Shrimp sector watches intently for post Chinese New Year price picture : January 21, 2015
Tom Seaman : Undercurrentnews
Shrimp sector sources are closely watching prices in Ecuador at the next harvest, which takes place in two weeks, for some indication of what might happen with post Chinese New Year prices.
Those on the buying and processing side feel prices are likely to decline; producers disagree. Both sides have their rationale, with buyers citing the drop at the end of last year, until prices started to rise a few weeks ago, driven by late Chinese New Year demand.
The next harvest in Ecuador, which will take place in two weeks, is being watched closely for a sign of what will happen next.
“Demand before Chinese New Year pulled prices up, I believe after the next harvest they will come down,” a source with a Spanish processor told Undercurrent News.
The rationale for weaker prices, a viewpoint from buyers producers see as wishful, is the expected increase in Asian production. India is talking up its plans for vannamei production increases, with sector sources bullishly predicting volumes of as much as 500,000 metric tons of vannamei and black tiger production.
Thailand’s industry is talking optimistically of a recovery in volume from the lows of 200,000t in 2014, but others are not so sure. Indonesian production was strong in 2014 and should continue in 2015, and Vietnam is also making bullish predictions for exports.
A lot will depend on Chinese demand and production, as well as just how much of a recovery Thailand makes from early mortality syndrome (EMS).
Sandro Coglitore, the managing director of Ecuadorian shrimp processor Omarsa, does not agree prices will drop off with bullish Asian production forecasts.
“I actually expect prices to go up further, as India has no shrimp and Indonesia will run out of shrimp too. So, the only source will be Ecuador,” Coglitore told Undercurrent.
“Europe is placing orders and has to step up for lent. They have to start orders now, despite the exchange rate [with the dollar], as they need shrimp,” he said.
Unlike in the US, European buyers are mostly also processors. “If they don’t order, their plants will stop, so they have to process. Unlike the US, where they are mainly trading with a small office no overhead, Europe needs to keep processing.”
Demand from the US is also “strong despite many people saying there is lot of inventory”, said Coglitore.
As for Asian production, Coglitore feels 2015 will bring more of the same.
“For Thailand, the information I have is that EMS, white spot and microsporidia makes for a very bad combination to dream about recovery in 2015,” he said. Thai production, if available, won’t be around before August.”
India, where production has been booming, will not have shrimp in significant volumes until May at least, he said. He was also skeptical of the recovery touted by Vietnam.
“For Vietnam, really check the figures and see how much of the growth in the recovery from EMS is really domestic production, I’m 99% sure most of that ‘recovery’ comes from raw material out of India, Indonesia and Ecuador and is accounted double in world production,” said Coglitore.
“This distorts the figures of real product available, that’s the only explanation that prices recover always quick after a drop based on rumors, as they turn to be just rumors,” he said.
Coglitore’s point on the doubling up of world production distorting figures was raised during last year’s Aquaculture Roundtable Series (TARS) conference. Figures presented by various speakers at TARS, particularly for China, varied massively.
Ecuador is expected to report production of between 300,000 metric tons to 320,000t in a strong year, despite the price drop seen at the end, which has since shifted to upward movement.
The free on board (FOB) Guayaquil prices in Ecuador for head-on, shell-on (HOSO) shrimp, mainly sold to Europe and China, are up dramatically in the last few weeks, albeit from low levels.
Prices for 40/50 HOSO FOB Guayaquil are now at around $8/kg, according to source in Europe and South America, with 30/40 at around $9/kg.
The previous week, 40/50 were at $7.80/kg FOB and 30/40 at $8.80/kg and had been around $0.40/kg lower a few weeks before.
For head-less, shell-on (HLSO), sources gave FOB prices of $5.40-$5.50/lb for 26/30; $4.40/lb for 31/35; $4.10/lb for 36/40; and $3.60/lb for 41/50.
Prices for 26/30 are up $0.40/lb in the last week, driven by strong demand in Europe, with the other sizes up about 0.20/lb higher this week. “Prices are going up as demand for HOSO is so strong that no farmer wants to make HLSO,” said one Ecuador-based source.
Vietnam: EMS recovery rate masked by imports?
For Bowie Leung, Vietnam manager for Bangkok, Thailand-based frozen seafood supplier Siam Canadian Group, the real story in Vietnam is one of a switch to vannamei from black tiger.
As for prices, which have also been firming in Vietnam, Leung said the stocks in the US have been impacting sales, but “luckily the UK and continental Europe is doing ok, so I hope all stock can be digested in Q1”.
Prices may rise a bit in April, then the harvest comes in May and June, so prices will be ease, he told Undercurrent.
“I do not expect the price will go up much in 2015, I believe it will keep at the 2014 level or with a 5-10% downward adjustment,” he said.
For the production level in 2014, a real picture is not available, he said. “All data in Vietnam comes very late, so I do not have too many numbers to share with you now. All I have is verbal info among farmers and packers only.”
In 2015, all farmers and packers hope there is a 10-15% growth in output, he said.
This would be from a total shrimp export value in 2014 of $4.1 billion, including local and imported material.
As for the split between vannamei and black tiger, the total farming area in 2014 was 685,000 hectares, 590,000 ha for vannamei and 95,000 ha for black tiger.
The total harvest volume in 2014 was about 660,000t, 60% vannamei and 40% black tiger.
The total material harvest volume increased about 12.7% as compared to 2013, said Leung. The quantity of vannamei increased 36.3% year-on-year and the black tiger volume decreases 8.7%, y-o-y.
As for the question of whether Vietnam will continue to import big volumes of raw material from India, Ecuador and Indonesia, “it all depends on the farming, raw material supply and price”.
X-factor of China
Chinese production in 2014 was hit because of EMS, said a source based in the country, not wishing to be named.
“Sizes were mainly small in order to try to beat the EMS. Nothing tells me that things would change suddenly in China,” he told Undercurrent.
“I think large sizes will carry on going down in demand while more demand on 60s and 70s. I think they [Chinese processors] will carry on buying big quantities from India and Vietnam for reprocessing for export markets for CPUD, CPUD and CPDTOs,” he said.
Unless there is a sudden and definite cure for EMS I cannot see the production being much better than last year, he said.
As for the Chinese market, it is expected to stay the same. “Shrimp is part of daily diet, at least smaller sizes. Probably large imported sizes will be reduced in quantities. Same for wild, sea caught. But otherwise, no big changes,” he told Undercurrent.
“What is changing here is the way people buy”, he said. “To start with there were some very large buyers, taking 40/50 containers at a time; then several large buyers, taking 10-20. Now, there are quite a lot of smaller buyers, taking only 2-3 containers.”
There is also a shift in term of Ecuadorian processors offering different specifications for Chinese buyers, with higher glaze and less net weight, he said.
At the same time, some Ecuadorian processors now have offices in China and have people scooping all fish markets searching for buyers for containers. “God only knows when they will start sending case by case from Ecuador?”
India prices firm
A lack of raw material, rather than a stronger market, has caused Indian shrimp prices to increase in the past few weeks, after a big drop.
On Jan. 18, the latest data available, prices for 30 per kilogram count shrimp were INR 490/kg; 40/kg at INR 380/kg; 50/kg at INR 340; 60/kg at INR IDR 300; 70/kg at INR 280; 80/kg at INR 260; 90/kg at INR 240/kg; and 100/kg at INR 220.
For some sizes, prices are up and for some they are flat (see prices for the previous few weeks below).
For 2014, sources expect around 300,000t of vannamei and 20,000t of black tiger to be produced by India, compared to around 250,000t of vannamei and 30,000t of back tiger in 2013
Despite the big increases in Indian production in 2014, there is a seasonal production shortage of raw material at the moment, which has been causing prices to firm, something sources expect to continue throughout January.
The second Indian season has been less productive this year, said a source with one Indian processor, based in Andhra Pradesh, speaking to Undercurrent earlier in the month.
“Generally, in the second season of stocking we are getting 40-50% success, but this year it was less than 20% and in volume terms there is a shortage of 30,000-40,000t,” he said.
Strong year for Indonesia
Indonesia is coming off a year of head-on production of between 300,000t-350,000t, but growth is likely to slow in 2015, said an executive with a processor, not wishing to be quoted by name.
Around 50,000t of this is now going for domestic use, he said.
“This number is much different from official number, normally I don’t want to dispute the number, but from what we can see import data in US, Japan and EU, you can total Indonesia number is about 120,000t-125,000t of finished products,” said this source.
Farming in 2014, especially the Q2 to Q3 was quite challenging, he told Undercurrent. “Reports of IMNV (infectious mionecrosis virus], white feces and slow growth were quite common from many parts of Indonesia, but as shrimp price was such attractive, farmers continue to farm and hence you can see Indonesian export number to the US grow almost 20% year-to-date in October.”
“For Vietnam… I’m 99% sure most of that ‘recovery’ comes from raw material out of India, Indonesia and Ecuador and is accounted double in world production” — Sandro Coglitore, Omarsa
In 2015, as shrimp prices coming back to the range of IDR 65,000-IDR 70,000/kg for size 50, production growth will slow, he said.
“Generally this is still a quite good price for farmers in term of margin, but this number is approximately 20-25% lower than what they can get 2014. This will slow down volume expansion,” he said.
Having said that, he feels some expansion will continue. “I do hear there are many new ponds being built in 2014, on a smaller scale. No major investments, so I would say the volume should be about the same as 2015.”
Indonesia is not supplying to China, so has not seen the increase in prices Ecuador experienced in recent weeks.
Buyers in the US, the main market for Ecuador since the dive in Thai production from 650,000t to 200,000t in 2014, are holding off on buying. “We hear their inventory is sufficient in US, but this can change suddenly.”
Demand is still there, but the high price of shrimp in 2013-2014 has dampened demand, he said. “We were hearing retailers and restaurants reducing promotion and changing menu. With shrimp prices being more reasonable today, I guess this will spur the demand.”
In the last quarter of 2014, demand has been quite low, as importers already filled many of their needs in Q2 and Q3, anticipating the shortage of 2013. “As we now know, the pattern totally changed, supply was abundant and China is not buying as much.”
This Indonesian source feels prices will firm in 2015, not to 2013 or early 2014 levels, but there will be an increase. There also will be some shifts, with Ecuador getting its GSP+ level back for 2015 meaning packers from the South American nation will focus more on Europe, reducing pressure on the US market, he said.
“To tell you the truth, I would say today’s price is already too low, and has to swing up, and with seasonal low supply in January-March, I hope [for] at least some improvement in market prices,” he said. “Having said that, shrimp prices have no pattern now, who knows who is going to get hit with virus or disease this year.”
The volatility of the last two years have shown that ‘expect the unexpected’ is the attitude to have in shrimp, he said.
“2013 and 2014 taught you how you don’t know the dynamics of shrimp business, farming and market. Always keep you eyes open, and being conservative is not a bad thing.”
In the last two years, farmers have been the big winners. “Hopefully they can understand, they cannot expect high margins every year.”
Talk of Thai recovery overstated?
The Thai Frozen Foods Association (TFFA) has come out and stated 250,000t as a low level for 2015, with 300,000t seen as the best-case scenario.
Daniel Gruenberg, a sector expert, does not agree with TFFA.
“I’m not sure what it’s basing its estimates on. Personally, I think it’s very difficult to predict what production will be in 2015,” Gruenberg, CEO of Acquestra, wrote on the Shrimp News blog at the end of last year.
In what he billed as a “not so pleasant Christmas greeting from Thailand”, Gruenberg wrote that eastern Thailand is now being inundated by the whitespot (WSSV) virus on top of the on-going onslaught from EMS and a microsporidian infection.
A large farm in eastern Thailand just stocked 100 ponds with new postlarvae, and 96 of the ponds were hit with EMS, while the remaining four were hit with WSSV, he said.
“This 100% failure on a large, well-run farm is a good indication that things are still very tough in Thailand. This pattern is typical of what I’m seeing in Eastern Thailand. I’m not sure what’s going on in the Southern Thailand, but temperatures are dropping there, which usually makes WSSV worse,” he wrote.
It looks like Thailand will produce 190,000t of farmed shrimp in 2014, according to Gruenberg.
He had earlier estimated production would be between 180,000-200,000t.
“Recently, there has been a dip in shrimp prices in Thailand. I think it’s due to the emergency harvest of small animals from ponds that have been hit with diseases,” wrote Gruenberg.
“Thai processors have a hard time selling shrimp that are less than ten grams. Low prices, combined with the WSSV scare and low temperatures, lead me to think that 2015 will get off to a slow start,” he wrote.
“Many people are working very hard to come up with solutions to the disease problems in Thailand. Let’s hope they find something that works in 2015.”