2015 vannamei roundup: Thai EMS recovery doesn’t mean smooth sailing : January 18, 2016
Neil Ramsden – Undercurrent News
Thailand’s gradual recovery from early mortality syndrome (EMS) in 2015 meant traded vannamei volumes crept back up in key markets; however, the supply and demand picture was far from back to normal.
In February 2015 Thailand’s government conducted a roadmap survey of the country’s vannamei production capabilities, and put production at between 300,000 metric tons and 400,000t; by the end of the year, feed ingredient supplier Epicore Bionetworks suggested Thailand would see production at 275,000t, still an improvement of 55,000t y-o-y.
After the Boston seafood show in March packers reacted to a situation which had been strong for buyers, switching tack and leaving prices to drop to THB 185 per kilogram for 60/kg count.
“Thai packers were previously hoping that the US market would be picking up and demands should be improving. They kept buying any available raw material aggressively,” a source told Undercurrent News. “However, after Boston’s seafood show, all of them figured it would be a waste of time to hope for something.”
By April, industry contributors to Shrimp News International were noting that farmers in Thailand, and Mexico too, were struggling as falling prices dropped below production costs. They were being hit with a triple whammy of low survival, slow growth and record low prices, the like of which hadn’t been seen since before EMS took hold.
At the end of April the Thai Shrimp Farmers Federation and the Thai Shrimp Association sent a letter to the prime minister asking for aid. Among their requests they asked the government to step in and stabilize vannamei prices, combat EMS, and make liquidity more available for exporters.
By then prices had dropped to THB 98 ($2.97) per kilogram for 100-count shrimp, the most prevalent size in the country – farmers were struggling to grow them any larger.
“Unless we, as an industry, can get 350,000t from our farms and imports then capacity will have to reduce. There will need to be less of us,” Choopong Lueskprasert, managing director of Marine Gold Products, told Undercurrent.
While Thai packers were banned from buying from Indonesia, imports from India were on the move.
In July Thailand experienced a blip in pricing, as a very long summer, droughts, and low shrimp prices in the prior months combined to create a drop in raw material supply, and higher pricing.
There were concerns for the Thai industry that this could make it less competitive in the world market, but by September this had proved somewhat unfounded. A weak domestic currency, and improved raw material supply, was making it far more competitive, especially with the US. Meanwhile Indian production was down and prices were rising, likely adding to increased demand for Thailand.
In December Thailand saw healthy demand continuing, with prices rising to THB 175-180/kg for 60 count. This was driven in particular by several packers buying aggressively to complete and ship orders before the end of the year, a source said.
A US buyer confirmed demand from the US had likely gone some way to boosting Thai prices.
Speaking up once more, the Thai Shrimp Association forecast a domestic production of more than 300,000t for 2016.
“Next year is expected to be a brighter year for the Thai shrimp industry as production increases after Thailand totally eliminates the shrimp disease, while buyers will purchase more Thai shrimp as they are highly confident about safety after India – a major rival – is faced with shrimp disease,” said Somsak Paneetatyasai, president of the association.
Jim Gulkin of Siam Canadian Group, meanwhile, told Undercurrent that Thai shrimp production could hit as much as 450,000t in next two to three years.
US buying habits alter post-EMS
Shrimp volumes available to the US market, from all its regular markets, had certainly recovered by summer 2015; August forecasts put US imports at a record 1.4 billion pounds for the year.
By March it had become apparent that supplies of shrimp raw material to the US had picked up, with National Marine Fisheries Service data showing prices had dropped more than 20% year on year, on some benchmark sizes, as softness in the market continued.
Plentiful inventories meant US buyers were able to wait for prices to fall even further. By July 2015 Undercurrent reported a lag in US retailers passing on the decrease in prices, meaning consumption was not picking up.
Weak demand was thought to be the main issue, though sources acknowledged the recovery from EMS represented something of an oversupply as well.
“Buyers have aligned themselves with their normal trade partners, and they’re not going outside of their circle – they’re just going hand to mouth this year,” said Todd Rushing, founder of the online shrimp brokerage platform, the Shrimp Trader.
“Traditional logic would say, well, prices got really high with the EMS problem, but now that they’ve come back down everybody’s going to get quite aggressive and trying to promote. I won’t say that’s happened,” added Travis Larkin, CEO of Florida-based shrimp importer Seafood Exchange.
That could be due to a lag in the time that it takes for retailers and restaurants to feature shrimp promotions now that prices have come down, he said.
“One of the things we’ve learned in this crazy business is that when prices get really high it does take a lot longer to rebuild demand than it did to lose it,” he said.
Labor issues lead to peeling shed clamp down
Thailand’s seafood sector as a whole has had plenty of attention regarding alleged labor abuses over the past years, and the attention on the shrimp pre-processing industry in particular led to changes at the end of 2015.
These pre-processing plants — or ‘peeling sheds’ — have proven very difficult to manage for supply chains, even for those companies buying from them, it seems. So, in December, Thai Union Group announced that all of its pre-processing work would be brought in-house, ensuring that “all workers, whether migrant or Thai, are in safe, legal employment and are treated fairly and with dignity”, it said.
Associated Press, which has been at the forefront of each revelation surrounding labor abuses in the Thai industry, published a report stating that global supermarkets have been discovered to be selling shrimp peeled by migrant slaves in Thailand.
Whole Foods — one of those implicated in the report, alongside Wal-Mart, Kroger, Dollar General and Petco — denied this.
However, in recognition of the issue peeling sheds pose, Global Aquaculture Alliance decided that as of Jan 1, 2016, any firms outsourcing the work to such plants would be unable to hold a Best Aquaculture Practices certificate.
The Thai Frozen Foods Association then duly moved to eradicate third party pre-processing operations from the shrimp supply chain of its members, effective from the end of December 2015.