Chinese tilapia farmers reduce seeding on dropping prices : July 10, 2015
Kim Tran – INTRAFISH
Chinese tilapia farmers are struggling in the face of low raw material prices and currency issues.
Landy Chow, general manager at Siam Canadian China, said the “main reason for the tilapia price drop is because major markets for tilapia fillet had a big depreciation in their currencies.”
US demand is slightly lower. One of the largest markets for Chinese tilapia, Mexico, saw a change in its currency rate from MXN 13.50 to $1 (€0.90) up to MXN 15.20 to $1.
“Russia is traditionally the third biggest market for Chinese tilapia,” he said, but the Russian ruble has also been volatile and has lost ground against the US dollar, from RUB 35 to $1 in early 2014 up to RUB 55 to $1.
“So the second and third [largest] market demand was reduced significantly due to the weak currencies,” Chow told IntraFish. “So soft demand actually pushed the raw material price down significantly in the past six months.”
The raw material price from China for whole round fish size 500/800 grams dipped from CNY 8.80 ($1.42/€1.28) in January to CNY 8.20 ($1.32/€1.19) per kilogram by the end of March, CNY 7.90 ($1.27/€1.15) by the end of April and CNY 7.50 ($1.21/€1.09) by the end of May.
On June 30, the price stood at CNY 7.10 ($1.14/€1.03) with the lowest point on June 10 at CNY 6.90 ($1.11/€1) per kilogram.
Jason Carter, CEO of Elite Seafood, one of the world’s leading tilapia suppliers, agreed telling IntraFish prices are low, “demand is weak” making it “hard to judge pricing now as a lot of packers have inventory.
“This year tilapia farmers have used a lower biomass and less feed due to the raw material price being too low,” he said.
“Raw material pricing is currently lower than the farmers costs so this is hurting the farmers financially. If prices remain the same then farmers will definitely choose to farm less tilapia.”
Chow agreed, saying farmers are taking a loss, but are still “financially good as they did make some money last year when raw material prices were high.” He added the low prices are discouraging to farmers.
Tight supply, higher prices expected
James Gulkin, group managing director at Siam Canadian, wrote in a recent note on LinkedIn that Chinese tilapia farmers, particularly those in Hainan, “have reduced seeding by up to 40 percent. Expect supplies after August to be tight and prices higher.”
“I think the farmers all across China reduce their seeding,” also said Chow. “But Hainan farming cost is higher than Guangdong, Guangxi and Fujian, so Hainan farmers reduced the seeding the most.”
Carter saw the same numbers, telling IntraFish that “spring fingerlings stocking quantity decreased by around 20 to 40 percent. This seems to be in all regions.”
Chow added farmers are still able to buy fingerlings and feed to farm, “but the current situation is that they do not have profit, so incentive for farming is not there, so they just reduce the seeding.”
Carter also said incentive is down and may stay down.
The second term, or fall fingerlings, has not started yet and “we need to wait until after August before farmers re-stock ponds,” Carter said.
“If raw material pricing doesn’t increase before September or October, then this will discourage farmers to stock autumn [fall] fingerlings and the tilapia quantity will decrease significantly.”
However, Chow said he’s heard most packers feel “the raw material price should go up in August as they expect the fish supply in August will be short.”
Chow said he doesn’t feel reduced seeding will have a domino effect in other countries.
“For farming from other countries in Thailand and Vietnam, I personally think that the farmers might also have no big incentive to increase their
farming because the current market price for tilapia is simply too low,” he told IntraFish.