Where have all the big shrimp gone?

Published on
October 17, 2010

Sourcing shrimp at an affordable price is no mean feat these days. As seafood buyers will testify, a voluminous imbalance exists between consumers' high demand for shrimp and the comparatively low production. And it's a safe bet this will see current high prices prevail for another two to three years, particularly in the case of large-size shrimp.

Last week shell-on black tiger (Penaeus monodon) market prices stood at about USD 6.70 (EUR 4.76) per pound. This time last year, the same shrimp were USD 5 (EUR 3.55) per pound and slightly lower again in 2008. For shell-on white shrimp (Penaeus vannamei) the highest price was achieved in June and July this year when it rose above USD 3.70 (EUR 2.63) per pound. In the same period in 2009, the price was USD 3 (EUR 2.13) per pound, and so on.

So what's happened to supplies of the world's favorite seafood, which at the last count was being consumed at a rate of 6 million metric tons annually? Well, there are a number of factors plaguing several regions and in an unprecedented occurance, three of the four biggest producers are reducing exports at the same time.

Firstly, the disease outbreak in Indonesia continues to be a challenge. The volumes for the country's No. 1 exporter, CP Prima, are down 40 percent, pulling the country's overall exports down by around 22 percent and no one knows how much longer exports will continue to be affected.

Next there's China, which produced 1.3 million metric tons of shrimp last year, of which 188,000 metric tons was exported. However, many market observers expect the country to ship much less in the future due to its fast growing appetite for shrimp, which is being matched by accelerating consumer wealth.

Gorjan Nikolik, senior associate commodities, farming and animal protein, food and agribusiness research advisory, Rabobank International told SeafoodSource that domestic demand in China is increasing at around 18 percent per year, while prices in the country are up 10 to 30 percent, with the 30 percent being paid for large shrimp. Domestic production is focused on smaller animals.

"We expect China's net export position to decline over the next year. It is already a significant net importer of larger sizes, particularly from Vietnam," said Nikolik, adding that this trend will certainly contribute to an ongoing supply shortage for larger sizes.

Of all the producing countries, Vietnam is the most interesting to watch with a number of different dynamics at play. Its problems started back in 2008 when a lot of monodon farmers who were subjected to low prices while enduring high costs either exited the industry or switched to farming white shrimp. In 2007, less than 5 percent of farmers were producing vannamei. This had increased to around 25 percent last year, said Nikolik.

Then in the first quarter of 2010 some of the producers that stayed with large shrimp cashed in on high prices by harvesting their stocks early. They weren't to know that prices would soar higher still, or that their actions would significantly chip away at the current availability of large shrimp. While they may be kicking themselves now, there's little they can do to respond as the production cycle for large sizes is around nine months.

But it's not just a problem with the long growth time, Nikolik pointed out. "Farmers need to secure financing to enable a nine-month production cycle and there's not a lot of capital available as we continue a slow recovery from the financial crisis. It will take a long time for the sector to rebound," he said.

There is one exception to the production dearth among the big four and that anomaly is Thailand, which last year increased its output by 9 percent. While Thailand is almost 100 percent focused on white shrimp, it is ramping up its large shrimp production and to all intents and purposes is sitting pretty.

"As the No. 1 producer for many markets, particularly the United States, Thailand is increasing its production and market share but numbers two, three and four are all suffering," confirmed Nikolik. "This means there's significantly less production for importers."

Nikolik suggested there will be a response to the short supply of large shrimp due to the attractive prices being paid, but the industry will take 12 to 24 months to adjust depending on capital.

One thing's for sure, forward-thinking shrimp producers will benefit more from being bullish rather than bearish.

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Contributing Editor reporting from London, UK

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