According to a new report from Dutch bank Rabobank, the outbreak of early mortality syndrome (EMS) in the Far East has brought an end to a decade-long boom in the shrimp aquaculture industry, resulting in the largest ever contraction in supply and subsequent record prices.
The report, published by the bank’s Food and Agribusiness Research and Advisory team, says the impact of EMS on the three largest global shrimp producers opens a window of opportunity for other shrimp producing regions, and predicts the long-term result will be consolidation and vertical integration of large, multinational shrimp producers.
With the recent discovery of the cause of EMS, Rabobank said it expects the industry to emerge more consolidated and with larger, diversified, more vertically integrated multinational producers leading the next growth wave. Producers in Ecuador, Indonesia, India, Bangladesh and Myanmar are rapidly expanding production.”
India, among other countries, has the potential to increase shrimp production many times its current production due to its large river systems that provide ideal shrimp farming conditions. Indian shrimp exports to the U.S. are estimated to rise by 69 percent, due to global supply constraints, and reach 11,000 metric tons (MT) by 2013. Rabobank expects India’s share of global trade to rise further in coming years.
However, the current shrimp supply deficit could reverse in 2014. Due to a rapidly increasing understanding of the EMS pathogen, it is likely that a solution for the disease will be found in the short- to medium-term. Thailand, the world’s leading shrimp exporter and most technologically advanced producer, is likely to be the first of the impacted countries to start recovering from the disease. Thailand’s return to the top of the shrimp exporter ranks, combined with strong momentum in production expansion by second-tier regions that are enjoying the current high prices, will create a sudden supply curve shift and a period of low prices.
For Asian exporters, a long-term strategy to mitigate against volatile price swings is to export processed shrimp products that are less commoditized. However, a lack of knowledge of local markets and lack of links to local retailers and buyers have proven to be key entry barriers for Asian suppliers to EU and U.S. markets. Therefore, Rabobank believes there will be an increase of intercontinental mergers and acquisitions to create integrated producers.
“The current environment will accelerate consolidation in the market, both among peers as well as vertically between processors and primary producers. Integrated producers that have access to raw material, low labor costs for processing, and access to markets are, in our view, the future model of the shrimp industry,” said Gorjan Nikolik, Rabobank analyst.
