Price drop halts Vietnam pangasius production
Many of Vietnam’s pangasius farmers are stopping production due to price drops partly prompted by price controls set by government in a crackdown on inflation, according to Dr. Flavio Corsin, manager of IDH Vietnam, a body advising local producers on sustainable production.
Corsin notes pangasius prices — which according to producers have dropped by an average 20 percent so far this year — have fallen for a range of reasons, including some government interventions to combat inflation. He predicts a repeat in 2012 of past consolidations of the sector in Vietnam seen several years ago when thousands of farmers went bankrupt.
“Restructuring of the industry with large scale companies producing an always increasing quantity of raw material,” said Corsin.
The decline in fish prices is not strictly a demand/supply issue, says Corsin “but rather down to the inability of processors to buy the fish because of the unavailability of credit from Vietnamese state-run banks - not because they have no demand.
”Prices for exporters are following their own trend depending on demand and on how ‘scared’ an importer is to lose their supply,” said Corsin.
Vietnam’s Ministry of Agriculture and Rural Development (MARD), noted in June that although seafood shipments were robust many seafood enterprises were struggling. It pledged as a matter of priority aid to support processors to remain production and strengthen exports to reach yearly targets.
In the first five months of the year Vietnam’s pangasius industry totaled USD 719 million of value, up 71 percent compared to the same period last year. Shipments to China and Hong Kong showed the highest year on year growth at 53 percent. However greater China accounts for only 4 percent of Vietnam exports, compared to 26 percent and 22 percent for the EU and US respectively. MARD expects Vietnam to export USD 6.8 billion worth of seafood exports in 2012 compared to USD 6.3 billion in 2011.
Asia-based aquaculture experts see challenges to Vietnam’s ambition. Simon Funge Smith at the UN-affiliated Food and Agriculture Organization says Vietnam's boom is built on pangasius filling an urban market niche demand for whitefish without bones.
“They produce this at an incredibly low price through very intensive farms based on cheap labor and cheap feeds,” said Funge. “However they are facing very small profit margins. They have hit the ceiling and are trying to cap production. They are under considerable land and water pressures.”
Long term Corsin sees a move to value-added and sustainability for the sector as prices get back to a reasonable level “…now that inflation seems to be down to single digit figures.” Corsin claims the sector has been embracing environmental and social sustainability. Upcoming Aquaculture Stewardship Council (ASC) audits are scheduled for seven Vietnamese producers.
“These are large scale companies hence the future for sustainable pangasius is looking good.”