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Industry News
Reviews in 2021 Some clips on significant events shaping Asian aquaculture and newsmakers in 2021
Global supply and demand do not determine price. Supply chain does farm
processing
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uring the lockdown in 2020, consumers have learnt to cook seafood at home, thus increasing sales in the retail sector. In 2021, vaccination and revenge dining have seen a rebound in the food service sector, leading to a nett increase overall. While this demand has led to a price increase in the consumer markets, this has not translated to higher ex-farm prices for farmers. Why the mismatch? The above chart describes the supply chain for aquaculture exports. A lockdown SOP in a producing country like Vietnam in July 2021 mandated processing plant workers to ‘eat, sleep and work’ in the factory, resulting in reduced overall capacity and buying capability, and therefore, lower ex-farm prices. Meanwhile, container freight charges to the US have increased more than fivefold due to fewer vessels plying and the lack of containers. The situation was exacerbated by port congestion at Los Angeles (LA). It was reported in The New York Times that more than 273 container vessels were anchored off LA port in mid-October and if these containers were lined-up end to end, it would reach Chicago from LA. These containers are essentially ‘trapped’ or temporarily out of circulation.
Container, shipping & port congestion
In-country inventory
In China, inspection for Covid-19 on seafood packaging has contributed to port congestions and clearing a seafood container has risen from 5 days pre-pandemic to 4 weeks today. In February 2021, markets turned sharply upward, and everyone wanted products and services immediately. US port volumes were up 43% due to increased consumer demand. Logistics were a mess due to Covid-19 SOPs with a shortage of port labour, warehouse labour, train capacity, truck capacity and chassis, noted HJ O’Neil Commodity Consulting, at the USGC Aqua Talks in November. Although every container vessel is back in service today, there are acute shortages in the supporting supply chain, and shipping companies cannot afford to have empty containers for 45 days going in the opposite direction (i.e. from US to Asia). Fewer ships, container shortage, and port congestion have led to low in-country inventory for seafood thus sending prices upwards. US fresh, frozen and shelf-stable seafood prices have all shot up 8-9.2% in 2Q 2021 vs 2Q 2019 (Seafoodsource.com).
Rising feed ingredient and feed costs Between August 2020 and August 2021, soybean and corn prices have climbed 60% and 74%, respectively. In October 2021, the Bloomberg Commodities index (BCOM) was at a 10-year high. These high protein meal costs have put pressure on feed prices. A typical shrimp feed grower diet of 36% crude protein in Asia has been priced at USD1.10 per kg without any fluctuation over the past decade but shrimp feed producers across Asia have been forced to increase their prices by up to 10% in 2021. Soybean prices have a bigger impact on pangasius feed where previously a typical diet of 26% crude protein was priced at USD0.46 per kg. Pangasius feed prices in the major producing country of Vietnam have increased by 20-25%. Although fishmeal prices and output have remained stable (Enrico Bachis, IFFO), the inclusion of fishmeal in shrimp feed is limited by Fish-in/Fish-out (FIFO) ratios. So how does the feed segment support the aquaculture industry when the feed ingredient prices do not seem to be easing in 2022? US consumer prices jumped 6.2% in October, the biggest inflation surge in more than 30 years, according January/February 2022 AQUA Culture Asia Pacific
to Bloomberg. As seafood prices increase in the major consuming markets of the US, EU and China, the margins will cascade down to the producer eventually, but it will not be a smooth process due to supply chain disruptions. The rising food inflation will also make consumers pay higher prices for food and they will adjust to the new normal. This creates opportunities for novel feed ingredients and protein meals to be more widely accepted. Single cell proteins boast of a high 72% crude protein and are being produced with a small footprint and easy scalability, but investment costs are high. Prior to Covid-19, there was more resistance to the introductory high prices, but this does not seem to be the case anymore when feed companies anticipate a protein shortage. Insect meals are also gaining acceptance but there remains the concern of scalability and production costs. Some companies have been able to secure constant feedstock for the insect larvae from commercial food processing which will improve product consistency. High protein DDG (Dried Distiller’s Grains) or Corn Fermented Protein are co-products of the ethanol industry. They can have protein meals ranging from 40-50% crude
