U.S. shrimp imports may be on the increase (year-to-year they’re up 2.4 percent to more than 331 million pounds through April), but replacement costs — the cost of replacing the product at current prices — for farmed shrimp from Asia remain high.
A number of factors are contributing to the high replacement costs. For one, the U.S. dollar remains weak, especially against the Thai baht, which strengthened more than other Southeast Asian currencies in 2010. And the baht is expected to continue to strengthen this year. The baht bottomed out at $31 against the dollar in late January and since then hass fluctuated between $29.75 and $30.50. Thailand is by far the United States’ No. 1 shrimp supplier. Also, higher production costs resulting from rising inflation in shrimp-producing countries are keeping replacement costs high.
What’s more, Mother Nature hasn’t been too kind to Asia’s shrimp farmers lately. Bad weather and disease has ignited a bidding war for raw material. Flooding in southern Thailand has wiped out 40,000 to 50,000 metric tons of this season’s shrimp crop, and the white spot virus is still impacting production in Indonesia, according to an industry veteran.
So if there are all these supply-related issues, why are U.S. shrimp imports up 2.4 percent in the first four months of 2011?
The answer: Spot inventories are way down this year. These days, so much of what’s coming into the U.S. market is already pre-sold and unavailable to the spot market. Product is moving in and out of cold storage quickly, and this turnover is likely attributed to program inventories. According to the industry veteran, up to 70 percent of product is now destined for retail and foodservice programs, leaving only about 400 million pounds for the spot market in a given year.
Last year, many Asian packers took extensive contract business, figuring the market would decline by the fourth quarter. But it didn’t decline. Packers scrambled for raw material trying to fulfill contract obligations, tightening up supplies and driving up prices. Hundreds of containers were delayed up to six months, and now that product is arriving on U.S. shores.
That’s keeping prices up, and it’s becoming increasingly difficult to envision a scenario where prices will fall significantly this year, especially as buyers are about to ramp up their purchases for the upcoming winter holiday season.
As of mid-June, raw, shell-on, head-off Pacific whites out of Asia were holding firm in the low- to mid-USD 6 range for 16-20s, low- to mid-USD 5 range for 21-25s, mid-USD 4 range for 26-30s, high-USD 3 range for 31-35s and 36-40s and mid- to high-USD 3 range for 41-50s.
