Gulkin: India shrimp production likely to drop, US inventories clearing : June 18, 2018
Tom Seaman: UndercurrentNews
Siam Canadian Group’s Jim Gulkin heard different views on the outlook for 2018 Indian shrimp production, on a recent trip to the country’s that’s aiming to ultimately farm 1 million metric tons of the crustacean.
Prices in India and other farming countries have dived, largely due to high US inventories, which Gulkin told Undercurrent News are also clearing. Farm-gate prices are starting to recover from these low levels, however.
According to official information, India produced 600,000t of shrimp in 2016/2017, 553,000t of vannamei and 47,100t of black tiger. The aim was to increase this further in 2018, with the forecast presented at the Global Seafood Market Conference (GSMC) in January of 697,000t for 2018/2019. Low prices (see Undercurrent’s prices portal for Indian, Thai and Chinese shrimp prices), however, have thrown a wrench in the works.
“The key is India and how many farmers will back off or reduce seeding due to low prices. I was in India last week and heard many different opinions,” he said.
“However, [the] majority consensus is that production will drop as too many farmers are below cost. There is also a minority opinion that many farmers will plow on ahead,” he told Undercurrent.
Shrimp landings have dropped in India and packer demand is heavy, he said.
“Regardless, Indian packers are heavy on US orders and that will keep them busy through September,” he said.
“So, even if landings do increase any price drop will likely be mitigated by demand and I am sure as raw material supplies tighten up, there will be many late shipments from India packers, so likely they will stay busy through October as well,” Gulkin said.
After Indian production, the second biggest factor in the current market situation is the need to clear US inventories.
“That process seems to be underway now and it looks like stocks are starting to get cleared through the system. Excessive US inventories have been the bottleneck and arguably the single largest factor of this year’s sloppy market,” he said.
The US has been importing massive volumes of shrimp this year, but the year-on-year volume growth was down in April, suggesting the sluggish market.
US domestic sales have started to pick up over the past two weeks, said Gulkin.
“Assuming this trend will continue — and no reason to assume it will not, as US economy is good, perception of economy is good, summer is starting — then many importers will be looking at replacements over the next four-six weeks. Thus more pressure on raw material prices,” he said.
However, Gulkin said he does not see any big increase in prices this year. “By the same token, I believe the bottom of the market has come and gone. Prices will have a moderate upward trend over the summer and maintain firm through year-end,” he said.
Thai output set to drop
There was a sense of optimism in Thailand that production might increase in 2018 from around 300,000t in 2017. At the GSMC conference, the 2018 outlook was 345,000t for Thailand.
However, multiple sources at the recent Thaifex – World of Food Asia show said output would more likely drop. Gulkin agreed.
“Thailand production will definitely not increase from last year and most likely drop as farmers are in a loss making position. Thus, Thailand takes a back seat this year in terms of its importance to the market and supply,” he said.
For Indonesia, Gulkin said production will be “adequate, or even good”, so there is unlikely to see any surprises there.
At GSMC, the shrimp panel forecasted 335,000t for Indonesia in 2018, up from 305,000t in 2017.
“Indonesia farmers are doing pretty much OK. Not brilliant, but, for the most part, good enough to continue. Having said that, I believe that many farms have been depleted over Ramadan leading up to the current Eid El Fitr holiday and expect prices to firm up there when the processors resume business later this week and next week,” he said.
In Vietnam, production is likely to drop, to some degree, said Gulkin.
“Vietnam’s farmers typically have higher cost than India and Indonesia so they are already under pressure,” he said.
At GSMC, the 2018 outlook for Vietnam was output of 470,000t, up from 415,000t. However, production was down at 230,000t in 2016.