US shrimp buying frenzy hits as prices climb to 13-year high : July 11, 2013
Jeanine Stewart – Undercurrent News
Buyers are in a frenzy to secure product after realizing high prices were a true reflection of Asia’s serious supply shortage; and as the weeks of difficult buying pass, it is only becoming harder to get access to product.
“In a lot of instances, there’s not even a price, and people are willing to commit,” a major US buyer told Undercurrent News. “It’s pretty bad right now.”
Even US shrimp buying giant Chicken of the Sea, part of Thai Union Frozen Products, can’t escape the mess that early mortality syndrome (EMS) and other mysterious production problems, such as those in Mexico, have created.
“We positioned well for summer needs; however, this 2013 holiday season is more challenging than any season over the past several decades,” Paul McCarthy, executive vice president for Chicken of the Sea Frozen Foods, told Undercurrent.
“Thailand’s EMS crisis has created much higher demand in the countries which have healthy supply. India, Indonesia, Vietnam, and Ecuador all have excellent production, but they also have seen demand exceed their supply.”
At this point, it is clear that Thailand – typically by far the largest producer – has little product to speak of, leaving buyers scrambling to avoid falling short on product for Christmas, when shrimp promotions typically run. Those promotions probably won’t happen this year. Meanwhile, India’s shrimp exports are up 150%.
“In Thailand, EMS is still present. Some ponds are failing and, in others, production is ok,” said Jim Gulkin, managing director of Bangkok-based supplier Siam Canadian Group, which also sources shrimp from India, China, Vietnam and Indonesia.
“In Vietnam, there seems to be product for export, despite the problems with EMS, but they are importing a lot from India,” he told Undercurrent.
China is also importing from India, said Gulkin. “For retail business, a lot are looking to Indonesia, as they can do the big contracts of value-added products.”
Indonesia has been very active on the market and prices have moved up a lot, he said.
“Even though there is some production in Thailand, prices have not come down to meet the levels of other countries, despite them also being high,” said Gulkin.
Pricing from Ecuador and Central America is also rocketing, with FOB prices for benchmark items, such as 40/50 count per kilogram HOSO, up by over $2/kg since the end of last year, sources told Undercurrent.
Prices are at a 13-year high on most items, McCarthy said, and they have rocketed up at a speed unseen in at least five years, Marc Nussbaum, president of International Marketing Specialists (IMS), told Undercurrent on Wednesday.
IMS, which supplies to some of the nation’s largest buyers, has also received calls from small buyers, asking for advice on whether to make commitments at this time.
One buyer told Nassbaum said he “doesn’t want to stick his neck out too far”, as he is worried about losing money if the price drops.
As that buyer ponders, Chicken of the Sea is buying aggressively.
“We have immediate needs, so we have purchased to cover several months in advance,” McCarthy said. “Our position was to cover through November, as we anticipated a correction in late October or early November.”
Ecuador has strong production but is busy answering calls for more product from China than usual. Its producers are also answering calls for product to fill in for Mexico, said McCarthy. Mexico has had significant disease problems, showing signs its farms have their own version of EMS.
As for the year-on-year price status, wholesale prices to retailers are up 53% over last year for 26-30 per pound count shrimp, cooked, tail-on, having risen from the high $4 range last year to the mid-$7 range this year, Nussbaum said. Prices are lower as usual for smaller shrimp, but still high, with easy peel 41-50s from Indonesia selling at $4.50 to $4.55, Nussbaum said.
Cooked shrimp in smaller sizes are particularly hard to get, he added.
Buyers just can’t go without
It’s clear that at this point, the high prices are no longer deterring IMS’ main customers, which include some of the nation’s largest buyers. Their demand for product is a big shift from the hesitant stance buyers were taking just three weeks ago.
“Since then, it’s been non-stop buying from the retailers, and the prices go up every day overseas,” Nussbaum said. In some cases, prices even increase every hour, he later added.
At first, it was difficult to lock in buyers without being able to assure them the price would hold long enough for them to put the order in, but at this point, many large buyers are willing to place orders without knowing the price, Nussbaum said.
Don Kelley, procurement manager for Western Edge Seafood, agreed.
“The large end users have to have shrimp – it’s not an option to go without,” he told Undercurrent.
Price, typically a reigning force in the US shrimp market, has taken a back seat to quantity as retailers and restaurant chains work to find ways to keep their menus and seafood cases consistent for customers.
“These are commitments that need to be kept in a timely manner, so people will give up their margins,” a large US buyer told Undercurrent. A decade ago, going without shrimp may have been an option for restaurant chains, but at this point, shrimp has become a staple protein item that brings customers in, the source said.
“When you’ve got a shrimp or a chicken protein, you really can’t pull any of those off the menu,” the source said. “Each one of those represents a significant portion of your sales mix.”
Suppliers worn down, checking out
Suppliers in Vietnam, Indonesia and India – the main three Asian countries that still have supply – have been working hard to fill the needs of US buyers, many of whom seem to have no inventory. Supplies are dry not only due to the lack of supply in Asia but also because buyers quit buying during the weeks leading up to the US decision on countervailing duty rates, when it wasn’t clear which countries would get new tariffs or how high those tariffs would be.
They’ve caught up quite quickly, and shipments are booked out through the summer for Nussbaum’s suppliers.
“The Vietnamese, the Indonesians, buyers – everybody’s already targeting September shipments,” he said. Some are even targeting October, which is extremely unusual, considering buyers are typically targeting August shipments at this point, he added.
After such an aggressively paced few weeks, suppliers in Indonesia are getting tired.
“Due to the Ramadan holiday, everyone’s slowed down,” one executive told Undercurrent.
The race has been run fast and hard, and at this point, it is about 3/4 of the way done, said this source. But will there be enough product to go around?
“It’s going to be close,” he said. “I’m surprised that some of these guys that called us last week that hadn’t bought before.”