Rising feed prices in China are putting pressure on the supply of key exports like tilapia, as producers have grown wary due to losses incurred from these soaring input prices.
Fishmeal prices in China rose by up to 40 percent in the first half of 2023, according to industry sources.
Landy Chow, who is based in Guangzhou and manages the Chinese offices of trading firm Siam Canadian, said tilapia farmers’ break-even cost of production is about CNY 8.00 (USD 1.12, EUR 1.04) to CNY 8.40 (USD 1.17, EUR 1.09) per kilogram. Selling at CNY 7.60 (USD 1.06, EUR .98) per kilogram, which was the average mid-summer selling price, they lost money, according to Chow. This has resulted in a trickle-down effect where farmers produce fewer fish, supply has decreased, and selling prices have shot up.
Chow said rising fishmeal prices are contributing to an increase in farm-gate prices and that reducing or replacing fishmeal in feed mixes has been a popular strategy farmers have taken to control costs, likely quickening the adoption of alternative feed ingredients in China.
“The instability in supply has caused the price of fishmeal to skyrocket in China,” Xiamen University State Key Laboratory of Marine Environmental Science Researcher Ling Cao said. “In response, the country has been advocating for and increasing the demand for cost-effective alternative ingredients.”
Higher aquaculture production costs in China could pose longer-term problems for global seafood supply.
A leading producer and processor of tilapia in southern China, requesting anonymity to speak candidly, said his firm has seen higher feed prices since the fourth quarter of 2022, discouraging his company and other tilapia firms from maintaining production.
Chinese freshwater aquaculture output grew by 4.5 percent to 16.5 million MT in the first six months of the year, according to Chinese Ministry of Agriculture and Rural Affairs data showed overall seafood production rose by the same percentage to 30.8 million MT. However, the executive said packers have seen a drop in tilapia supply volume since early July.
“Some tilapia growers have emptied their ponds and waited for higher selling prices or have made a shift to raising other species,” the executive said.
As their costs increase, tilapia processors are also facing weak demand from traditional export markets.
“The U.S. market is recovering slowly but not back to where it was before; demand is still weak,” said Josephine Wang, head of the international market desk at Hainan Golden Spring Foods Co. “Currently, pond stock is around 40 percent lower than last season … Farmers are not [as] afraid of dead fish [stemming from] ‘summer fish disease’ [as they have been in] previous years, they have lower raising density, and the mortality is lower than before; Thus, they have no rush to sell their fish and can wait for a better price.”
Wang said some tilapia farmers have begun to decrease feeding rates after their fish reach 500 to 600 grams.
“Fish became thinner, which also lowered yields and made factories’ costs higher,” she said.
Shrimp producers are also in a tight spot with rising feed prices, but they’re actually facing a supply glut – driven by an influx of cheap Ecuadorian imports – that has caused the price of shrimp to “spiral downward” in China, according to Peter Fleming, the CEO of Lim Shrimp, which has farms in China and Southeast Asia.
“Most farmers are suffering and cannot adjust the price upward,” Fleming said.
Chinese Ministry of Agriculture and Rural Affairs data showed Chinese seafood imports rose 20.8 percent year over year in the first six months of 2023 to 2.9 million metric tons (MT). By contrast, the country’s overall imports fell by 7.8 percent year over year in the first seven months of the year, according to recent trade data published by Chinese customs authorities.
Lim Shrimp’s sea cucumber production base in China remains unaffected, according to Fleming, but many producers in other sectors are not as well-positioned.
“The cost of feed went up, but our profit margin is high enough to buffer the rise in the cost of feed for the sea cucumber trade,” Fleming said.
Fleming said he’s worried that if demand returns from primary markets, the supply might not be there to meet it.
“We have faced a significant decline in demand from America and Europe after the 2023 Chinese New Year,” he said. “It is expected that China tilapia packers would have a … shortage of raw materials in the fourth quarter of 2023 if the demand proves great enough.”
Photo courtesy of Lim Shrimp
