Strong production, weak Europe: Good times ahead for US shrimp buyers : June 26, 2012
With strong production forecast for the major shrimp farming nations and a weak European market, US buyers are in a strong position. The volatile dollar and euro exchange rate and tough economic climate in Europe are not helping vannamei shrimp importers and sellers – neither is the terrible weather.
This, however, is creating an attractive picture for shrimp buyers in North America as the major production seasons in Asia start in earnest.
Part of the reason for this market picture is the slow demand in Europe, driven by the financial crisis in the eurozone, the fluctuations in the dollar and euro exchange rate and the bad weather.
“The European recession can be translated into less demand, and supplying countries need to allocate this poundage to the other two important shrimp markets—the Unites States and Japan,” said a farmed seafood buyer with a large North American processor.
Both these markets have inventories and are buying according to the unwritten rules of oversupply — one load at a time, he told IntraFish.
“This also happens when the trading currency, the US dollar, starts to fluctuate either way,” he said.
An executive with one continental European importer lamented how the dollar and euro exchange rate (see graph for euro to dollar rates in June) said his company is importing less shrimp this year, compared to 2011.
“We are not importing as much, in addition, the exchange with the dollar is shifting so much. It went from 1.32 to 1.24 in a couple of days,” he told IntraFish. “This makes all of our deals more expensive.”
In addition, bad weather across Europe has made shrimp sales even slower, he said. “A few weeks ago, we had snow in the Ardennes. The weather has been so bad. People want to buy shrimp when the weather is good.”
The shrimp supply, demand and pricing picture is “very complex, for the moment,” a Belgium based shrimp source told IntraFish.
Export prices may be down, with some packers looking to sell below or at cost to get orders, but prices of raw material from Asia are still quite firm, he said.
“The cheaper prices are mostly driven by packers trying to get orders,” he said. “Origination and production cost is not down, sales prices are. Some are selling at or below cost.”
This is a picture also presented by Jim Gulkin, managing director of Siam Canadian Group, a Bangkok-based frozen seafood supplier and a major shrimp supplier from across Asia.
“Thai shrimp raw material prices are still firm, but packers who need orders are more flexible on pricing,” he told IntraFish.
Gulkin gave the following farm gate prices for the year so far for head-on, shell-on vannamei in the benchmark 60 and 70 piece sizes.
|60 pcs||70 pcs|
|Jan 2012||144-153 baht/kg||137-145|
Prices from India, which is ramping up its production of vannamei over black tiger, are starting to move down, he said, while prices in Indonesia are steady, for the time being.
Vietnam has disease problems and may be looking to import raw material, said Gulkin.
However, the first European shrimp buyer, who lived in Vietnam for some time, said raw material prices in Vietnam have dropped.
Prices have come down to VND 74,000 (€2.84/$3.55) per kilogram for 100 count, head-on, shell-on vannamei from Vietnam, said the source, the “lowest point of the year.”
“Vietnamese packers are saying that prices should not drop more. I am not sure about that,” he said.
According to Gulkin, prices are “mostly steady” in Indonesia, for the time being, with China prices “still rather high.”
Prices from Latin America have stayed stable, which the second buyer put down to strong demand from China.
‘Ample’ supply for US market
With this slower demand picture in Europe, it seems US buyers are anticipating good supply.
“With the weak market in Europe we could see more cargo destined for the United States and prices reflecting that. That scenario makes sense,” said Gulkin.
“Expect a continuing softening of whites as the Europe economy will push their demand down,” the buyer with the large North American processor told IntraFish.
Another top US buyer said importers are holding off on buying, however, because they feel prices might fall.
In addition, demand is still slow in the US, he told IntraFish, in both retail and foodservice.
Gulkin said he sees buyers holding off, but also some coming into the market.
“They are hoping prices will fall further. However a whole slew of retailers has come into the market last week and today and looking to book product. Once the orders start being places I would look for Thailand medium to small sizes move back up again,” he said.
In addition, buyers are in flux as to what they will do with sizes and specifications, said the US buyer. “It will be worked out in a month of so.”
Although this buyer does not deal with imports from Latin America, he said that more Ecuadorian shrimp could be destined for the US market because of the weakness in Spain, echoing points made by Ernie Wayland, executive vice president of shrimp and seafood importer International Marketing Specialists (IMS).
Buyers will be reserved on contracts
The strong supply picture is also referenced in a report from Boston, Massachusetts-based Slade Gorton.
“All indications are that there will be ample supply to easily handle any increased summer demand,” said the company.
“We anticipate increased vannamei production out of Asia, especially from India and Vietnam as those nations see higher profitability and less risk than producing black tigers. Indonesia will remain a strong source along with the leader, Thailand,” said the Slade Gorton report.
In terms of the US market, things are “quiet but steady – the same thing we have been seeing for at least the last six months,” said Slade Gorton.
However, the new spring production is right around the corner as current inventories continue to wind down, the company said.
“Production is good in all countries and I do expect prices to be soft as we get into the first harvest cycles,” said the first North American buyer quoted.
“Contracts will start to be sought, but I think in a reserved fashion,” he told IntraFish.
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