Asia shrimp supply likely short through H1 with China production, consumption key : November 29, 2016
Tom Seaman : Undercurrentnews
China is currently buying farmed shrimp from India, Vietnam and Thailand for its early New Year celebrations at the end of January, with sources forecasting tight supply from Asia generally in the first half of 2017.
Chinese New Year in 2017 comes around a month earlier than this year, which means the deadline for shipping from Asia is around the middle of December, sources said.
In the short term, this is causing pressure on raw material in Asia, said one US shrimp sector executive with a major importer (source A), who did no wish to be quoted by name.
“I see that there is enough shrimp for factories in Indonesia and India now, but the pressure from the Chinese is keeping the raw material going out,” he told Undercurrent News.
“The Chinese have been buying very significantly, up until now. We are expecting it to slow down some, as it gets too late to get the product into the pipeline for Chinese New Year,” said source A.
Hotels in the shrimp farming regions of India and Vietnam are full of Chinese buyers, at the moment, he said.
“I see vannamei raw material supplies being very short from now, right through to mid-to-end Q2 ,” said Jim Gulkin, CEO of Siam Canadian Group, a Bangkok-based supplier with operations in Thailand, China, India, Myanmar, Vietnam and Indonesia.
He confirmed the picture presented by source A on China buying, but said he is “not sure” about volumes being bought.
“China is buying both in India and Vietnam. I am not sure about volumes. I am seeing steady demand from India, but not really any spike at this time,” said Gulkin.
From Vietnam, the Chinese are buying a lot of fresh shrimp straight off the farm, as well as basic processed product from secondary factories, so its hard to gauge the volume, he told Undercurrent. “China will definitely be a key factor for imports and consumption in 2017.”
A third executive, a big US shrimp buyer (source B), who also declined to be named, agreed with source A and Gulkin on Chinese buying.
“I concur with information that China is buying more from India, Vietnam as well as Thailand, for CNY,” he told Undercurrent.
However, Chinese buyers are “pushing back on prices” and countering at 5-10% lower, he said. “They felt the impact of the devaluation against the dollar.”
Sellers are generally accepting these counters, which sets a soft undertone, given the US market is relatively quiet, he said.
There should be stock left over in China after Chinese New Year and buying will also slow down, said source A.
“My ‘sources’ say they anticipate there will be a carryover of inventory after CNY, and do not anticipate heavy buying. With prices this high, there will likely be re-seeding and there will be some supply in Q1,” he told Undercurrent.
Despite this, he said the outlook is still for a tight raw material situation in the first half.
In the second half, the outlook is for this to increase, however. This is in line with the forecast from the recent Global Outlook on Aquaculture Leadership (GOAL) conference, held in September in Guangzhou, China.
The GOAL forecast is for an increase in shrimp prodcution in 2017 and 2018 (see below).
Gulkin agreed, but said disease will be a limiting factor. Early mortality syndrome (EMS) and other diseases have decimated production in Thailand, Vietnam, China, Malaysia and Mexico. EMS is also said to be present in other countries, such as Honduras and Nicaragua, in Central America.
“As long as there is demand there is impetus for farmers everywhere to increase production, but disease and risk of disease will potentially limit production,” he told Undercurrent.
“Largely due to disease”, production problems are now occurring in Thailand, China, Indonesia, India and Vietnam, he said. “At this time, all Asian origins are producing below expectations. Overall Asian production for 2016 is lower than original projections.”
China is already out of season. “We are moving into what is traditionally the low production season in Thailand, Vietnam and India. Indonesia should be in its peak production season now through February. But, we expect lower production for this period, due to disease issues, such as white spot, white feces and EHP [Enterocytozoon hepatopenaei],” he said.
“I believe that prices are high enough now in most Asian origins to give farmers good incentive to seed, starting late Q1 2017. However, that incentive could be mitigated by perceived risk of disease and other sources of potential crop failure. Farmers may be more cautious as a result,” said Gulkin.
Source A said he is hearing of “some pretty good increases in India”, as well as Thailand, however.
“India is going to keep expanding [see the GOAL forecast for Asian production below], Thailand is doing pretty well,” he told Undercurrent. “For the increase we saw in Thailand year-over-year, we should see a good increase again this year.”
Talk of disease issues in Indonesia are overplayed, he said. “Our people were down in Indonesia two weeks ago, there is plenty of shrimp. They are having some whitespot issues. But, for the most part, all the vannamei has whitespot, and none of it dies from whitespot.”
Vannamei are carriers, but they are resistant, unless there is a “huge stress, which there is not at the moment”, said source A.
“I believe we are going to see a significant increase [next year] in all countries, including China,” he told Undercurrent.
“The caveat is, how much is China going to buy of it? What is driving the market, as far I can see, is not a shortage of product, it is where it is going,” he said, referring to the growth in demand in China.
In the US, the market has not moved all that much, “but the market overseas to replace product is quite high”, he said. “At some point, something has to give. A few months back, that ‘something’ would have likely been the raw material price. Now, it is the opposite.”
Gulkin sees demand in Europe, Japan and the US being similar to 2016, meaning the variables are Chinese demand and production.
Assuming 2017 demand will be similar to 2016, I believe the strength or weakness of the market will really depend on production itself. If disease problems persist, supplies will remain short into Q3. If there are fewer production problems, farmers may feel comfortable in stepping up seeding and if so, we could see some softening of prices late Q2, early Q3,” he said.
Source B made a similar point.
“Personally, I think output in the first half of 2017 will be no different to the same time in 2016. With increasing demand, the market will be slightly short,” he told Undercurrent.
Another variable is what Donald Trump does on trade, when he takes over as US president, said Gulkin.
“I don’t see any compelling reasons why demand in North America, the EU, Japan should be significantly lower or higher than 2016, unless Trump starts his presidency by doing something radical that will frighten the markets and affect consumer confidence,” said Gulkin. “That’s certainly not beyond the realm of possibility but nothing anybody can accurately predict at this time.”
Latin American production is also likely to continue to influence the Chinese shrimp market in 2017 and beyond.
As much as 60% of Ecuador’s production is going to China, head-on, now, according to Undercurrent sources. Also, much bigger volumes of wild shrimp are going from Argentina to China.
According to a production forecast from the recent GOAL conference, Ecuador is set to increase production in 2017.
The outlook for 2016 in Ecuador is for more than 300,000t, with increases coming in 2017 and 2018, according to the outlook from GOAL for Latin America, which you can see below.
China production outlook
A key factor for the global shrimp market is what happens with China next year, both as a producer and a buyer.
“Total supply is significantly impacted by China’s own production. Therefore, if one can forecast China production, we can determine the general market for a certain cycle,” said source B.
The second half of 2017 should be good, as disease issues in China seems to happen only during colder months late in the year, during the second crop, he told Undercurrent.
In 2017, Chinese shrimp production is set to bounce back, after dropping this year, according to a forecast presented during GOAL in September.
According to the GOAL forecast, production in China will drop to around 1.3 million metric tons in 2016.
This is a bit above the level given to Undercurrent by Cui He, the executive vice president and secretary general of the China Aquatic Products Processing and Marketing Alliance, however.
According to He, Chinese farmers are still having problems with diseases, such as early mortality syndrome, hence the drop in 2016.
Then in 2017 and 2018, production is set to gradually increase and get close to 1.5m metric tons, according to the GOAL forecast.
As Chinese production has declined, its own consumption has rocketed.
According to data presented at GOAL, Chinese shrimp consumption has increased by 123% from 2005 to 2015.
Looking at 2010-2015, it has increased 60%. Jim Anderson, a professor from the University of Florida who presents the shrimp data at GOAL every year, emphasized the figures are not exact.
“But, they show the trend,” said Anderson. The figures, which are in round weight, show that Chinese shrimp consumption was roughly 1.7m metric tons, using an equation of production plus imports minus exports.
In 2011, the level was just under 1.5m metric tons, while it was 1m back in 2010.
Meanwhile, shrimp exports from China have dived from around 500,000t in 2011, a record level, to close to 300,000t in 2015, according to data presented at GOAL.
From 2011 to 2015, this is a drop of 37%, said Anderson.