai Chamber of Commerce, said Thailand holds a strong competitive edge in agriculture and food production, earning its reputation as the "Kitchen of the World". Around 70% of output in these sectors is consumed domestically, with 30% exported.

"More countries are seeking to stockpile food, especially those lacking domestic production and reliant on imports," he said.

This year signals the start of a prolonged period of challenges, as rising energy prices have weakened consumer purchasing power, while transport costs have increased significantly, said Mr Visit. These factors have discouraged businesses from trading goods that require large inventories, causing both manufacturers and importers to be reluctant to hold substantial stocks due to associated expenses.

With many countries issuing guidelines for residents to stockpile essential goods in preparation for emergencies, this trend could benefit agriculture and food sectors, he noted.

Mr Visit anticipates higher demand for processed food with a long shelf life, ready-to-eat meals and dried food items. Fresh produce and food ingredients also present opportunities, particularly in countries with established production bases.

Despite this opportunity, he said producers remain hesitant to ramp up production due to cost pressures and liquidity constraints, especially among small and medium-sized enterprises.

"If a clear uptick in food demand emerges, the government must offer support to ensure that businesses have sufficient liquidity to respond effectively," said Mr Visit.

LIMITED WINDFALL

Food exporter Thai Union Group (TU) expects existing inventories of foreign buyers have curbed any surge in incoming orders, noting factory efficiency is key to offsetting rising shipping expenses as manufacturers brace for higher freight costs.

TU is a manufacturer and exporter of frozen and canned seafood and does not expect significant benefits from the global trend of food stockpiling as major customers and its brands already maintain around two months of inventory in distribution channels, limiting any exceptional increase in orders.

Ratiporn Ratcharoen, chief financial officer of the group, said sales in the US already reported strong and consistent growth, which was not driven by temporary stockpiling. In Europe, sales remained stable despite cost-of-living pressures, as food products remain essential goods.

Ambient products, including canned seafood, continued to provide a consistent contribution to growth throughout the year.

Looking ahead, the company sees opportunities from improved market access in Europe and the UK. The UK has suspended import tariffs on tuna until 2028, while a potential reduction in EU import tariffs in the middle of next year could further support market expansion.

TU wants to expand into higher-margin products, including tuna-derived collagen and dietary supplements targeting Europe's health and beauty markets. The company is also shifting its original equipment manufacturing (OEM) model towards co-creation partnerships, bringing R&D and marketing teams closer to customers to develop private-label products.

TU targets consistent annual revenue growth of 4-6%, with a longer-term revenue goal of 140 billion baht.

However, rising oil prices and shipping costs remain a challenge, particularly as 50-60% of its products are manufactured and exported from Thailand. OEM customers bear freight costs themselves, while TU absorbs shipping expenses for its own branded products and shipments.

To limit the impact, the company is tightening demand and supply forecasting, aiming to keep errors within 2-5%, with a preferred range of 2-3%. More accurate forecasts help prevent unused shipping bookings and costly penalties from delayed deliveries.

TU is also improving factory productivity through its Impact Olympics programme, focusing on reducing excess product weight and optimising raw material usage. The company aims to keep average tuna costs within US$1,700 per tonne.

Other measures include refinancing bonds to reduce financial costs by 10-20%, controlling capital expenditure and global inventories to strengthen free cash flow, and preparing contingency plans for possible changes to US import tariffs, currently at 12.5%.

MANAGEABLE RISKS

The Federation of Thai Industries (FTI) has worked to reassure the public that Thailand is unlikely to face severe disruptions from cyber-attacks and geopolitical conflicts that prompted European governments to advise residents to stockpile food and essential items.

"The FTI does not want Thais to panic. Instead, we encourage them to stay aware, monitor developments and assess situations rationally," said Pimjai Leeissaranukul, chairwoman of the FTI.

Several countries have issued recommendations encouraging households to maintain emergency reserves amid concerns that cyber-attacks could disrupt critical infrastructure, including electricity grids, water supply systems and financial networks.

Authorities are also monitoring geopolitical tensions that may threaten infrastructure security, as well as natural disasters such as wildfires and floods that could affect public utilities.

Mrs Pimjai said Thailand would face only limited consequences if undersea communication cables in Europe or the Middle East were attacked, as internet services in Thailand would not be completely cut off, and major banking apps would continue to function normally.

"The main impact would likely be temporary slowdowns in internet connectivity and digital services that rely on servers located in Europe," she noted.

Thailand uses different submarine cable networks from those serving Europe and the Middle East.

In addition, the country has terrestrial fibre-optic connections linking it with neighbouring countries, including Malaysia, Laos and Myanmar, providing alternative routes for data transmission to other regions.

Regarding food security, Mrs Pimjai said many European nations are heavily reliant on processed and canned foods, while agricultural production faces limitations due to colder weather.

As a result, governments are emphasising food procurement systems and strategic stockpiles, making potential disruptions appear more concerning, she said.

"Thailand is one of the world's leading food producers and ranks among the top 10 global food exporters," said Mrs Pimjai.

"As an agricultural nation, there is no need to worry about food shortages here."

However, the situation in Europe could present opportunities for Thailand's food industry as concerns over supply security may drive higher demand for food production and exports from the region, she said.

"The FTI is monitoring the situation and remains ready to respond if orders for Thai products increase," said Mrs Pimjai.