What Crisis? A Shrimp Crisis!

Farm gate shrimp prices are falling in all producing countries the world over. At the end of June, a quick summary of the benchmark size 60 (around 17g) showed the following prices: USD3.84 in Vietnam, USD2.88 in India, USD3.62 in Indonesia and USD2.20 in Ecuador. This is close to the lowest prices the industry has seen in history (not counting for inflation). What is happening?

Prices are generally a function of demand versus supply so let us review demand from the largest markets. The US market rebounded post covid lockdown to import 900,000 tonnes in 2021. This dropped to 800,000 tonnes in 2022 and is forecasted to end 2023 at 650,000 tonnes. The root causes are inflation, extended supply chain woes increasing retail prices coupled with global economic uncertainties which started to kick-in by 2Q 2022.

Shrimp is a highly price-elastic commodity which means when prices increase, consumption will drop. The EU27 plus the UK face similar challenges affecting the food service sector as well as retail and hence black tiger shrimp is also affected. China showed positive prognosis upon news of re-opening with huge shrimp imports in 4Q 2022 ending the year with over 900,000 tonnes. However, this rebound did not happen and shrimp consumption is now stagnating. Unverified reports estimate China having 6 months of inventory and nearly 50,000 tonnes of frozen shrimp looking for cold-room storage facilities. The Chinese population may be cash rich post lockdown, but they are not spending due to lack of confidence in the economy moving forward. This promotes saving and sends the economy into a further downward spiral. In addition, unemployment among the 16–25-year-olds is at 20%, an all-time high.

In terms of supply, the industry reported global production at 5.5 million tonnes in 2022 led by Ecuador which forecasts another production high, close to 1.5 million tonnes in 2023. These low farmgate prices are not new to Ecuador. In September 2020, prices for size 60/kg dropped to USD2.70 and exporters reacted by repositioning exports to focus equally on the US, EU and China. However, this time is different as the cost of production has increased buoyed by high feed and energy costs contributing to negative margins for farmers. Willem van der Pijl of Shrimp Insights reported that Indonesia’s YTD June 2023 exports have fallen 19% Y-o-Y. Indonesia is more vulnerable as it exports nearly 80% of its shrimp to one market i.e., the US and this was highlighted as the major challenge in the recent Shrimp Aquaculture Conference organised by PMI.

Rabobank had already forecasted in its Animal Protein report that 2023 will see Inflation, Recession and Headwinds. However, the severity is more serious for the shrimp industry than predicted. The intent of this editorial is not to dramatise ‘doom and gloom’ but to ensure the industry accepts reality and overcomes denial and anger and moves quickly to acceptance. In short – ‘Powering the engines to challenge each other and surpass the 1 million tonnes production volume in each country is not the way forward’. The question often asked is ‘Who is going to buy all this shrimp?’

In the way forward, the first thing to remember is that we are all in this together, notwithstanding, if we are Ecuador, India, Vietnam or Indonesia. The industry needs to put marketing ahead of production by creating and building demand. Now that prices are low, it should be easier to do, and suppliers should ride this wave. This will be the major point of the industry dialogue with the younger generation of farmers in TARS 2023 Shrimp Aquaculture – Regeneration. Kontali will also be at TARS to discuss domestic and regional markets. Although the dream is to have global generic marketing, it will remain a pipe dream. However, country-wise generic marketing is attainable. National associations can build on quality, sustainability and branding for export while developing a local market. Here is an opportunity for self-regulation and weeding out the bad apples. Can governments help? A definite yes in promoting quality, transparency and traceability with country of origin. What governments should not do is to restrict imports through tariff barriers and implementing beggar-thy-neighbour policies which benefits one country by harming its neighbours and trading partners.

With every crisis, comes an opportunity. Winston Churchill once said, ‘Never let a good crisis go to waste’. The shrimp industry should not waste this crisis.

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