Profitability, fraud and marketing were among the subjects a panel of shrimp industry experts tackled at the International Boston Seafood Show’s Annual Shrimp Forum on Sunday.
Profitability led off the discussion, as panelists were asked, “Who’s getting squeezed in the shrimp supply chain, and what, if anything, can be done to reverse the trend of narrowing profit margins?”
“When the antidumping tariff was first established [in 2005], the consensus initially was that the cost would be passed on to the buyers. That never materialized because the U.S. government selectively imposed tariffs on countries and companies,” said Morton Nussbaum, chairman and CEO of International Marketing Specialists in Newton, Mass. “The fact that Indonesia has no tariff while China, Indian Vietnam, Ecuador, Brazil and Thailand do, makes it impossible to sell shrimp from a duty country at the same price as a non-duty country. So the importers have absorbed the duty rate and, in certain cases, the exporters.”
U.S. shrimp imports totaled 1.21 billion pounds last year, representing about 90 percent of the U.S. shrimp supply. Thailand is by far the United States top shrimp supplier, exporting more than 400 million pounds in 2009.
“We feel squeezed equally and eventually the farmers feel squeezed. That’s when you see big fluctuations in production,” said Erik Smeys, managing director of Incomfish in Vietnam. “Vietnamese companies have diversified their exports more to Europe, Japan and within the region because of costs. We’ve been struggling selling our shrimp to the U.S. market because regularly we get the remark that we are at the source more expensive than what you can get in the U.S. domestically. The U.S. market is very diverse and the value chain is complex. It’s not easy for exporters to see through the maze of what’s going on in the U.S. market.”
An emerging trend among the panelists’ countries was the growth of larger farms amidst the hedging out of smaller farms that are struggling to stay afloat.
“There’s an infrastructure that is vast but remains underutilized,” said Smeys. “We’ve seen an increase in more conglomerated farms and associated farms, and smaller farms are disappearing because of the costs involved.”
“Volume has remained steady in Thailand, but smaller farms are disappearing in 2008 especially when prices went up. Output hasn’t decreased overall, but the trend is toward bigger, more integrated farms,” said Dr. Panisuan Jamnarnwej, president of the Thai Frozen Food Association.
“The bottom line is we’re all doing more volume and making less, which is an upside-down formula for success,” said Nussbaum. “So the more we grow the less we make. So how do we reverse that?”
“We get squeezed with the profit margins. Every year they get smaller because production increases, but we cannot increase the price,” said Eric Halim, managing director of PT Wirontono in Indonesia. “One problem is that demand is bigger than supply, so getting the raw materials makes things more difficult. I think margins are getting smaller in the U.S. as well. Maybe we have to live with it or become more integrated with the packers and importers.”
