How pricing 'war' may be killing the pangasius industry

Published on
October 13, 2015

Earlier this year it seemed as though the pangasius industry in Vietnam couldn’t deteriorate any further. However, the situation has gone from bad to worse, according to industry sources.  

The main reason is the low price retailers are paying for the fish. As one importer characterized it, “We are at war.”

This “war” has been created by the discounters. The German supermarket chains Aldi and Lidl are fighting fiercely to bring prices down and are only willing to pay suppliers far less than USD 3.00 (EUR 2.67) per kilo CNF for IQF skinless boneless pangasius fillets. This was the price calculated by the Vietnamese Association of Seafood Exporters and Producers (VASEP) some years ago at which pangasius producers would get a fair return.

Also VASEP and the Vietnamese Fisheries Ministry (the Ministry of Agriculture and Rural Development – MARD) tried to set a minimum price for farmers when selling their fish. Unfortunately both of these efforts proved fruitless.

Not surprisingly, other supermarket chains are joining in the price war. On breakfast television in the United Kingdom last week, Tesco boss Dave Lewis admitted that price was now the main factor in attracting customers into its stores. This was on the day that the country’s biggest supermarket announced a further huge fall (55 percent) in profits as it struggles to turn its business around.

In many European retail outlets (mostly supermarkets) customers can now buy pangasius from between USD 2.50 (EUR 2.22) per kilo (treated) to about USD 2.90 (EUR 2.58) per kilo for a non-treated top quality fillet. (“Treated” basically means adulteration in the form of added water, although there are reports of artificial protein being added to pangasius fillets as well.)

At these prices, the pangasius industry in Vietnam will not survive in anything like its current form, and already it is a shadow of what it was ten years ago. Farmers’ costs continue to escalate as the price they are being offered for their fish is constantly being eroded.

The cost of feed has nearly doubled during the past few years, as has the price of fingerlings. Meanwhile the interest rates payable on bank loans in Vietnam are still sky high.

Now, of course, there is the added expense of paying to be certified as sustainable as more environmental organizations are encouraging the big retail and catering companies to use their services.

As a result more and more farmers are ceasing to grow pangasius. Some are switching to tilapia or shrimp – both vannamei (Penaeus vannamei) or the giant freshwater prawn (Macrobrachium rosenbergii) production – while others are simply going back to farming rice.

The farmers who are continuing to produce pangasius are the processors who own their own farms. However, even they often do not restock their ponds after harvesting, but buy fish on the open market, while there still is one, as farming it themselves is more expensive than buying it in.

Pangasius production in Vietnam is forecast to come in at under one million metric tons (MT) this year, compared with annual production of 1.5 million MT some 10 years ago, and the processors expect another shortage in the beginning of next year as farmers continue to pull out.

As sales to traditional markets such as the EU and United States decline, new outlets for pangasius have been opened up such as in Brazil and the Middle East. However, it seems as though these markets are prepared to take the worst quality on offer to the detriment of the market as a whole.

There has been talk of work being done by VASEP and MARD to improve the image that pangasius still suffers from in continental Europe, but no generic marketing has so far been carried out.

Also in the United States, the Catfish Institute and Catfish Farmers of America have run very negative campaigns about pangasius, an imported catfish species, with suggestions that the Mekong River is polluted with Agent Orange and contains human corpses.

However, there is still a demand for pangasius particularly in the United Kingdom, which has escaped the negativity publicity aired in other countries. This may be due to the fish being given alternative names such as “basa” and “river cobbler” – in other instances it has been passed off illegally as a marine whitefish.

The great pity, particularly as the world’s population continues to expand, is that the potential for producing pangasius in the Mekong Delta must be around 2 million MT. But this potential is hardly likely to be realized.

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