Higher supply, lower prices and margins in 2019 despite the emerging market in China
Towards the end of 2019, there were several exchanges on what was happening with farmed shrimp production, some focussing at the global stage while one was specially on the Philippines. These are reported in this issue. In this review, it was decided not to repeat these discussions, but to focus on the market, sourcing and supply situations. Following up on the interest to bring back the production of the monodon shrimp reported in the last review in the January/ February 2019 issue, updates are given below.
During the Shrimp 2019 Conference in November 2019, Dr Darryl Jory, USA and Dr Cui He, China Aquatic Products Processing and Marketing Alliance (CAPPMA) indicated that the two major exporters in the farmed shrimp trade are India and Ecuador. Cui He also said that slowly, China is reducing its production output of shrimp and in 2020, will import more shrimp, up to 750,000 tonnes and if consumption rises, up to one million tonnes.
In the recent 2 years, Ecuador’s and India’s combined growth in output and exports have tipped the balance. Since 2018, supply has exceeded demand. Even though Ecuador exports mainly HOSO (head on shell on) while India’s exports are 80% HLSO (headless shell on), both countries have competed for the China market resulting in the easing of prices from the second quarter of 2018. India started the 2019 year poorly due to poor local prices which deterred farmers from stocking. However, production of the second crop was higher even though the average harvest sizes tend to be smaller, partly to avoid diseases and partly to cash-in with the existing ex farm prices.
Vietnam started strongly with its first crop but was not translated into exports due to the poor prices which means that processing plants were carrying larger inventory in their cold storage. It was reported in Shrimp Tails (7 Sept 2019, seafood-tip.com) that Bangladesh was seeing poor exports of the monodon shrimp due to poor post larvae quality and high temperatures leading to lower production, and the Bangladesh Shrimp and Fish Foundation (BSSF) has plans to overcome this situation.
According to Dr Ho Quoc Luc, during Vietfish 2019, the US is a big market for Vietnam, but since Vietnamese shrimp are subjected to antidumping duties, exports to the US have been decreasing. In 2019, the US market was only 10%. Minh Phu, the largest shrimp exporter has 44% of this share and enjoys 0% duties whereas others have a tax rate of 4.58%. An opportunity for Vietnam’s exporters is the US-China trade war which may open markets. Vietnam’s main competitor in the US market is India; with lower prices, India has a 35% share of this market. Indonesia is also a competitor and it does not have antidumping duties to pay.
Ho said that the EU is the third largest importer of shrimp from Vietnam, which is looking forward to a thriving export trade into the EU, with the impending EVFTA (Europe Vietnam Free Trade Agreement). This means that gradually Vietnam’s producers will pay zero tax. Furthermore, Vietnam can supply IQF shrimp, as demanded by the EU markets. Ho emphasised that in the long term, Vietnam must develop a brand for Vietnamese shrimp.
“Thailand’s shrimp exports have diverted away from the EU as it lost the Generalised System of Preferences (GSP),” said Dr Somsak Paneetatyasai at Shrimp 2019 (see page 47). Shrimp imports from Thailand face 20% taxes on cooked shrimp (GSP was 7%) and 12% taxes on fresh shrimp (GSP 4%). Among the traditional markets, only Japan is importing 25% of total exports of Thai shrimp. Other markets take up 46% of its shrimp exports. Robins McIntosh, CPF, said during TARS 2018, “Efficient vannamei farming favours large sized shrimp, which is Thailand’s new focus.”
In this annual review, we looked at the production data. The annual GOAL survey presented at the conference in Chennai, India, gave a global marine shrimp production from aquaculture at 3.47 million tonnes for 2019. Southeast Asian production was 1.69 million tonnes. While the GOAL report gave 1.4 million tonnes for China, Dr Cui He, said it was 0.8 million tonnes for marine shrimp and another 0.5 million tonnes of vannamei shrimp production in freshwater aquaculture systems (Shrimp 2019).
Ravi Yellanki in his presentation at GOAL 2019, gave India’s production in 2019 at 600,000 tonnes, 18% below that reported for 2018. It is still difficult to assess the production from Vietnam and Indonesia. In the case of Indonesia, based on post larvae and feed sales, industry estimated a production at 300,000- 350,000 tonnes. Based on feed sales and feed conversion ratio (FCR) of 1.5, the estimate for Vietnam was only 550,000 tonnes. Malaysia’s production continued to be around the 40-50,000 tonnes range. There are reports that shrimp farms in East Malaysia are doing much better than those in Peninsula Malaysia.
A country to watch is the Philippines, which reportedly produced only between 60-70,000 tonnes of the vannamei shrimp in 2019 which is marginally higher than that reported officially by the government at 60,122 tonnes (Albaladejo and Usero, 2019) in 2018. However, industry active in the Philippines are convinced that production was much higher, with the rapid expansion of farms in Mindanao Island in the south. Most of them opting for intensive culture systems. The interest is with smaller ponds and increasing stocking density.
During the PhilShrimp 2019 congress, there was interest by the second generation to move away from traditional extensive systems to more intensive culture systems as well as utilise more of the available land for production. Such large proposals will require external sources of funding. PJJ farm which now stocks 70PL/m3 in two large 1 ha and 0.8ha ponds has plans to modify the ponds into smaller ponds and intensify culture in 2021. Currently, there are multiple harvests, starting with 16g shrimp to a final harvest with 23g shrimp. The next step is to increase production and harvest more often.
The situation up to the third quarter in 2019 was summarised by Shrimp Tails in its January update (seafood-tip.com). Overall the global supply growth was 5% vs that of 2018. There is a tighter supply of larger sizes as cycles are shortened due to weather and disease problems in Vietnam and Indonesia, respectively. This resulted in a major supply of smaller sized shrimp and increased price for larger ones. Ravi Yellanki (2019) reported that in March 2019, imports of broodstock were down 50% but went up again in the last quarter of 2019. This matches with the report that India is working on a third crop as the October import of broodstock was high. In India, growth was 4% but in terms of value it was only 0.5%, indicating lower prices.
Indonesia showed about 1% growth in output but value fell by 6% when compared to 2018 figures. Compared to 2018 figures, Vietnam’s growth up to the third quarter was 6% but lower stocking was expected in the last quarter.
EU demand has been slow for the whole year and is expected to cross 600,000 tonnes which will be at the same volume for 2018. However, prices are expected to ease by 10%. The US is expected to grow about 1% and import about 650,000 tonnes and prices will slump by 5%. The interesting growth market is China where for the first time, grey imports through Vietnam were at a minimum due to the fierce clampdown by the Chinese government. The result is a significant increase of direct imports which allows accurate data to be collected. Undercurrentnews.com reported that in May 2019, volumes imported showed an increase close to 285% on volume but only 210% increase in value. This equates to a drop in average prices of 20%.
A price war was predicted between Ecuador and India, but this did not happen. Inventory in China was estimated to be at 4-6 months before the Shanghai Seafood Exhibition in August, but China’s purchase levels exceeded expectations and prices increased by an average of USD0.15-0.20/kg. In September, an Ecuadorian shipment was tested positive for a virus and consequently all their shipments had to go through checks on arrival to China main ports. This dampened exports from Ecuador and prices crept up by USD1/ kg by October. However, a diplomatic meeting reversed this in November, and it will be interesting to see prices in 2020. By this time, major buying by China had already been done for Chinese New Year 2020 which falls on 25 January 2020.
Conundrum with the monodon shrimp
In the last marine shrimp review, it was reported that lured by demand from processing plants and the availability of post larvae from SPF broodstock, in Malaysia, there was a surge to farm the black tiger shrimp in 2018. This trend did not last long as in mid- 2019, farmers in the south of Peninsular Malaysia could not find markets for the large sized 20/kg or even the smaller sized 30-40/ kg shrimp. One possible reason was that prices were too high when large sized vannamei shrimp were much cheaper. Offer prices went down to around MYR38 (USD10/kg) for size 20/kg. At the same time, the live monodon shrimp market has been competitive; farms in Southern Thailand and Malaysia vie for the live shrimp market in China. Meanwhile, the indoor farms in China are supplying live shrimp. Prices are very good and did not put any caps on costs of production, which are high. Astaxanthin is added to the feeds to produce the red colour demanded by consumers.
Reviving monodon shrimp production
With the exception of Bangladesh, there has been little focus on production of the monodon shrimp. According to industry, 220,000 tonnes of this shrimp were produced in Vietnam, where there is a preference for a dual species industry vannamei shrimp in intensive culture and monodon shrimp in areas more suited to extensive and semi-intensive culture practices. The production of monodon shrimp increased from 3% to 5% of total production of farmed shrimp in Thailand in 2019.
In the Philippines, traditional farms focus on extensive culture of the monodon shrimp but with the success in farming of the vannamei shrimp with higher returns and also the fact that SPF post larvae are available, a younger generation taking over farms are now looking at converting to vannamei shrimp farming. Furthermore, the market in the Philippines still favours small sized shrimp, at 16g. According to an industry source, some farmers in Cebu and Negros produce monodon shrimp to large sizes (40g) to get the higher prices, above USD8-10/kg. The Aquaculture Department, Southeast Asian Fisheries Development Centre (AQD, SEAFDEC) started a “return to the monodon shrimp” program in 2017 and is in the midst of collecting wild shrimp as founder broodstock.
“Despite perennial calls for the vannamei shrimp to be farmed in Bangladesh, the country has opted to stay with the monodon shrimp,” said Syed Mahmudul Huq, chairman of the Bangladesh Shrimp and Fish Foundation (BSFF). There is a large World Bank project to expand monodon shrimp production.
During the recent GOAL conference held in Chennai in October, in the presence of representatives from shrimp farming countries, leading importers and retailers from Europe, USA, Japan and China, aquaculture scientists and disease specialists deliberated on how to revive the market and production of monodon shrimp. Led by George Chamberlain, Global Aquaculture Alliance (GAA), a round table session discussed ideas and a small group was formed to continue the dialogue and come up with concrete strategies and action plans for this purpose.