Is Vietnam’s shrimp industry in crisis?
Shrimp export turnover in Vietnam is expected to reach just USD 3 billion in 2015, down by one third on the previous year.
The latest figures from the Vietnam Association of Seafood Exporters and Producers (Vasep) show that export turnover from shrimp is likely to reach just USD 3 billion by the end of 2015, which is USD 1 billion down on the previous year, representing a significant drop in revenue.
Shrimp farmers in the Mekong Delta, the main center of production, have experienced heavy losses due to disease and a drop in selling price.
In just one district in Tra Vinh province, 2,450 producers – 41 percent of the local farmers – are in trouble, a further 11 percent breaking even, and the rest registering an insignificant profit.
Processors are thought to have fared little better than the producers. According to Tran Van Linh, director general of Thuan Phuoc seafood and trading company, many countries have reduced their imports, whilst export prices have dropped by around 30 percent. Exchange rate fluctuations have also affected the shrimp industry’s competitiveness.
Ho Quoc Luc, director general of Sao Ta Food company, explained that whilst many of the input costs have increased, output has reduced, leaving exporters struggling to survive.
Processing plants have been upgraded in recent years and the skills of workers upgraded, to enable companies to supply a higher quality product. However, issues in the farming sector continue to challenge the viability of the industry.
Vasep blames some of the problems on the fact that the white leg shrimp (Litopenaeus vannamei) industry in Indonesia and India are doing well, which puts more pressure on Vietnam, where higher production and logistics costs mean the country’s shrimp is priced USD 1-3 higher than that of other nations.
Logistics is a major issue for Vietnam, with poor road infrastructure, excessive traffic and disjointed transport routes costing the country’s businesses an additional USD 10-15 billion per year compared to nations with the same development level in Southeast Asia, according to the Vietnam Logistics Business Association.
For instance, railways, seaports and airports are not well connected to production zones and most of the goods from the Mekong Delta have to be sent by road to reach seaports in Ho Chi Minh City, which the Minister of Transport Dinh La Thang admits raises the costs of goods from this region by hundreds of millions of US dollars each year.
Around 80 percent of cargo is currently sent by road, but water transport routes and railways are being restructured, and businesses hope that once fully operational, these will help to reduce the burden of the transport cost.
In spite of its production issues, Vietnam remained the leading shrimp supplier to Japan during the year to the end of October 2015, for the second year running, according to statistics from the International Trade Center. However, exports of 171,753 metric tons, worth USD 1.8 billion, were down 3.7 percent in volume and 17.8 percent in value on the previous year.
Thailand, Indonesia, India, China and Argentina are also major exporters of shrimp to Japan and consequently their revenue reduced significantly. The most widely imported product into Japan is frozen raw shrimp (HS code 030617) and processed shrimp (HS code 160521).
According to Vasep, Japanese processors were forced to spend more on imported shrimp as the yen depreciated, resulting in higher prices of the finished product. Consumers however, were not willing to put their hands any deeper in their pockets.
Vietnam’s total seafood export turnover to December 2015 was USD 6.72 billion, down 14.3 percent on the previous year and down 10.4 percent on the target for this year, according to the Directorate of Fisheries.