A price war among processors is being blamed for low farm-gate prices for tilapia this summer with producers and agents in Guangdong province claiming that prices are down to RMB 7 (USD 1.12, EUR 1) per kilo compared to RMB 10 (USD 1.60/kg, EUR 1.44) paid at this time last year.
Severe overcapacity in the tilapia processing sector has led processing firms to compete for orders by undercutting each other. That’s according to a tilapia representative body in southern China. Processing firms are short-cutting tilapia farmers in order to beat each other to export orders, according to the Zhanjiang Aquatic Products Import & Export Association.
But while buyers might be getting low prices, they’re also taking big risks: processors are seeking to cut costs by over-glazing tilapia filets and by adding excess water to the fish prior to its export to markets like the United States, claims the Zhanjiang Aquatic Products Import & Export Association’s secretary general Cen Jian.
Lousy prices for tilapia farms have caused some fish farmers to hoard fish while low pond stocking suggests farmers are holding back on breeding new stock. Farmers interviewed by the Guangdong Daily near Zhanjiang and the key tilapia farming region of Lianjiang claimed they were barely breaking even with input costs, pond rental and seedlings amounting to an average RMB 7/kg (USD 1.12, EUR 1) – of which the largest input costs portion, RMB 6/kg (USD 0.96, EUR 0.82) was for feed – meaning tilapia growers are just about breaking even.
Others see additional structural problems holding back tilapia pricing for Chinese producers. Overreliance on the United States and Mexico markets – which together account for 70 percent of Zhanjiang tilapia exports, according to Zhanjiang Aquatic Products Import & Export Association – remains a key weakness.
“China is the world’s leader in tilapia but there’s not been a lot of profitability because tilapia is a poor western person’s food and we have too many companies in China chasing this market,” explained a source at one of the city’s large tilapia processing firms, Zhanjiang Universal Seafood Co. Only by diversifying its customer base can the industry prosper, he added.
A production cartel or alliance to regulate the number of factories and to sign collective deals with export customers is the way forward, believes Cen Jian. He foresees production being farmed out to processors by the alliance central office. Likewise, those processors would also purchase from producers within the alliance at set, negotiated prices.
Jian says his organization wants to enforce a code among member firms which would compile a quarterly price guide to guarantee fish farmers a fair, predictable revenue. The organization would likewise have a database of tilapia farmer/members sign a pledge to not use antibiotics like sulphanilamide while a pledge would also compel processor firms not to use polyphosphates. Enforcement, however, has long been a problem for Jian’s organization. “devising a way to monitor firm’s enforcement of the code is an ongoing challenge,” said Cen Jian.
Zhangjiang is the home base of major seafood firms like Guolian Aquatic and Baiyang Aquatic – both firms export tilapia to the United States. Seafood production in Guangdong province – at 481,700 metric tons down was 4.4 percent in 2014 on the previous year. Guangdong contributed 11.5 percent of China’s total export volumes in 2014 with tilapia and shrimp among the key export commodities.
