China’s dominance of the international tilapia trade could soon come under threat, according to a new report compiled by Rabobank International.
The global production of tilapia has increased by 11 percent annually over the past decade, largely thanks to increased volumes coming out of China, by far the world’s leading producer of the species with an output of around 1.5 million metric tons (MT) per year.
However, Rabobank’s latest report, “The Rise of the Aquatic Chicken,” forecasts that fast-rising feed and labor costs and a change in government policy will result in Chinese tilapia producers becoming less competitive over time. It states that these key factors will level growth and turn Chinese producers’ focus more toward the domestic market, which will likely create opportunities for other tilapia producers to enter the global market.
“Although volumes from China are larger than volumes from any other country, profit margins have been very low, and the industry as a whole has been making a loss,” said the report.
Furthermore, the Netherlands-based banking group believes the competitiveness of the Chinese will be further impacted by the appreciation of the Yuan, producers limited access to fresh and clean water as well as food safety concerns relating to Chinese products in key overseas markets.
It also adds that subsidies have created competitive prices for the Chinese product, which is sold as frozen fillets in the United States, the world’s leading importer of tilapia. However, they also pose a risk to the market as discontinuity could mean rising costs.
Doubling output
Global tilapia production volumes increased from just over 100,000 MT in 1980 to 4.5 million MT in 2012 and the industry has an estimated total value of USD 6.7 billion (EUR 5.8 billion).
“Volumes in the global tilapia industry have seen strong growth, and — assuming no major disease outbreak or other negative event occurs — there is potential to double output again to 9 million MT (live weight equivalent) by 2025,” says Rabobank’s report.
Commercial production now takes place in more than 80 countries, but Rabobank expects Latin America to deliver the most growth in the coming decade. It projects production in the region to rise from 453,000 MT (2012 figures) to 2 million MT within the next 10 years.
Having already doubled their output between 2007 and 2012, Latin American producers are in a strong position to further benefit due to their close location to the U.S. market, competitive labor costs (compared to China) as well as their excellent access to feed and natural resources.
Tilapia from Latin America is sold fresh in the U.S. market and fetches a price of USD 1 (EUR 0.86) higher than frozen products. However, auxiliary businesses such as processing, feed and logistics will need further development to grow the industry, said Rabobank.
The report forecasts Brazil to remain the main tilapia producer in the region, producing in excess of 1 million MT by 2025, but also expects Mexico and Colombia to increase their production significantly.
In Asia, producers such as Thailand, Indonesia, India and Malaysia are also expected to step up their tilapia outputs in the coming decades.
Egypt, the second largest producer in the world, is expected to continue leading the way among Africa’s producers and its output is currently growing at a rate of 15 percent annually. In addition, Ghana’s production has grown an average of 39 percent annually for the past five years, albeit from a low base level.
“Although no fish farming business is risk-free, the future for tilapia looks bright,” according to the report. “What chicken has been for the poultry industry, tilapia can be for aquaculture. Low-cost feed, simple farming structures and fast growth contribute to its popularity among farmers, while its neutral taste makes it popular among consumers — characteristics that make it much like its terrestrial equivalent, the chicken.”
Rabobank does however acknowledge that on average the price of tilapia is currently double that of chicken breast fillets, which makes it “more relevant” to compare it with other seafood products.
