Drastically low prices started the ‘stop and start’ trend.
By Zuridah Merican
At the end of 2022, most farmers worked with the expectation that post pandemic, demand will rebound and with this comes better prices. Buying had started in China in late 2022 and the first half of 2023 saw record high imports in China, going over the half a million tonnes mark but consumer demand and imports in the western markets of North America and Europe were down. Imports also declined in Japan and Australia (Globefish, 2023).
Since early 2023, farmers grappled with lower farmgate prices, (Figure 1). According to Globefish, in June 2023, the benchmark farmgate prices of vannamei shrimp for 60/kg were record lows at USD3.83 in Vietnam, USD2.88 in India, USD3.62 in Indonesia and USD2.20 in Ecuador. Thailand started well with a high price of USD5.37 in January 2023 but fluctuated downwards to end at USD3.88 in December, drastically low compared to that in 2022 at USD4.65 (Source: Vinij Tansakul).
By December 2023 prices were better at USD4.58 in Vietnam, USD 3.20-3.43 in India and USD2.65 in Ecuador but lower at USD3.52 in Indonesia. The highest farmgate price at USD4.84 was in Malaysia, where shrimp are mostly for the domestic market.
Vannamei shrimp supply in 2023
With falling farmgate prices, the question was whether the global vannamei shrimp supply in 2023 will contract. The Global Seafood Alliance (GSA) and Rabobank global shrimp aquaculture production survey and forecast report (presented at the Responsible Seafood Summit 2023 in October) gave a modest supply decline of 0.4% for 2023 at 5.6 million tonnes. During TARS 2023 in August, Robins McIntosh, Charoen Pokphand showed data for 2022 at 5.34 million tonnes and in 2023, only 5.10 million tonnes. However, when Kontali considered the growth in volumes by Ecuador, the projection was 6.3 million tonnes in 2023 (Visch, 2023; Bussel, 2023).
As early as January 2023, India’s industry leaders were pessimistic and projected drops as much as 10-12% for 2023. Rabobank (Sharma, 2023) also gave some projections of 2023 production: Vietnam to be less -15.1%, Indonesia, -5.1% and Thailand -2.2%. However, data from the Department of Fisheries Thailand (DOF) gave a 1.27% growth in production to a total of 260,268 tonnes with more volumes for both vannamei and black tiger shrimp (Table 1). Production from China is expected to increase by 8.8%.
Farmed shrimp trade in 2023
Until July 2023, Chris Bussel, Kontali, at TARS 2023 reported a supply of 6.25 million tonnes of live weight equivalent (LWE) and out of this only 3.5 million tonnes entered the global trade, with 57% exported and 43% consumed locally. In a November review on export data up to Q3 2023, Willem van der Pijl, Shrimp Insights said that in Q3, the average prices of exported shrimp remained low. Despite a price slump, export volumes, mainly from Ecuador and India, continued to grow while others dropped. In Q1-Q3, the top six producers, Ecuador, India, Vietnam, Indonesia, China and Thailand exported1.8 million tonnes (Shrimp Insights, 2023).
In a presentation on export statistics for the global shrimp market at the second Global Shrimp Forum 2023 (GSF 2023), van der Pijl noted that within 6 months in 2023, Ecuador had reached 600,000 tonnes of exports raising a possibility that exports would reach 1.2 million tonnes for the whole year.
“The total export value for Ecuador decreased, reflecting the negative price trend that Ecuador’s exporters have been experiencing in China and other markets they supply to,” said van der Pijl. Similarly, India’s export value is on the decline. This is reflected in the negative price trend that exporters have experienced in the US and China, India’s two largest export markets.
China was absorbing most of Ecuadorian shrimp. There are also exports of Ecuadorian shrimp via Vietnam to China as the final destination. China was also absorbing shrimp from India, followed by Vietnam, Indonesia and Thailand. With regards to other markets, volumes into the US dropped 18% y-o-y with an average retail value of USD9/kg. In 2023, while Ecuador’s exports to the US dropped by 4%, other countries -India, Indonesia and Vietnam showed drops ranging from 20-28%.
Eyes on Ecuador
Industry in Asia continues to be intrigued by the success of Ecuador in growing its shrimp production and marketing. Sandro Coglitore, General Manager, Omarsa S.A shared some factors responsible for this success, during the Shrimp Summit 2023, among which were: low failure rates, technification with automatic feeders, aeration, and genetics and larval rearing. Production is within the same area of 220,000 ha. Thankfully, China is absorbing its production. Robins McIntosh added that Ecuador’s advantage is the post- harvest handling which Coglitore added that Ecuador has large integrators unlike the many 3-5 ha farms all over Asia. In the past year, large farms have been absorbing smaller farms too. Industry in Ecuador has enjoyed years of profits and is also more capitalised than their Asian counterparts.
Manoj Sharma, Mayank Aquaculture, India noted that Ecuador, albeit one-tenth the size of India but produced 1.3 million tonnes, surpassing India. Sharma attributed Ecuador’s success to their efficiency. “Ecuador’s farmers are far more efficient than us, at 15% less than India’s cost of production”.
Asian farmers realise that Ecuador has the better advantage especially when their market prices are low and the US market is nearby. Seabina.com said that Ecuador can sell up to USD2/kg lower than Vietnamese shrimp. It added that Ecuador has 40,000 ha of ASC certified farms allowing them to easily access the EU markets. With record low prices (USD2.80/kg for size 40- 50/kg dropping from USD4.10/kg in April 2022), supply chain challenges, rising prices of fishmeal, pending El Niño etc, Coglitore sees the only way to lower costs is through increasing yields.
At GSF 2023, Gabriel Luna, Gluna Shrimp, Ecuador, and other industry experts estimated a 10-15% growth for Ecuador’s production to 1.5 million tonnes in 2023. On the contrary Rabobank gave a less optimistic 6.3% growth.
Industry and production trends in 2023
India
There was a slow start in 2023, with farmers not stocking. It was a wait and see situation, either harvesting size 100/kg when prices were low or in anticipation of prices rising, keeping shrimp in ponds to reach larger sizes. Many large integrators managed to cope with low prices while pessimism with the second crop pushed others to give up leases for farms.
Most pond sizes are large and unlined. As farmers are challenged by disease outbreaks, Ravi Kumar Yellanki, Vaisakhi Biomarine said, “The route opted was to improve cost efficiency which was to lower stocking density from the current 40-50 PL/m2. There is also the realisation that carrying capacity is constrained by the concentration of farms in a few areas. The trend of not taking a break between cycles and using the same water and probiotics is changing too. Some farms take crop holidays to break the pathogen cycle. Ultimately, production volumes in 2023 is expected to go down.” To access markets in Europe, some farms are pushing for ASC certification. “The current landscape presents a dichotomy. Despite India’s ascent as a global shrimp producer, boasting a capability to reach the one-million-tonne output and as one of the leading exporters of shrimp, the industry grapples with a stark reality — a diminished farm success rate hovering around 40-50%, compared to a success rate of 85% in 2010,” said Manoj.
Vietnam
It was confirmed by industry that production declined in 2023. However, data presented in Table 1 on black tiger shrimp only reflected production from intensive/semi- intensive farms. Globefish reported that Vietnam’s average farmgate prices for June 2023 was the highest in Asia at USD3.83/kg for size 60/kg. However, similar to India, there is a waiting game for higher prices such that at Vietfish 2023, Ho Quoc Luc, Fimex, expected a shortage of raw materials in the third quarter of 2023. He added that there was a lot of inventory in Vietnam. The current strategy is to work on value adding. Key is also to have a larger domestic market to absorb production. Vietnam has a free trade agreement with the EU but for better access, such markets require traceability.
For several years, industry leaders lamented on the high cost of production (COP) in Vietnam at almost USD4.00/kg. Bringing down COP is a support mechanism by aquafeed producers such as CP Vietnam, Sheng Long, Grobest and Skretting as well as Minh Phu, the leading integrator which have been developing models to increase yield and lower COP.
At GSF 2023, Dr Loc Tran, Shrimp Vet stressed that farmers need to reduce the risks of disease to achieve better profitability. He promotes a farm concept where the focus is on survival rate and COP and shrimp farming as a business. The minimum production is 2,000 tonnes which will require farms to consolidate. At Vietfish, Jesper Clausen, De Heus Vietnam said, “Some in Vietnam expect 2024 to be a transition year but industry will need to work hard at lowering the impact of disease and improve on efficiency.”
Indonesia
The Industry estimates production of 265 -275,000 tonnes of vannamei shrimp and 40-45,000 tonnes of black tiger shrimp in 2023. Farmgate prices fluctuated and prices for size 50/kg shrimp ended the year at USD3.54, much lower than 2022 at USD3.96 (Figure 2, JALA Tech.)
According to Aryo Wiryawan, JALA Tech, at TARS 2023, “Today 60% of the farms are no longer operating showing disease is impacting the industry.” In contrast, Denny Leonardo, Pandora Aquatech, Indonesia, believes that the fear of low farmgate prices is the major factor deterring production. Indonesia has one of the lowest COP at USD3.00-3.50/kg and some well managed farms can secure a lower COP such as USD2.50-2.90/kg. At TARS 2023, Bussel had anticipated some issues when a new regulation PP36 takes effect in August 2023 which may likely affect the cash flow of processors and buying of harvests.
Indonesia, together with Ecuador, India, and Vietnam are subjected to antidumping duty (AD) and countervailing duty (CVD) investigations for imports of frozen warmwater shrimp to the US. This is a first for Indonesia and for industry players, it is particularly challenging when the US is the major market. Indonesian shrimp exports reached 130,776 tonnes, which was 17% behind the 2022 third quarter. Some 76% went to the US and other markets are Japan (12%). Malaysia is the third largest market this year with 3,581 tonnes (Shrimp Insights, 2023).
China
In recent years, there have been changes in China’s production landscape with the push to meet domestic demand by setting up small and large green houses. Guo (2023) gave an estimate of 1.49 million tonnes from seawater farms in 11 provinces and calculated 300,000 tonnes from freshwater ponds based on a success rate of 80%, bringing production to 1.89 million tonnes. At GSF 2023, Fang Qing, Aquaculture Stewardship Council China, countered that a success rate of 20% is more likely as farmers faced poor farming conditions, disease challenges and poor market prices. Another point raised was that such systems, using ground water may not be in line with the government’s program on ecological methods of farming.
Visch (2023) said that there is increasing competition between domestic production and imported shrimp. Farmgate prices are usually much higher in China, compared with those in other countries, but in July, prices dropped 30% because of quality issues. Shrimp production in recirculation systems (RAS) is gaining momentum and Guo reported on plans by leading feed companies (Tongwei, CP and Evergreen) to expand their investments in RAS. Live vannamei shrimp are sold at USD40/kg.
What’s next in 2024
Responsible Seafood Summit 2023 expects global production to grow by about 4.8% in 2024 to close to 5.88 million tonnes (Dory, 2023). Rabobank’s Aquaculture Update 1H 2024 expects mild growth and mild contraction in Ecuador. However, an industry insider predicted a supply increase of 8% for 2024. While some in Ecuador’s industry expect some effects from El Niño which was due to start in December 2023, particularly to 110,000 ha out of the total of 225,000 ha, Kontali’s shrimp analyst, Erwin Temaat, is convinced that large integrators are well prepared to mitigate risks with little effects on Ecuador’s production.
In India, Rabobank says that the expected contraction may not occur in 1H 2024. Another scenario is a contraction as prices are still very low and farmers will continue to skip cycles. Vietnam is the most expensive producer in Asia and production is expected to drop. In 2023, export volumes declined 23% but value went down 40%.
The curve ball for 2024 will be the US AD and CVD investigations, which will only take effect in 2H 2024. Before that we may see importers stocking up in 1H 2024.
The comeback with black tiger shrimp
The GSA/Rabobank survey featured a chart on the comeback of the black tiger shrimp with a CAGR of 7.6% in 2022, 9.3% in 2023 and a further 7.8% is expected in 2024 (Figure 3). Asian black tiger production is estimated at 520,000 tonnes in 2023 and is expected to increase to 580,000 tonnes in 2024 (Robins McIntosh, pers comm.) with growth in India and China.
According to Shyamal Das, MU Seafoods, Bangladesh produced 70,219 tonnes in 2022, with 1,229 tonnes from semi-intensive farms. Thailand and Malaysia are small producers targeting the niche and live markets. There was more production in 2023 in Thailand according to DOF data, as well as in Malaysia. A Malaysian insider expects more production in 2024.
At TARS 2023, Manoj said, “Understanding the world market for the black tiger shrimp is critical. India can hardly achieve an annual production of 40,000 to 50,000 tonnes since price realisation will be difficult when volumes increase.”
Shrimp Insights reported that India’s black tiger exports in 2023 almost doubled to 22,315 tonnes from that in 2022. Exports went to Asian markets in 2022 and 2023, moving away from the focus on EU markets. Bangladesh exported 17,409 tonnes of black tiger shrimp and its major market is the Netherlands (Das, 2023).
In 2023, the major setback was depressed prices, often close to that for large size vannamei, such as in India, Vietnam and Malaysia (Table 2). Recent data on farmgate prices in Vietnam showed a farmgate price for size 30/kg black tiger USD6.95/kg) compared to USD 5.93/kg for vannamei shrimp (Table 2). There is a premium of MYR1.50/kg for live black tiger in Malaysia (MYR26.50/kg (USD5.62) versus MYR25/kg (USD5.30). Within Malaysia and also internationally, the market is small and very competitive. “Quality matters for buyers, such as offering Malaysia’s black tiger USD2.00/kg more over those from India,” said Catherine Lee, GST at TARS 2023.
Conclusion
During the panel on shrimp production at the Shrimp Summit 2023, Robins McIntosh said that the price cycle with shrimp farming will always be there. Lower prices at retail may increase consumption but ultimately, it is about managing costs. Farmers always need higher margins to compensate for the high failure rate, hovering at 20-30%. Managing costs is critical, which farmers can control. At TARS 2023, he said, “In an oversupply situation, it will be the lower cost producers that will stay alive.” When prices recover, he predicted that Indonesia and India will be ready.
References are available on request
The article was published in issue January/February 2024 AQUA Culture Asia Pacific
