Published: 11 June 2012
‘Why increase production in a falling market?’ asks buyer from farming background.
Some suppliers and buyers are forecasting increased shrimp production from Thailand, as well as other countries, but one US-based importer doesn’t see it the same way.
Don Berger, procurement and sales director with Sea Lion International, points to the development of Thai sales to the United States, in reference to talk of increased farmed production in 2012.
“I have heard talk about increased production which sounds nutty,” he told IntraFish.
The total US imports from Thailand for the last six years are as follows (in metric tons):
“So now in a falling market the farmers are going to build more ponds, increase stocking density? I don’t buy it,” said Berger.
However, the general consensus is that Thailand, the rest of Asia and also Central and South America will have a strong production year in 2012.
Forecasts for Thai farmed shrimp volumes for 2012 range from 670,000 metric tons to 700,000 metric tons.
“It is expected that Thai production will increase 8 percent to 10 percent over last year,” said Jim Gulkin, managing director of frozen seafood supplier Siam Canadian Group.
“This is more of a function of returning to normal production than market forces,” Gulkin told IntraFish. “Production dropped last year due largely to flooding.”
We should see a return to 2010 volumes this year, he said.
Another US importer concurred. “All indications are pointing towards a significant increase in production this year. It looks like Thailand will bounce back strongly from the heavy flooding and crop losses incurred last year,” said Ernie Wayland, executive vice president with International Marketing Specialists (IMS).
The situation also looks positive outside of Thailand, Wayland said.
“Both Indonesia and Vietnam authorities are predicting an increase of 10 percent and 20 percent in production over last year. Some of this is due to black tiger farmers switching over to white shrimp because they can get more than one crop,” Wayland told IntraFish. “Also, whites are somewhat more resistant to disease which has been a big problem, especially in Vietnam.”
The purchasing manager for a large North American processor also sees a decent supply picture.
Although Vietnam has seen some mortality, it will most likely go for higher volumes of white shrimp, upon re-stocking, with some holes in sizes to be expected, this source said.
“Indonesia is expected to be strong with whites, but some areas are having problems with too much rain,” he told IntraFish.
Thailand is expected to be strong with whites and India is concentrating on vannamei, with good first harvest results showing, he said.
The outlook from Central America is good, despite early rains. “South America should expect less than last year, but good overall,” he said.
“Inventory positions are good and expect a moderate to firm black tiger market and a continuing softening of whites as Europe economy will push demand down,” he said.
The wildcards right now — besides the unknown and unpredictable disease and weather — are China consumption and a possible euro collapse,” he said.
The slower markets in Greece, Spain and other troubled European economies could see more shrimp sold into the United States, said Berger.
However, the situation in the US is also far from assured.
“Prices are trending down and it appears to me more about lack of demand than increases in supply,” he said. “I have heard from many accounts that sales are off when looking at year over year numbers.”
End of year sales appear to have been lower than expected and carry over inventories into 2012 were much higher than in years past, he said.
“Combined with warmer than normal weather, retail sales for the Lenten period were off from year’s numbers,” he said. “When you consider the average consumer buys shrimp in two-pound units at a grocery store, while the average meal eaten at a restaurant is only four to six ounce per serving. You can see that missed retail sales cannot be made up via foodservice,” he told IntraFish.
“So far, we are off by about 10 percent to 15 percent since early January, for freight-on-board (FOB) selling prices,” said Berger. “Prices overseas seem to be following the market down as sellers are not able to push down prices enough to catch any buying interest in the US.”
Thailand is in a “pickle” as the duty circumstances make it very hard for sellers to discount prices, said Berger. “In years past they would cut prices, but now they have to worry about the US Customs and Border Protection assessing penalties for selling too cheap.”
“I have a farming background from my family and I recall clearly how farmers would plant their crops based on the prevailing markets,” said Berger. “Unfortunately, they tend to follow the markets.”
In this current market, no farmer would want to increase output in the face of declining prices, he said. “There is no new innovation and other component of costs such as feed and energy are still up. I am very doubtful of any significant increases in output.”
“Horse pucky,” is what he describes the talk of increased supply as.