Coronavirus complications will likely affect shrimp supply chain into summer months

Published on
April 3, 2020

The ongoing coronavirus pandemic is having a big impact on seafood as restaurants remain closed, employees are affected by stay-at-home orders, and borders become tighter to prevent the spread of the virus.

According to a number of industry experts, the disruptions occurring now are likely to have an affect on supply chains into the forseeable future, as processing facilities struggle to obtain products and importers shy away from purchasing goods in the face of uncertain demand. Southeast Asian shrimp production, in particular, will likely be in flux for months to come, according to Robins McIntosh, executive vice president at Charoen Pokphand Foods.

“There’s really no free movement anywhere in Southeast Asia,” McIntosh said.

Vietnam was the latest country to lock down its residents on 1 April, instituting a 15-day isolation plan. Other big shrimp producing countries – Indonesia, Thailand, Malaysia, and India – have had lockdowns in effect for even longer.

Those lockdowns, according to McIntosh, are complicating supply chains both between and within those countries, even in areas with relatively low rates of infection.

“It’s not dependent on where infections are, the whole country is trying to isolate,” McIntosh said. “There’s checkpoints and all kinds of impediments to moving within the country.”

In many countries where farms and processing facilities are located in different areas, moving products from one space to the other is becoming difficult. and with those complications causing demand to shrink, farmers are reluctant to stock ponds.

“No one is stocking ponds at this point,” McIntosh said. “Farmers are nervous about the future, so they’re not really pushing the stock either.”

Those farmers with stock in their ponds are likely not harvesting, as the low demand and pricing means the product may not have anywhere to go. The longer the stock is in the pond, the larger the shrimp will get – a problem when a significant chunk of larger shrimp are sold in restaurants which will be closed for an indeterminate amount of time.

“Being in the pond longer and longer only means bigger shrimp,” McIntosh said. “Getting smaller shrimp at this point, on a scale outside of whatever is coming out of India right now, might be difficult.”

In addition to that, McIntosh estimated up to 50 percent of hatcheries have ceased shipping PLs (post-larval shrimp), and most of them have been closed.

“If we got back into business in May, overall there’s going to be minus 25 percent shrimp in southeast Asia,” McIntosh said.

Those supply-chain interruptions are going to have impacts down the road, as most suppliers are typically thinking months ahead in terms of sourcing products due to the transit times most goods take.

“If something takes a full 13-week quarter, we’re thinking 13 weeks ahead, sometimes 26 weeks ahead, to manage our inventory, based on the movement,” James Berger, vice president of foodservice sales and marketing for Slade Gorton, said. “We’re not working on the supplier side, necessarily, on a weekly safety stock-type position, we’re working on replacement time.”

That means disruptions in shipments now aren’t going to have an effect on supplies in the U.S. until months from now.

That, according to Jeff Stern of CENSEA, could result in a sort of whiplash affect.

“It’s very complicated. If there’s an oversupply today because of lack of foodservice sales, U.S. importers as a result are not placing orders,” he said. “As things start to return to even a slow but more normal pattern come May, June, there will be enough inventory, probably, to take care of that.”

However, right as things come back online, the shipments that were supposed to be leaving Southeast Asia in April, and which got delayed or didn’t ship at all, could leave a gap.

“When the containers stop arriving in June, July, August, because of all these shutdowns, we may potentially see shortages of product,” Stern said. “I figure it’s a five- to six-month lead time from hatchery to a container arriving on the coast of the U.S.”

Those shortages will only get worse the longer that impediments to farming and processing continue. McIntosh said if things don’t return to relative normalcy by the end of May, shrimp production in Southeast Asia could be down 50 percent compared to 2019.

With things as they are now, it is not a question of whether some form of shortage could develop, it’s how bad it is going to be when they occur, McIntosh said.

Photo courtesy of Igor Grochev/Shutterstock 

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