Dropping India shrimp prices put farmers below break-even point : July 2, 2015
Tom Seaman – UNDERCURRENT NEWS
The prices for Indian vannamei shrimp raw material have taken a tumble, dropping below the break-even level for farmers, sources told Undercurrent News.
Amid a lack of a “big buy” from the US and some emergency harvesting from farmers, prices have come down for all sizes in Andhra Pradesh, the main farming area; even for the small sizes that have been holding firm.
Prices are down between INR 20-30 per kilogram across all sizes, whereas the smaller counts, the 90/kg and 100/kg count, are down INR 30/kg, because of emergency harvesting, sources said.
For 30/kg count, prices are now INR 390/kg ($6.13/kg), having been INR 410 the week before and INR 450 at the end of May.
The 60/kg shrimp are at INR 210/kg, having been 230/kg the week before and INR 250/kg at the end of May. For the small-sized 100 count, prices are INR 150/kg, down from INR 180/kg a week ago and INR 170 at the end of May.
Farmers are making a loss at this price level, two sources involved in the Indian shrimp business told Undercurrent.
“If the farmers get spooked, they don’t seed their ponds. If they have 100 hectares of ponds, maybe they will harvest only half of them… If they seed all the ponds, they could lose several $100,000. They have all made so much money in the past few years, when the prices were high, there is no need for them to do this.”
The average production cost is INR 250-300/kg, one executive involved with the shrimp trade in India, not wishing to be quoted by name (source A), said.
Durai Balasubramanian, secretary of the Pattukottai Shrimp Farmers Association, which has 4,000 members in Tamil Nadu, the state south of Andhra Pradesh, agrees with source A.
“The current price is well below the production cost,” Balasubramanian told Undercurrent.
According to sources, the reason for the dive on the small size shrimp — 70, 80, 90, 100 and 120 counts – is emergency harvesting, as crops were hit by the white spot virus and dissolved oxygen.
Farmers were forced to harvest these small sizes, when they were attempting to grow them out.
Packers are expected to start taking orders on the small sizes, source A said.
There is also hope in India, he said, that the export price for the larger sizes, such as 21/25 and 26/30, will rise next week. The view, source A told Undercurrent, is that demand from Vietnam for reprocessing will rebound.
In Tamil Nadu, Balasubramanian said, the sentiment from the farmers is pretty negative.
“Farmers feel we are heading in to a falling market, everyone wants to get rid of shrimp from ponds,” he told Undercurrent.
“Prices are down to as low as they have ever been. The prices for 26/30s are down at $8.60-$8.70/kg. At the peak, they were at $12/kg.”
The Tamil Nadu harvest started two weeks ago amid the uncertainty on prices.
“All farmers got in a massive panic once the prices crashed, mainly due to price difference,” said Balasubramanian, adding landings have been for 60, 50 and 40 count shrimp.
“The harvest season for summer will come to an end by next week. Even the exporters are struggling to give ice to farmers. Now the June stocking has completely stopped in our area,” he said.
There is likely to be a different picture in the second half. Shrimp prices have gone back to levels of late 2012. Now we are in 2015 and feed prices and everything else has gone higher,” said Balasubramanian.
A European buyer who sources a lot of shrimp from India agreed with Balasubramanian.
“If the farmers get spooked, they don’t seed their ponds. If they have 100 hectares of ponds, maybe they will harvest only half of them,” he told Undercurrent. “If they seed all the ponds, they could lose several $100,000. They have all made so much money in the past few years, when the prices were high, there is no need for them to do this.”
The buyer, source B, not wishing to be quoted by name, echoed Balasubramanian’s point on the historically low level of pricing.
“Prices are down to as low as they have ever been. The prices for 26/30s are down at $8.60-$8.70/kg. At the peak, they were at $12/kg,” he said.
“I personally feel the bottom is almost there. A few people I am talking to expect the market to soon start picking up once the major harvests from the first crop get completed”
The current level is around the same point as before early mortality syndrome (EMS) hit, in late 2012, he said.
Source B feels the price is at or close to the bottom.
“It also has to be getting to the point where buyers in Europe and the US have to be starting to make moves. It is not happening yet, however,” he told Undercurrent. “What I can see happening is buyers will come back in and prices will recover. Then, in the UK, as coldwater shrimp prices are so high, maybe you will see more retail promotions on vannamei for Christmas.”
A US-based source importing Indian shrimp agreed. “I personally feel the bottom is almost there. A few people I am talking to expect the market to soon start picking up once the major harvests from the first crop get completed,” he said.
“Raw material prices in India are weakening but I don’t see any sort of panic. Most exporters have contracts and packing quantities. There are also some importers who are buying their requirements,” he told Undercurrent.
Indonesian prices firm, Thai prices high
While Indian prices have been dropping, Indonesian sellers have recently raised their prices.
“All [Indonesian] packers increased prices to us and I feel that it will stay this way until after Ramadan,” said Marc Nussbaum, president of International Marketing Specialists (IMS), a US importer.
A recent note from ShrimpTrader, an online buying platform, echoes this.
“Aggressive offers out of Indonesia are closing the gap with offers from India. Price direction is expected to firm after Ramadan,” writes ShrimpTrader.
“Aggressive offers out of Indonesia are closing the gap with offers from India. Price direction is expected to firm after Ramadan”
While Indonesia has been low and is now firming, Thai prices for raw material have just been rising.
Thailand is “really not too much of a factor because of rising prices. I don’t know where they are going with their shrimp, especially with the problems in the EU”, said Nussbaum.
Poor harvests in Thailand mean raw material prices are moving in the opposite direction to other countries, said Satasap Viriyanantawanit, the general manager for Thailand for Bangkok-based Siam Canadian Group.
A very long summer; droughts; and a low shrimp price, meaning farmers were losing money over the last three to four months, are all factors that have been impacting current supply, he told Undercurrent.
“It is expected that supply in Thailand will be tight through the end July at least. Unfortunately, the majority of current pending orders in Thailand are required to go between June and July. Therefore, we expect that Thailand price will remain firm and high until at least the end July,” said Viriyanantawanit.
“We are afraid Thailand will be losing more businesses to other countries, due to higher prices over the next five-six weeks,” he said.
However, he said, some buyers still prefer to work with Thai packers, for “product of Thailand”.
ShrimpTrader also flags this up, noting the “reputation and reliability of Thai packers remain very strong”.
A positive for Thai packers could be an upgrade to Tier 2 in the US Trafficking in Persons (TIP) review, which is expected soon. Although it has been EMS-induced low supply that has hit Thai packers and not really the downgrade to Tier 3 — which happened in June 2014 –, it did have a reputation impact with some buyers.
“Packers are anxiously awaiting the result of the US TIP review, which may result in Thailand being upgraded to Tier-2 status,” notes ShrimpTrader in market and supply update.
Due to the low supply from Thailand, a lot of buyers have already switched over to other points of origin, said Viriyanantawanit.
“It is expected that supply in Thailand will be tight through the end July at least… We are afraid Thailand will be losing more businesses to other countries, due to higher prices over the next five-six weeks.”
“Some US buyers are negotiating new contract but they have not yet made a final decision yet. Ones who already bought, seem to be breaking up their quantities and only buy hand-to-mouth for now,” he said.
For several weeks now, Undercurrent has been reporting US buyers are sitting back and holding off.
“All are asking for prices but many are waiting,” said Nussbaum, of IMS. “It’s been quiet much longer than I thought it would be.”
IMS is encouraging buyers to “buy exactly what they need”, said Nussbaum. “Sooner or later, they will have to book because of time constraints and having to get goods here in October.”
The note from ShrimpTrader referenced the lack of a “big buy” from the US.
“The balancing act between supply and demand continues as each side tries to influence the direction of the market. It is clear that farmers and packers across Asia are in the state of shock over the lack of demand from US buyers that, in the past, stepped into the market in early June with their ‘big buys’,” reads the ShrimpTrader note.
These large purchases have yet to materialize and many are questioning if they ever will, reads the update.
“This has caused a constant downward pressure on raw material pricing as the market has clearly shifted from a sellers’ market to a buyers’ market. In come cases, falling raw material prices have dropped below the cost of production, prompting farms to cease production.”
“Many packers and raw material suppliers have been openly yearning for ‘the good old days’. Despite new harvests, farmers continue to try to boost pricing by restricting supply of certain sizes … but to no avail,” ShrimpTrader states.
“With the ‘new norm’ of significantly lower price points, buyers appear to be following the same strategy that ShrimpTrader has recommended for quite some time … ‘don’t try to time the market with a big buy … buy what you need, when you need it’. The clear benefit is carrying costs are lowered and replacement cost risks are mitigated,” reads the update.
The exchange concludes that prices and demand appear to have stabilized.
“It appears that price points and demand have stabilized for the time being and will probably trend sideways for the remainder of the year,” says the update. “Time will tell.”