Rabobank: Shrimp price crash has arrived, more professionalization to come 

By Jason Holland - SeafoodSource By Jason Holland - SeafoodSource
För första gången sedan utbrottet av EMS är tillgången på jätteräkor större än efterfrågan, och priserna har störtat.

With the supply of shrimp exceeding demand for the first time since the outbreak of the far-reaching early mortality syndrome (EMS), shrimp prices have plummeted this year. And while there may be a small near-term price correction, in the absence of an unforeseen disease challenge, the low price situation is here to stay, according to a new report published by Rabobank.

The analysis, “Keeping up with the Crustaceans,” compiled by Gorjan Nikolik, associate director of animal protein and seafood at Rabobank, states that the EMS-induced high prices caused a change in the shrimp industry at a number of levels. It adds that while India and Ecuador were the main beneficiaries of the outbreak, expanding their shrimp farming industries by some 400,000 metric tons (MT) and 250,000 MT respectively, the effects were felt globally.

Rabobank observed a “plethora of technical innovation” to support biosecurity, particularly in those producing countries that had fallen foul of disease issues, including China, Thailand, Indonesia, Vietnam, Mexico, and Malaysia. At the same time, India increasingly converted extensive black tiger shrimp (Penaeus monodon) farms to intensive whiteleg shrimp (Litopenaeus vannamei) systems. This also occurred in other Asian regions. In addition, rice fields and fish farms across Asia have been converted to shrimp farms.
Motivated by the high shrimp prices, it was only a matter of time before the supply recovered, according to the report. In 2017, the first signs of supply exceeding demand became noticeable, with traders reporting rising inventories. Moreover, China, an insatiable shrimp buyer for the last five years, started to show signs of demand weakening due to the falling value of its currency, the renminbi. 

The price crash occurred during the first harvests of 2018, as a result of strong double-digit supply coming, once again, from India and Ecuador – but production growth was also reported in Indonesia, Vietnam, and other regions. In India, for instance, prices for vannamei (60 pieces per kilogram) declined from INR 350 (USD 4.98, EUR 4.38) to INR 220 (USD 3.13, EUR 2.75) per kilogram in the first half of the year. 

Rabobank reported that currently, many farmers are harvesting their shrimp at a loss, or at least with a far lower profit margin than in the last five years. This is mainly because the key cost elements such as feed, energy, and labor have not contracted, and for some, have increased. 

In addition to social unrest, such as farmers taking to the streets to protest, the shrinking profit pool of the industry will be redistributed throughout the value chain with considerable consequences, it said. 

The report advises that many farmers will reduce seeding in their next crops, and some may even choose not to stock their ponds, while others may reduce feeding rates and delay harvesting. 

“In our view, although a mild short-term price recovery is likely, the lower price level, in the absence of a major new disease outbreak, does represent a new reality. A reality in which price levels dictate supply trends even more than biological supply-side challenges: a shift from a supply-driven industry to a more demand-driven one. 

“The main medium-term impact of this will be a decline in the overall profit pool in this industry, with farmers bearing the brunt of the contraction. In addition to impacting existing farms, this development may also discourage new land and new farmers entering the industry. Certainly those planning to invest in Greenfield operations will reconsider the investments, especially if these investments are high and there are no government development subsidies available,” the report said.

However, the low shrimp price levels and consistent supplies from multiple regions also provides an opportunity to focus on demand creation, product innovation, and “decommoditization” of shrimp, according to Rabobank. 
“Speaking from a Western point of view, there is an opportunity for importers, processors, and retailers to drive the consumption of shrimp. Arguably, the profitability of importers and processors is likely to be temporarily elevated at the moment. This should allow for some more room for marketing expenditures.” 

It further suggests that a lesson could be learned from the other “pink gold” of the aquaculture industry: salmon, whereby demand creation is key for ensuring long-term growth and a long-term increasing profit pool for the industry.
“In this respect, shrimp has a huge opportunity for increasing the number of products on offer. It increases value addition and convenience, along with the number of consumption moments, perhaps joining salmon as the other ‘affordable everyday luxury’ in the seafood space. A lower price alone is not enough to ensure long-term growth in demand, as we, for instance, have seen with pangasius in Europe.”

Rabobank also sees the continuing modernization and professionalization of the shrimp sector as a key driver. Notably, improved genetics – providing both disease resistance and better growth – effective animal health products, and water treatment products are needed to keep improving biosecurity, while better feed and farming equipment, such as feed distribution systems, can lower labor and feed costs, as well as reduce disease risk. 

The report states that the availability of new technology is increasing the difference in performance between the larger sophisticated farmers and small-scale farmers. It said this, paired with the current price environment, is leading to consolidation at farm level. 
Nikolik told SeafoodSource that he doesn’t think that the trend toward greater professionalization will change. 

“The larger, more professional farmers are still growing. Investment in biosecurity [is] still occurring and improving. The larger, more professional farmers may even use this period to consolidate smaller, less well-performing farmers.  And what is very important is that the farmers with the highest costs, usually those who have not managed biosecurity in a good way, those are most likely to exit the industry,” he said.
The report supports this view, concluding that “the low prices will ensure that the world’s favorite crustacean will be produced by a considerably more professional and sophisticated industry in a few years’ time."

Källa: SeafoodSource 17 augusti 2018 >>

Kommentera gärna:

Senaste inläggen

Senaste kommentarer

Bloggarkiv

Länkar

Etikettmoln