With demand softening and El Niño driving fish meal prices higher, 2H 2023 is expected to be the most challenging period for global aquaculture since the peak of the pandemic in 2020.
This was the outlook given in Rabobank’s Global Aquaculture Update published in July 2023, by the Global Animal Protein Sector team led by Senior Analyst Gorjan Nikolik. This covered salmon, shrimp and fishmeal and fish oil. Some key takeways were:
The salmon industry will remain highly profitable in 2H 2023, despite more normalised prices. Rabobank does not expect further price weaknesses since the fish is currently competitively priced relative to alternatives. Salmon prices have largely corrected to more normal levels but remain high compared to historical levels.
The Asian shrimp industry is facing a challenging period with persistent low prices and high costs, making its farming unprofitable. Weaker Chinese demand amidst supply growth in Ecuador, means a sizeable supply correction in Asia is needed to balance the market. The slump in shrimp demand may even get worse in 2H 2023 as Chinese demand softens.
High prices for fishmeal and fishmeal are likely to be supported throughout 2H 2023. Prices of fish oil are already at record levels. And due to El Niño and high fish meal and fish oil prices, aqua feed prices will not experience the correction that had been expected given lower soymeal prices.
On the demand side, soft demand driven by inflation in the US and Europe is continuing, with salmon appearing relatively better placed than shrimp. Chinese demand is not recovering from the pandemic as fast as expected, resulting in low protein prices and high inventories. Fish meal and fish oil demand seem robust for now, but high prices will force rationing and substitution for many.
On the supply side, salmon supply will return to growth after nearly two years of contraction in Q3. The Asian shrimp industry is facing a challenging period of record-low prices due to oversupply caused by Ecuadorian growth. Finally, El Niño conditions have caused the cancellation of the first fishing season in Peru creating an acute fish meal and fish oil shortage. Aqua feed prices will be supported due to this scarcity of fish meal and oil.
Shrimp industry in 2H 2023
The report said that the second half of 2023 is expected to be even more challenging than 1H 2023. Despite stellar shrimp imports earlier in 2023, Chinese shrimp consumption has not kept up with imports, swelling inventories. Asian producers are suffering from low-price and high production costs and have started to reduce production. Indian production is expected to contract significantly in 2H 2023. Vietnam’s shrimp industry is at an inflection point due to flat prices and high costs. With a high reliance on the soft demand in the US market, it is inevitable that Indonesia will reduce production.
According to Urner Barry White Shrimp Index, prices have fallen below pre pandemic levels to ten-year lows.
However, production from Ecuador is expected to expand 16-18% throughout 2023, assuming no negative effects of El Niño. This is lower than the 20% growth rate achieved in 1H 2023 but will nevertheless worsen the global oversupply situation.
With regards to markets, the team said that China is likely to join the US and EU with soft market conditions. US Shrimp demand was lacklustre in 1 H 2023 and is not expected to change in 2H 2023. YTD 2023, US import volumes were down 18%. YTD 2023, the EU-27+UK imports were down 14.5% in volume, according to Rabobank’s Trade Data Monitor. Rabobank expects a marked slowdown in 2H 2023 due to rising frozen inventories in the Chinese market. YTD 2023 China’s imports were up 39.4%, reaching more than 340,000 tonnes by April 2023.
Acute shortage of fishmeal and fish oil expected
The team also covered the fishmeal and fish oil situation. El Niño, is expected to not only create a shortage of fishmeal but threaten shrimp production in Ecuador in 2H 2023. “We expect acute shortages, escpecially certified fish meal and fish oil. The already high prices in 1H 2023 will be supported in 2H 2023.â€
The team explained that high prices of fishmeal and fish oil were due to high prices of plant alternatives. The high prices will create hard choices for feed formulators but added, “However, with the easing of soybean meal prices, we expect aquafeed prices to stay relatively stable in 2H 2023 with formulators more reliant on plant proteins and oils.â€
