Siam Canadian: Markets can’t follow Thai shrimp prices : May 16, 2013
Tom Seaman – Undercurrent News
The main markets for shrimp are unable to follow the high prices for Thai vannamei products, said Jim Gulkin, managing director of Bangkok-based frozen supplier Siam Canadian Group.
Disease is hampering production in Thailand, as well as Vietnam and China, said Gulkin.
In Thailand, the world’s biggest exporter, early mortality syndrome (EMS) is hitting supply hard, as can be seen in the Q1 results of companies such as Charoen Pokphand Foods, Thai Union Frozen Products, Seafresh and Surapon Foods.
As a result, prices are high for Thai finished products.
“There is strong competition among Thai packers to get raw material to run through their plants, every day,” Gulkin told Undercurrent News.
“Price-wise, between now to July, prices may not be moving up since there is very strong resistance on these high prices from US, Canada, Europe, Japan, Asia,” he said.
“Most main markets are unable to follow Thailand prices. However, due to very poor supply, it is also unlikely that prices will drop to any appreciable degree,” said Gulkin.
Peak production in Thailand is expected to be around September/October.
Total production this year will be less than 2012, Gulkin told Undercurrent.
2012 estimates are around 425,000-475,000 metric tons (finished products).
This year, the industry is expecting 350,000-375,00t and “possibly below 350,000t”, he said.
The uncertainly from the countervailing duty process in the US is also not helping matters.
There are a “lot of rumors and many importers and processors slowing down their imports and exports until the rates are announced”.
Most importers prefer to buy on DDP (delivered duty paid) — where available — as the processor covers the risk, Gulkin told Undercurrent.
This uncertainty from importers is evident in comments made to Undercurrent by Eric Bloom, CEO of Eastern Fish Company, on May 9.
“I am not telling anyone to buy big right now,” said Bloom. “I think ultimately, at least certain sizes…there’s a possibility of prices backing off in the next two to three months.”
US buyers are holding off on buying until summer time, a shrimp producer based in India told Undercurrent.
On top of price uncertainty is the uncertainty over what the duties on shrimp will be after May 28. That’s the day the US is scheduled to announce whether it intends to impose countervailing duties on six shrimp export countries, including Thailand, China, India, Malaysia, Indonesia, Vietnam and Ecuador.
California-based Certi-Fresh Foods is also avoiding collecting any inventory of shrimp, although holding off on buying completely is not possible.
“We are [holding off] to the extent that we can, but we’ve got contracts, we’ve got customers that want shrimp, so we can’t really hold off,” chief operating officer Scott Obel told Undercurrent. However, “we’re not stocking up on shrimp, that’s for sure,” he said.
High mortality in China
Chinese production is being hampered by high morality rates, in some areas, said Gulkin.
This supports information from Anton Churakov, shrimp purchasing manager with Russian firm Agama, speaking to Undercurrent on April. 25.
There was speculation that China might somewhat cover for the lack of raw material from Thailand.
However, this is unlikely to happen, said Churakov at the time.
The harvest in China is poor, while its domestic demand has increased, he said. There is also talk of the “bird flu” effect, which is said to have boosted demand for seafood at the expense of chicken.
“There is some harvest in the south but it’s very limited. The demand is so high that there is not enough for packers.” According to Gulkin, in Guangxi, Zhejiang and Fujian, the shrimp growth is apparently good.
“However mortality rate from western Guangdong, which is the major production area for vannamei, is high, he said. According to sources in Zhanjiang — the western part of Guangdong — the mortality rate is 50%.
China’s 2013 production is expected to be close to last year’s production of approximately 700,000t. By contrast, the 2009/2010 production from China was estimated at 1.3 million metric tons.
High prices in Vietnam
It is expected that the first crop of intensive-farmed shrimp from Vietnam will start from July for vannamei and August for black tiger, said Gulkin. The market should expect the price to remain high until then as raw material supply is very limited.
According to VASEP, shrimp supply will decrease by 30-40% for the first crop, said Gulkin.
As a result of disease risks, some farmers will turn to extensive farming of black tiger, but with limited production and targeting bigger sizes, he said. “With packers importing shrimp for processing, the average export price will be high.”
Shrimp export of finished product is forecast to be total around 200,000t, including all species, which is down about 13% if compared to 2012. For the second crop, if a solution has been found for EMS, production will increase in the second half of 2013 and full year supply will be only drop about 20% from 2012.
Indian and Indonesian production is stronger.
In India, landings are expected to improve later this month and it is expected that 2013 will be a good production year.
“There will be some price softening, but less than expected, due to shortfalls in other countries,” said Gulkin.
Producers in India are taking advantage of the drop in other countries with strong sales to the US market. Imports of shrimp from India were moved into the second place slot in January for US imports and continue to rocket up after a year of boundless growth in 2012.
“I will say the trend will continue for some time,” a shrimp producer in India told Undercurrent. Bloom, CEO of Eastern Fish, agreed, noting that if Indian producers continue to switch from the notoriously difficult-to-farm black tiger to vannamei, production is bound to increase.
“Like anything else, nature has its checks and balances, and I do believe there’s still some opportunity for conversion for some black tiger to white shrimp,” Bloom told Undercurrent.
In Indonesia, there are some “problems with white spot disease, but overall production is reasonably good and expected to meet or exceed last year’s output”, said Gulkin.
“Indonesia is taking up a lot of the slack for shipments to US, created by Thailand’s shortage and India’s late start into production this year”, he said. “Prices have been firm over the past two months.”