China tilapia prices expected to rise but US market still slow : August 3, 2016
Ola Wietecha : Undercurrentnews
After falling for several months, prices of tilapia in China seem to have bottomed out, and sources told Undercurrent News they expect prices will continue to increase amid supply shortages.
The US market, the main one for tilapia, remains slow, however, according to sources.
According to Landy Chow at Siam Canadian China, raw tilapia prices have fallen this year from a 2016 high of RMB 8.90 ($1.34) per kilogram in April, to a low of RMB 7.40 in June.
The price for July, according to these numbers, was RMB 7.8/kg, the first increase since April.
“The export price of tilapia from China touched bottom in June,” said an executive at one major tilapia and catfish processor and exporter in China who wished to remain unnamed (source A).
Low prices unsustainable
Accord to source A, the current tilapia prices are unsustainable and he expects them to continue increasing.
Prices now are similar to those in 2006, he said, when the Chinese currency was valued higher against the dollar.
“The current USD rate against Chinese currency is about 6.65, in 2006 the rate was about 7.80,” he said, and added that labor costs since then have risen about 350%.
“So the price level this June is not sustainable,” he said.
Don Kelley, procurement manager at US importer Western Edge Seafood also said that prices at this level are too low to be profitable for producers.
“It’s been there for some months now and that is concerning. Whenever the market does that to the producer it leads to farmers making decisions to grow other species or to just participate at a lower level of growing, that is the worry right now,” he said.
Kelley said the situation is concerning but not surprising, however.
“Probably about three out of every five years there are times of the year when the market pushes the price down below the cost of production, this happens fairly regularly in tilapia,” he said.
Prices have already started to go up in the past month and that will likely continue.
One industry executive who wished to remain unnamed (source B) said in an email to Undercurrent that “prices to farms in China have gone up 10% in the last four weeks.
According to Kelley, prices will almost certainly go up.
“I don’t think anything can happen to make it go down, I’d say there are 10 things that could make it go up…the most likely to happen is demand will tick up,” he said.
Supply out of China short
Part of the reason for the price increase seems to be a shortage of supply.
“I am being told that farmers are demanding more money and that later this year, starting in late October, supplies are going to be very tight and that product may not be available,” source B said.
“This situation is expected to last a minimum of two months, but more likely three months,” he said.
Source A said that tilapia farmers, especially in the Hainan Island and Zhangjiang/Maoming regions had to “clean up their fish from last year before July to avoid the threat from a fatal disease during the hotest time of the year from July to August”.
Source A also said that the “semi peak harvest” that occurred during May and June has ended.
“The material supply has come down by 70% in the first half of July,” he said, adding that new fish from this year will not be available until September.
Due to low prices last year, farming volume also decreased and is down about 25%-30% below what was originally estimated for 2016.
The weather in tilapia-producing regions has also have an effect. According to a report put out by Tradex on July 25, China’s storm season has been putting pressure on supply.
“Supply will be short and prices are already strengthening as a result,” Tradex said. In the weeks to come, the report predicts that prices would just between 5%-10% as a result.
US demand low
Despite prolonged low prices, demand among US consumers has remained low.
“From what I hear, demand has been especially sluggish on the retail side,” Kelley said.
Source B also said that demand throughout the summer has been slow. “The summer season in US is the lowest sales season of the year, so shipment demand were very low during May-July.”
According to statistics from the National Marine Fisheries Service, US imports of Chinese tilapia were 69,382 metric tons from January through May in 2016, down 12.32% year-on-year.
They were worth $214.87 million, down 25% y-o-y. The value per kilogram of the imports in 2016 is $3.53, compared to $4.15/kg for January through May of 2015.