Shrimp prices slide in topsy-turvy European market : April 1, 2015
Dominic Welling – INTRAFISH
Prices for vannamei and black tiger shrimp are falling sharply as weak demand, currency fluctuations and a generally unclear market picture make buyers hesitant to commit.
“The present shrimp situation is indeed a very challenging one at the moment, and most people are in a state of uncertainty,” Heiko Lenk, managing director of Lenk Frozen Foods told IntraFish.
“Prices have come down all over, depending on size, by as much as 30 percent.”
According to Lenk, demand for shrimp worldwide is very low at the moment, which is the main cause of the “rapid fall” in prices.
In general, buying markets are slow, but this is especially true in Europe where the unfortunate euro versus dollar exchange rate is continuing to cause problems for people importing new material, he said.
“The euro rate is coming down every day and makes imported product more and more expensive,” said Lenk.
“This has put importers into a kind of uncertainty, and they don’t know what they should do with their remaining stocks.”
Though buyers are reluctant to purchase new products with the high exchange rate, the fact prices are coming down compensates slightly for this.
A source in the shrimp trading sector, who did not wish to be named, told IntraFish prices for raw peeled, deveined, tail-on, IQF vannamei from India are currently trading at around $4.50 (€4.20) per pound for sizes 21/25, and $4.25 (€4) per pound for sizes 26/30.
For raw headless shell-on (HLSO), easy-peel, IQF vannamei shrimp from India, prices are around $4.70 (€4.40) for sizes 16/20, $4.10 (€3.80) for sizes 21/25; $3.75 (€3.50) for 26/30; and $3.35 (€3.10) for sizes 51/60.
Wait and see mode
Many in the industry are now waiting in hopes that the market will stabilize.
“We had an all-time high two years ago where many importers burned their fingers buying too early and so now with all these factors and the uncertainty, they are simply hesitating to buy new product and everybody is in a wait and see mode,” said Lenk.
Meanwhile, consumption of shrimp in Europe is on the slide because of the higher prices in the market over the past year or so, he said.
Jim Gulkin, managing director of Siam Canadian Group, told IntraFish that overall, markets have been mostly on the slow side for the first quarter of 2015 with origin pricing trending weaker.
Gulkin confirmed EU consumption has been slow. “The current exchange rate has had a big impact and overall uncertainty in the economy is creating some level of caution amongst consumers,” he said.
Likewise, imports throughout the EU have also slowed, partly as a result of importers and end users holding off purchases in anticipation of lower pricing, said Gulkin.
“It is likely however that the overall lower pricing in the shrimp sector will more than compensate for the exchange rate differential and as a result the weaker Euro may be a moot point and consumption may rebound to some degree,” he said.
Koenraad Van Simaey, co-founder and purchasing manager at Belgian shrimp venture Seacorin, agreed buyers are concerned about the existing climate and hesitant to commit.
Again, he said the exchange rate is heavily influencing the market, and there is more stock available than there is demand for it.
“What we hear at the moment is it is not good: there’s is a lot of stock available, prices are going up and down all the time, and the exchange rate is influencing, so it’s a little bit hectic — that’s what I hear in general from both importers and from origin [suppliers],” he told IntraFish. “It is very volatile at the moment.”
The end of the Indian fiscal year — March 31 — is also causing some market movements, as companies push to sell their stock.
A lot of it as well depends on what is happening in the US market, said Van Simaey.
US inventory after the New Year was fairly high and many importers and end users have been cautious about placing forward orders as the outlook for shrimp production in Asia and South America is looking good, and most indicators are pointing to lower pricing this year.
“Importers and end users are to a large degree sitting on the fence waiting to see what pricing is going to look like once Asian production is in full swing,” said Gulkin.
“However, there are deficits starting to appear in inventories and purchasing has already started to pick up, but the heavy buying won’t likely start until May or June.”
It’s not just vannamei prices that are dropping — black tiger prices are also slipping.
“Bangladesh has experienced a rapid fall of market prices over the last few weeks for black tiger shrimp,” said Lenk.
Bangladesh mainly depends on EU markets for its exports, so the country’s industry has been fully affected by the general economic problems in the EU as well as the exchange rate, he said.
Who’s going to pay?
While the foreign exchange rate of the euro is influencing market prices, the big question is who will end up paying for it.
If you compare the euro against the US dollar, six months ago it was €1.35, now it is more like €1.05 — a 30 percent drop.
“Who will pay this 30 percent?” asked Van Simaey. “Not the importer, not the packer, and not the consumer, so it will be the farmer.”
Furthermore, the market situation at the moment means vannamei shrimp raw material prices today are now far below farming costs.
“That is of course a problem for the farmers,” said Lenk. “Prices have come down already to such an extent, we will see farmers doing less seeding of shrimp because with this kind of price level they simply do not get back the money to cover their costs.”
This in turn will lead to less shrimp availability later on in the season, which should ignite demand and result in an increase in prices later in the season.
“It is a difficult moment for everybody no doubt,” said Lenk.
Seacorin’s Van Simaey thinks buyers are holding off for the Brussels Seafood Expo due to take place at the end of this month.
“Maybe some people are waiting for the exhibition in Brussels to see what is going on, and then I expect it to maybe increase again,” he said. “The price in May last year was the lowest in 2014, but after June prices were going up again.”
Gulkin added he expects US, Canada and EU purchasing to increase through May and June, during which time pricing in countries of origin will likely bottom out and will trend higher for the third quarter of the year.