Soft demand muddles Vietnam-Japan agreement

Vietnam will soon get tariff-free access to the Japanese shrimp market under the Vietnam-Japan Economic Partnership Agreement signed on 25 December, 2008.
For shrimp and lobster, the current 10 to 15 percent tariff rates will be lifted upon domestic ratification of the agreement by the two countries. Chief Cabinet Secretary Takeo Kawamura confirmed in January that Japan would soon ratify and implement the agreement.
Japan is Vietnam's No. 1 market for frozen shrimp, importing nearly USD 400 million (EUR 310 million) worth of frozen shrimp annually. Indonesia, Vietnam and Thailand are Japan's top suppliers; exports of raw frozen shrimp in 2008 were 17,920 metric tons, 15,632 metric tons and 10,412 metric tons, respectively. Indonesian and Thai shrimp already enjoy duty-free status.
Yet, despite tariff-free access, Japanese importers and Vietnamese exporters are gloomy.
At the Osaka Central Wholesale Market, Nobuhiko Hayashi of retailer Taiho Suisan said demand for higher-grade black tiger shrimp is steady but prices have declined greatly on lower grades.
"There is no profit for us in this product, yet the trading companies will not or cannot lower the price," he said. "There is good demand for vannamei (Pacific white) shrimp. Japanese consumers like the taste." His store sells Indonesian vannamei shrimp under the DCD brand.
At the Vietnam booth of the FOODEX trade show near Tokyo, Pan Van Cung, sales manager of shrimp processor Ocean Food Corp., said processors are struggling with material shortages."The high-production season is May. Now, we have short supply," he said. At the booth, his company introduced value-added products, including breaded shrimp with vegetables on a skewer for deep frying in the Japanese kushi-yaki style.
VNBusinessNews reports that Vietnamese seafood processing workshops have been running at just 20 to 30 percent of capacity due to lack of material. Many shrimp pond operators are losing money and are being hit hard by tight credit and high interest rates. Many shrimp farmers failed to break even in 2008 due to low shrimp prices and higher material costs, leaving them without funds for farming this year. Some are switching to the smaller and faster growing white leg, or Pacific white, shrimp (Litopenaeus vannamei).
Reduced shrimp demand in Japan in 2008 is attributed to people staying inside to watch the Beijing Olympics on TV instead of eating out, and the "ox day," celebration falling during the Obon holiday, causing people to eat eel instead of shrimp.
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