Seafood Demand vs Supply Outlook. Jump-on the aquaculture band wagon

Shrimp imports to the USA reached a record 890,000 tonnes in 2021 while Ecuador is the first country to reach the one million tonnes production benchmark. Norway exported USD13.7 billion worth of seafood products in 2021 – a record and an increase of 14.3% over 2020. This included 1.4 million tonnes of fish from aquaculture operations valued at USD9.7 billion. Meanwhile, US seafood retail sales reached new records in 2021, boosted by robust demand as well as inflation. Fresh seafood sales at USD7.1billion rose 30.8% vs pre-pandemic levels in 2019. Frozen seafood sales at USD7.2 billion rose 40.8% vs 2019. All these data seem to ignore (or be due to) the pandemic and lockdowns of 2020. The data quoted here (SeafoodSource. com) are for the US as they are readily available, but it sets a good example of expectations in the EU as well.

During the lockdowns, retail sales of seafood surged as food service suffered but when restaurants reopened, there was an overall net increase. There is no doubt that retail seafood benefitted from the pandemic with ready to cook, ready to heat and ready to eat meals and analysts see this as an advantage in the supply chain. China’s Guolian share price surged 19% in midJanuary when it announced a strategic partnership with Hema (an upmarket retail hypermarket, majority owned by Alibaba).

Rabobank reported that the aquaculture industry is primed to have another strong year in 2022, especially with the leading farmed species of shrimp and salmon. Asia, as a major producer, must take advantage of this growth in shrimp. With a current global production at 4.58 million tonnes of shrimp, the forecast for 2030 is to exceed 6 million tonnes, even with a conservative CAGR of 3%. The old school of thought would be a case of supply exceeding demand leading to low prices, but the past two years has shown that this may not be the case. However, Asian shrimp has three issues working against it. Firstly, is the uncertainty of production i.e., due to the short cycle, farmers can pull out and skip cycles when prices are poor. Secondly, Asia does not have a sustainability story to tell and sell; and finally, investors still see Asian shrimp aquaculture as a ‘casino’ with little control over winning and losing big.

Rabobank also reports that higher seafood retail consumption is here to stay which is driven by increased familiarity of cooking at home, demand for healthy food and availability of convenient seafood products. Asia also needs to build a single species marine fish to complement shrimp. While this growth has benefitted salmon, consumers are looking for alternatives in whitefish from aquaculture. One can only consume that much salmon in a week and tilapia and pangasius do not reach that higher value product. This is where the Asian seabass comes in and fits the sweet spot. But we can also add the groupers and snappers if we have volumes.

Unfortunately, today farmers may experience low ex farm prices while prices in the consuming country are high. We know that in the short term, global prices are not determined by supply and demand but by disruptions in the supply chain and high inventory in warehouses lead to poor buying capability in the producing country. Farmers skipping cycles will only lead to uncertainty and higher volatility in demand vs supply outlook. To enter these markets, the cycle will be 18 months for the seabass (>2kg fish). Our advantage is no over wintering when compared to Mediterranean seabass and seabream and producers should take advantage of this strength, but it requires the supply chain working together.

Inflation is no longer transient but here to stay and higher energy and feed ingredient prices will increase cost of production. These prices cannot be borne by the supply side alone and will have to be passed on to the consumer. In conclusion, even with increased supply, there is a matching increase in demand and prices will not fall. This is a good time to jump on the aquaculture band wagon.

If you have any comments, please email: zuridah@aquaasiapac.com