Shrimp production to increase to cash in on high prices : March 17. 2011
Global shrimp production is to increase amid high prices in 2011, as domestic consumption in emerging economies adds pressure on global demand. Despite hampered production on account of disease affecting Asian countries such as Indonesia, there seems to be no paradigm shift among companies to reduce production capacities by reducing stocking density.
Constrained production on account of reduced stock density might be possible in some countries such as China, Gorjan Nikolik, analyst at Rabobank, told IntraFish.
“But my view is that when prices are this high the industry finds a way to produce more,” Nikolik said. “2010 was a very bad year indeed with many issues, but that will hopefully not repeat in 2011.”
Nikolik said that he expects global production to increase in 2011 in response to the high price environment and recovery from disease outbreaks in countries such as Indonesia and Mexico.
“China is a key question mark. The forecast is that production volume will recover from the contraction of 2010, possibly to 2009 levels, but any new weather or disease problems can change the recovery expectation.”
Latin American countries such as Mexico and Ecuador are expected to increase production in response to the higher prices.
“Mexico particularly, which is expected to recover from the white spot disease that reduced supply in 2010,” Nikolik said.
Globally, the expected recovery in volumes of farmed marine shrimp coincides with continuing strong demand in China and a mild recovery in demand in the western markets. But Nikolik predicts that the high prices are not likely to crash anytime soon as global prices of other protein sources are increasing too.
“Considering the increasing cost of production of shrimp, and also the increasing costs of all other proteins, a substantial price correction from the current record levels, is not expected,” he said.
An interesting observation is that imports in the European Union in 2010 expanded only marginally in volume terms but grew by 14 percent in value, indicating that either the EU processing industry or the EU consumer — most likely a bit of both — are absorbing the price increase with no change in demand volumes.
Cheap shrimp is history
IntraFish. “But my view is that when prices are this high the industry finds a way to produce more,” Nikolik said. “2010 was a very bad year indeed with many issues, but that will hopefully not repeat in 2011.”
Ernie Wayland, of U.S. importer International Marketing Specialists, predicts the shrimp industry is to trend on high prices.
“I think we have seen the last of the very cheap shrimp in the U.S. Importers, distributors, retailers and especially, the consumer, had better brace themselves for high prices, or higher than we have seen in a very long time.”
A sharp increase in Asian shrimp prices is in order too. “Compared to the same period last year, shrimp prices from Asia are much higher, on average 20 percent to 30 percent,” Jim Gulkin, Managing Director of Siam Canadian, a Bangkok-based seafood exporter, told IntraFish.
But the high prices haven’t put a significant stopper to consumption. “The higher prices have translated into reduced consumption to a degree but business has not slowed nearly as much as predicted. Recovery in the U.S. economy has helped to cushion the effects of higher prices and thus the drop in consumption is not as significant as previously expected.”