Sources: Global farmed shrimp prices to remain firm through May; US buyers in strong position : January 13, 2016
Alicia Villegas : Undercurrent News
With contribution from Tom Seaman
Global shrimp prices are expected to remain firm through May 2016, which will likely be followed by a softening of prices on the back of production growth worldwide, multiple sources told Undercurrent News.
One executive with a large importer based on the east coast of the US, who preferred not to be quoted by name, said shrimp output will be short until May and prices will remain firm until then. Another east coast importer, who also did not want to be quoted by name (source A), added that the price increase could range from 3% to 5%.
Jim Gulkin, managing director of Bangkok, Thailand-based Siam Canadian Group, agreed with this forecast, adding that industry players might see “some softening of prices” from mid Q2, when global shrimp output is expected to go up.
Despite firm prices through May, 2016 will see “stable prices” overall, multiple sources said.
“Of course there will be price increases and drops during the course of the year, but I do not expect any seismic shifts either up or down,” Gulkin said.
“If there is volatility, it will be due to disease or weather, which are difficult to predict. In the absence of any major events on that front, global supply should be adequate to cover demand and prices should remain generally stable,” a buyer with a large US processor, who spoke under an agreement of anonymity (source B), told Undercurrent.
A buyer with a large restaurant chain in the US, also speaking under an agreement of anonymity, said supply in 2016 will be “slightly” better than the previous two years, and this year’s prices should stabilize at levels close to today’s level, since, despite India’s setback, Ecuador, Indonesia and Thailand “will pick up the slack”.
Thailand’s recovery from early mortality syndrome (EMS) is expected to continue this year, sources said. Recently, Thai shrimp farmers and traders forecasted a 10% increase in domestic production to total more than 300,000 metric tons in 2016. Thai production was around 230,000t in 2015, sources told Undercurrent.
“Thailand continues to be a very positive story as they recovery from EMS and farming/processing volumes continue to rise. Many people are becoming much more optimistic given the stocking levels we’ve seen over the past few months. This will help take some pressure off of other regions that have struggled lately,” source B said.
According to the latest report seen by Undercurrent, Thai shrimp prices from Jan. 4-9 were at THB 180-185/kg for 60 pcs/kg, head-on; THB 160-175/kg for 70 pcs/kg and THB 150-160/kg for 80 pcs/kg.
This is slightly up from prices seen in the last week of December, quoted at THB 170-180/kg for 60 pcs/kg, head-on; THB 155-165/kg for 70 pcs/kg and THB 145-155/kg for 80 pcs/kg.
India’s output in 2016 will have a big impact on the market, but recent flooding and poor weather are making India’s shrimp supply very volatile, source B said.
Gulkin said India production will be “only slightly higher than 2015” on the back of the impact of diseases and low material prices. Last year, India had a 80,000t drop in production to 280,000t, according to estimates by Fernando Garcia, aquaculture business development director at Epicore BioNetworks.
Gulkin said processing capacity in India will increase significantly in 2016, with many new factories coming online and existing factories expanding and increasing their processing volume.
“This is likely to put more upward pressure on India raw material prices, so we might see higher production in the second half of 2016 if the farmers take that as a cue to seed more pond area,” he said.
Prices for Indian shrimp vannamei raw material dipped at the start of 2016, with the Pongal festival causing a slowdown in processing, and so low demand for raw materials; but prices are expected to keep rising after mid-January, sources told Undercurrent previously (see data from the Undercurrent prices portal, below).
Indonesia, for its part, is slowing production after a “rapid growth”, but it will still be a major contributor to the global market, source B said. Last year’s forecasts saw Indonesian shrimp production at 427,000t.
“Indonesia’s production should be similar to 2015 unless higher raw material prices spur farmers to increase production,” Gulkin said.
The price for 41/50 raw vannamei ez-peel IQF from Indonesia was $3.60 per pound at the end of last year, wheras it had been at $3.15/lb in mid-October, said an executive with a major west coast shrimp buyer, source C.
Although production from November to February is supposed to be Indonesia’s peak season, harvest is lower than expected volumes. Some sources said Indonesian shrimp output has been affected by weather and disease issues, such as EHP and white spot.
Vietnam is generally stable, although there continues to be issues with antibiotic related rejections in some key export markets. They are very focused on supplying the Chinese market where antibiotics are not a major concern, source B, the buyer with the US processor, said.
Awaiting China’s comeback
China is now off season and production will not return until June, Gulkin said.
Meanwhile, industry players are waiting to see how shrimp consumption in China behaves during the New Year festivities, in order to estimate stocks status there, an executive with a European processor said.
Emerging trading patterns will depend significantly on the Chinese New Year and the amount of deficiencies they have in their own production, said source C, with the west coast shrimp importer.
“Lately the reports show the supply from Chinese farming has been deficient a few hundred thousand metric tons,” he said.
Apart from China’s shrimp output, other important factors expected to impact shrimp prices this year is the Chinese market turbulence and its crackdown on shrimp imported by Vietnam for smuggling via Haiphong, a source with another European processor said.
US buyers in strong position
In 2016, the US market will be “even more important than usual” as US buyers will benefit from a strong dollar, lower shrimp prices from previous years and improved US economy, Gulkin said.
In additon, the US market is now healthier and expects higher consumption on the back of lower prices, source A, with the east coast importer, told Undercurrent.
According to Angel Rubio, chief market analyst at research company Urner Barry, retail shrimp promotions in the US are set to nudge up on the back of falling wholesale prices seen from the last quarter of 2014 – a move that is thought to lead to higher demand, Undercurrent reported previously.
On the contrary, Europe is not benefiting from the drop in shrimp prices, due to its weakened currency.
“Europe has a poor exchange rate now, so shrimp is expensive to them,” source C said.
Although Europe buys heavily in the last two quarters of the year, demand decreased after securing stock for Christmas. However, orders from European buyers are expected to grow now to restore stocks, an Ecuadorian producer said.
Ecuador’s shrimp prices were not buoyant at the end of December, but prices have recovered slightly now, another local producer said.
Ex-farm prices in Ecuador, for HOSO [head-on shell-on] 30/40 count, were on Dec. 21 at $7 per kilo; at $6/kg for 40/50 count; at $5.25/kg for 50/60 count and at $4.75 for 60/70 count.