Weathering the pandemic

Aquafeed.com staff

COVID-19 is affecting us all. As part of the global food supply chain, the aquafeed industry has not escaped the impacts of these unprecedented times. Patrick Charlton, CEO of Alltech Coppens, summed up the situation: “As with all food sectors, the impact varies from region to region and country to country. Markets primarily dependent on export have been the first to see declines in demand and are responding accordingly. Producers are adapting by managing their stocks to prevent an oversupply,” he told Aquafeed.com. “Many of the fish species farmed globally are dependent on demand from the restaurant and catering trade, and the effective closure of these markets during lockdown is going to impact demand at the local level.”

“We see that aquaculture is highly affected in all high-value export species, such as salmon, shrimp and marine fish,” Peter Coutteau, Business Unit Director

Aquaculture at Adisseo confirmed. “Dominant markets for these items are in lockdown. Restaurants, tourism, reduced access to supermarkets … it all minimizes the consumption of high-value seafood. Locally, mostly freshwater fish production is less affected, similar to the poultry sector, since it continues to be on the local menu.”

“For our clients, business is not as bad as expected: big farmers have found new ways to sell their fish and the small ones are selling in short food supply chain since the French market is buying French now, a measure that has been very helpful,” French feed manufacturer, Le Gouessant Aquaculture said. “But it is really difficult for many small and medium fish farmers.” The company reported that it was doing its best to deliver on time to its customers, but the transportation and logistics could be complicated in Europe.

The largest global feed companies are of course in the strongest position to withstand the immediate pressures imposed by the pandemic. “We’re working very hard to monitor the situation, and so far, we don’t see immediate consequences for feed production at our factories,” one of the largest, Skretting, told us. “We have a good overview of the status of all ingredients so that we know if and where we could potentially face challenges. While feed production is not impacted for now, a number of our clients are experiencing the collapse of markets. This will no doubt affect us in the weeks and months to come.”

Pilar Cruz, Group Leader and President of Cargill’s aqua nutrition business said: “We have seen increases in demand as our customers respond to the uncertainty in front of them. In response to this, we are working very hard at running our plants to be able to meet our customers’ needs. Currently, we’ve been able to successfully manage our raw material supply chains to meet higher customer demand and feed supply logistics.”

Asked about the impact of COVID-19 on Cargill’s customers, she noted that “in the U.S. and Europe we’ve seen a drop in overall [seafood] demand in the short term as consumers purchase more in retail channels rather than via food service. As a result, many salmon farmers are opting to reduce harvest and keep fish in the sea longer. We expect long-term demand for salmon to continue to increase.”

“In the shrimp supply chain, the COVID-19 outbreak is leading to disruptions due to reduced customer demand in destination markets and canceled orders. This is leading to significant price drops at origination markets as farmers and processors deal with the realities of an oversupply situation, resulting in panic harvests and diminished stocking of shrimp for the new season.”

Regional impacts Every country and region share the same challenges, but the impacts have been different.

CHINA Nowhere has the effect on exports been more pronounced than in China, the Ground Zero of the pandemic. Exports to Korea have stopped, and exports to the country's other main seafood markets of Japan, the EU and the U.S. have slowed dramatically. Sustainable aqua farmers who produce specifically for these overseas customers have been particularly hard hit. There are however cautious signs of a potential recovery in the country as it emerges from lockdown, although the effect will be slowed by a backlog of shrimp and fish stocks from prior months.

Most of the feed mills have been running at normal production. Although the price of some feed ingredients was initially higher, as logistics improve the ingredient supply has become more stable and prices are going down, Nutriera Group told us.

With low confidence in the economy and aquatic product consumption, harvesting has been slow. There are a lot of fish still stocked in the ponds, resulting in higher feed volume compared with last year. As to shrimp, the prices are still good and the domestic supply is not enough to meet local market demand. Annually, China needs to import more than

Main culture area South (Guangdong, Guangxi, Hainan, Fujian)

Aquafeed 2019 (MT) 750

Center (Hubei, Hunan, Anhui, Henan, Jiangxi)

Yangtze river delta (Jiangsu, Zhejiang, Shanghai) 660

400

Southwest (Sichuan, Yunnan, Guizhou, Chongqing)

90

North (Tianjin, Hebei, Beijing, Heilongjiang, Jilin, Shandong, Shanxi) 190

Table 1. Aquafeed market expectations in China by Nutriera Group.

January - March 2020 Stable or a little decrease

Decrease about 20%

Stable or a little increase

Stable or a little decrease

Decrease about 20%

900,000 tons of shrimp from India, Ecuador, Vietnam and other countries. But these countries are deeply impacted by the COVID-19, and import and export was blocked and slower recently. This makes the shrimp price strong and may be higher in the coming weeks.

SPAIN Spain has suffered badly from the pandemic, topping the EU incidence charts as we go to press. However, the production of fish feed continues at its normal pace, although with staff limitations, Javier Ojeda, General Manager, Business Association of Marine Aquaculture Producers of Spain (APROMAR) said. The daily supply of feed to Spanish aquaculture farms is not being hindered. Work on aquaculture farms is also considered an essential activity and keeps pace, albeit with the complications of the precautionary measures imposed, he said.

Fresh fish sales in Spain have fallen, on average, by 55%, however, frozen and canned fish has increased. While aquaculture farmers are dealing with less financial liquidity due to lower harvests, they see fish stocks (live biomass) increase beyond what was anticipated. The uncertainty makes it hard to plan. “Farms are reducing their maximum feeding rates to try to limit the damage in case the crisis lasts longer, but feed consumption continues to grow,” Ojeda explained. “This creates two problems: higher feed consumption in the coming quarters, and greater difficulty for farmers to cope with feed payments.”

Besides, hatcheries have stopped their activity due to the lack of rotation of fish in the on-growing farms. In the EU, the vulnerability of aquaculture has been recognized

and will attract specific financial support programs by the EC; Ojeda says these will not be enough, however. “Spanish aquaculture companies expect direct support measures to materialize. We are waiting for direct help to compensate for the loss of liquidity and to allow some form of temporary storage of fish out of the water (filleted and frozen),” he said.

INDIA India imposed a three-week lockdown from March 24 to April 20 which may well be extended in view of the large size of India and its huge population. All activities and operations, other than those classified as essential have not been allowed to operate.

“The lockdown initially crippled the transportation of fries and fingerlings, feed, fish and shrimp and movement of labor for the farms, harvest and feedmills,” Yeo Keng Joon, Chairman of fish and prawn feed manufacturer, Bharat Luxindo Agrifeeds Pvt Ltd, India said.

“Some shrimp hatcheries were forced to drain out 5-10 million seeds due to lack of demand, labor and transport, because of movement restrictions. Several feed companies announced shutdown until the end of March. Scaled down startup has since been affected, with most factories reporting lower production rates.”

Several shrimp processors reported that they would close operations due to a shortage of labor and logistical problems. Aquaculture related organizations took up the issue with respective state governments, and shrimp and fish have now been classified as essential, allowing their transportation. “This allows aquaculture-related industries to operate as usual during the lockdown. Hence we do not foresee any further disruption in raw

material supply, feed production an feed supply to farmers,” Yeo said.

At ground level, problems persist due to locked down workers not able - or unwilling to risk COVID-19 infection - to go to hatcheries, farms or plants. Most shrimp and fish farms have re-stocked cautiously given the lower demand and uncertainties. Some states and regions reported as low as 40% stocking compared to last summer. However, annual Indian shrimp production and feed demand will not be significantly affected by the COVID-19 lockdown, Yeo predicted. “Greater impact from lower international shrimp prices can be expected; fish production, which is mainly for domestic consumption, will be significantly affected by the expected impact of COVID-19 on the domestic economy causing lower demand for fish,” he added.

Feed ingredients and the feed supply chain A huge volume of commodity raw materials and additives on which aquafeed mills depend originate in the United States. As of now, the demand, price and availability of ingredients seems to be stable. John Stewart, Director, Membership and Stakeholder Engagement at the American Feed Industry Association and the AFIA staff representative on the Aquaculture Committee, said ingredient manufacturers are still working to get those ingredients to their end-users. “So far we have not heard of any major disruptions,” he said. A key piece of this success was AFIA’s advocacy to have the animal food, including aquaculture feed,

supply chain deemed “essential” by state and federal governments keeping them operating.

In Europe, the whole EU feed chain, including aquafeed, came under intense pressure at the early stages of the COVID crisis, before and during the first days of the ‘Green Lane’ agreement, due to cross-border trade problems, leading to very long downtimes at certain border posts, unclear quarantine measures and lack of PPE for drivers, Alexander Döring, Secretary General of The European Feed Manufacturer's Federation (FEFAC) told Aquafeed.com. “These issues have now been resolved and the supply chain for feed and aquafeed products is operating relatively well given the difficult circumstances. However, issues remain with supplies of certain micro-ingredients and expected lower availability of EU produced vegetable proteins (non-GM) due to the downturn of activities of the EU biofuels sector.”

Specialty markets including farmed fish were immediately affected by the loss of the food services market, and consumers currently prefer prepacked foods, which hurts fresh products like farmed fish. "The EU feed sector will see the main economic impact of the COVID crisis in the farmed fish sector in Q3/Q4 as we expect farmers to lower their replacement numbers due to downturn in consumer demand," Döring said.

He said FEFAC welcomed the inclusion of the feed sector as an essential economic activity and noted that there has been an overall improvement in cross-border feed transport, and that livestock farmers are receiving their feed in adequate quality and quantity. “The main

concern that the European Commission and the Member States need to share is more precise guidance on how to ensure the flexibility to allow sufficient workforce at feed plants, while applying COVID social distance rules, including regular access to personal protective equipment (PPE) for drivers and other staff.”

Logistic problems due to disruption of international and local transport has certainly made it difficult for some companies who operate on a global scale. However, the demand for fishmeal and fish oil remains robust worldwide. “Fishing and reduction operations have continued to be carried out almost everywhere,” Enrico Bachis, Market Research Director at IFFO said. “This has been possible thanks to the fact that the reduction industry has been associated with the essential food supply chain through the feed sector. However, the reorganization of shifts and work patterns to minimize staff interactions and satisfy new governmental guidelines have obviously delayed the supply chain of fishmeal and fish oil. A special dispensation from the limitations of workers’ free movement was granted to the sector’s companies, which are currently busy implementing maintenance work to plants and vessels in view of the forthcoming fishing season."

He noted that “Peru is still under a fishing ban in its more productive area, the North-Centre, as it usually happens between the end of March and mid- April.” As we go to press, the Peruvian government had not announced a new quota yet but a new research cruise to evaluate the status of the anchovy biomass was underway.

Feed additive and ingredient suppliers we spoke to said they were able to maintain supply for now.

Evonik’s business as a feed additive manufacturer has not been affected to a high degree these past few months. “How long this will last we don’t know but some impact is expected in Q2. We can report that production and supply chains are stable,” Torben Madsen, Head of Product Line Sustainable Healthy Nutrition, Evonik Animal Nutrition told us.

Adisseo has activated a continuity plan in the face of near lockdown in France. “Our European manufacturing units are benefiting from the good practices established in our Chinese plant, which allowed us to successfully keep running production since the beginning of the Coronavirus crisis in China,” Peter Coutteau said. “Therefore, as we speak, European and Chinese plants are still producing at standard levels and we have taken additional measures to mitigate impacts in our production schedules.”

So far, Coutteau said their aqua business has not been affected, possibly due to a balanced distribution of business in terms of regions and species which allowed them to spread the risk. “Seeing the governments planning to gradually release lockdowns in major consumer markets, starting with China, we expect that the outlook for the aquaculture industry will improve in the coming months.”

Industry leaders we spoke to were confident in the long view, echoing the predictions of Patrick Charlton: “Before coronavirus began to spread, we saw an increase in aquaculture feed production globally - a 4% increase, according to data from the Alltech Global Feed Survey. Just as other sectors will stabilize as the crisis subsides, we expect fish to continue to play a significant role in feeding the world, and for market growth to reemerge.”