The pangasius bubble is about to burst

Published on
July 12, 2012

Pangasius supplies are plentiful at the moment, with prices averaging around USD 3, CIF, for top quality product (100 percent white with 5 percent glaze). However, importers need to make the most of the situation, because after September and October when the next harvest takes place there will be far fewer ponds to empty and therefore far fewer fish to process.

Pangasius farmers are already closing their operations down. According to a Vietnamese news report, the area dedicated to pangasius farming in the Mekong Delta has shrunk by about 20 percent compared to this time last year. (The fact that there is plenty of pangasius available now is because farmers are panic selling.)

The farmers are currently receiving VND 13,000 to 16,000 (USD 0.62 to 0.77) per kilogram for their fish (round weight, harvested), while it is costing VND 23,000 to 25,000 (USD 1.10 to 1.20) per kilogram to rear them. They are therefore losing about VND 10,000 (USD 0.48) per kilogram for every kilogram of fish they sell. This situation is unsustainable and it is expected that about 50 percent of farmers will give up after harvesting their next lot of fish.

For farmers to stay in business they need VND 25,000 (USD 1.20) for each kilogram of pangasius they sell. This price then has to work its way through the chain and with a fillet yield of 30 percent, plus the cost of processing and freezing. This would mean a selling price for export of USD 3.80 to 4.00 per kilogram, a substantial rise.

In fact, if the price increase goes ahead (and it’s difficult to see how it could be avoided if Vietnam is to remain a major producer) some in the industry say that this would make pangasius more or less “unmarketable,” as it would lose out to other cheap whitefish species.

If there is no increase in price for farmers, the further reduction in supplies will naturally lead to more processors cutting back on production, or even shutting down completely.

Already only about 50 percent of the seafood companies that were dealing in pangasius last year are still in business, and around another 100 such companies are expected to halt production after the autumn harvest. Plus, agencies that broker pangasius will also be forced stop operating.

Right now farmers are selling their fish at a loss in order to pay off the loans they took out to pay for feed and juvenile fish. Bank interest rates are sky high, ranging from 15 percent to a massive 30 percent, and companies are being given no leeway on paying them back.

This is a real worry as costs are continuing to rise. However, it is the steep increase in the price of feed, particularly that produced by foreign-owned feed mills, that is of most concern to farmers. One Vietnamese press report says that feed prices have increased by 40 percent already this year, and as feed accounts for 60 to 70 percent of the farming costs this is a very heavy burden for farmers to bear.

Regardless of what happens to price and its impact on sales in the future, there are already problems with exports to northern Europe where consumers are reining in their spending because of the economic crisis caused by the plight of the euro. As a result, importers in the Netherlands and Germany are reported to be “sitting on huge piles of pangasius” they cannot sell.

There are also problems in other parts of the world. The United States is now the biggest market for pangasius from Vietnam, but there are doubts that opportunities for increasing sales there are as big as was once thought.

Exports to Russia have been hit by yet another dispute about quality, and overall the number of markets to which pangasius is exported is shrinking – it was down to 117 from 125 during the first quarter of this year.

However, this is just the calm before the storm. Come autumn, the pangasius bubble will have truly burst.

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