Louis Harkell: UndercurrentNews
Indian shrimp farmers have stocked ponds with 20-30% less shrimp larvae so far this year, industry sources told Undercurrent News, in an assessment which could have significant ramifications for global shrimp markets.
Depressed market prices, outbreaks of disease, inclement weather and lingering fears of a recurrence of last year’s price crash are all behind the contraction in stockings, the scale of which would be dramatic by most standards.
One industry source told Undercurrent stockings could be down by as much as 45%. If presaging a proportionate decrease in harvests, Indian shrimp output would drop by almost half.
“[There has been a] massive downtrend in stockings. The overall scenario not good for farmers,” Durai Murugan, secretary of the Shrimp Association of Pattukottai, Tamil Nadu, and managing director of New Diamond Aqua Enterprise, told Undercurrent. “A farmer producing 50 count [shrimp] still would be making losses. So the price scenario is not too encouraging. Severe drought and temperatures are also factors in India.”
“Overall we expect a production drop of 30% on the farming side. It’s clearly visible all over India,” he said.
The disparate and vast geographical area used to farm shrimp in India makes it difficult to accurately assess how much farmers are stocking on a national level.
However, industry sources in Andrah Pradesh, Orissa, West Bengal, and Gujarat all independently told Undercurrent stockings have declined in their regions, although to varying degrees.
The situation comes as the latest US import data confirms the tough market conditions Indian exporters face.
According to latest trade data from the National Oceanic and Atmospheric Administration (NOAA), imported Indian shrimp is now cheaper than during last year’s global shrimp price crash.
In the month of April, the average unit value of imported Indian shrimp was just $8.18 per kilogram, or $3.71 per pound, according to NOAA figures (see chart one). This is down $0.02/kg compared with August 2018, when average monthly import values hit their lowest point in the year.
US import volumes of shrimp from India continue to stay high, which, on the surface, conflicts with a decline in Indian stockings. Between January and April of this year, the US imported 74,775 metric tons of shrimp from India, an increase of 14% compared with the same period in 2018 (see red bars in above chart).
Latest Indian customs figures also show the country exported 124,403t of shrimp in Q1 of 2019, up 6% compared with Q1 of 2018, and up 32% compared with Q1 of 2017, according to International Trade Center (see chart two lower down).
However, on a monthly basis, the US’ April imports from India were flat compared with last year at 32,789t.
Trade data does not reflect on-the-ground conditions given the lag between stocking ponds, harvesting, processing, and shipping. Harvests from this year’s main first cycle tend to concentrate in June.
Aditya Dash, managing director of Ram’s Assorted Cold Storage, a packer based in Odisha, told Undercurrent he expects a downturn in production given stockings for the first cycle of farming in Odisha, east India, were 30% lower compared with last year.
“[Last year] people lost a lot of money and we lost a lot of money because we financed the farmers,” Dash told Undercurrent on a call. “We estimate stocking is down 30%, and the primary reason for that is the price and disease outbreaks, and so because of that the farmers aren’t making any money.”
“I was expecting in the second cycle farmers would stock more,” he went on. “But now I’ve got the stocking figures, a lot of the farmers are still very cautious, they’re going for lower stockings, saying they don’t want the risk. They just want a normal harvest and larger sizes.”
“It’s 100% true”, a source at a large processor based in Andrah Pradesh – India’s largest shrimp production region — told Undercurrent, in respect to lower stockings. He said in Andrah Pradesh stockings are down 20% year-on-year.
In Gujarat, west India, identified for its significant potential for expansion of shrimp farming area, S. G. Nair — chairman and managing director of Forstar, a Mumbai-based shrimp processor — told Undercurrent stockings in 2019 are down 20-40%, although he said he is “still not able to ascertain the situation because we just started the harvesting and we don’t know production”.
Even more bearish, a trader source based in India claimed hatcheries are estimated to have sold 40-45% less shrimp post-larvae so far in 2019.
Although the trader source — who wished not to be quoted by name — said the figures lack consensus, “that is a clear indicator for the reduction of the output of India’s summer crop (main crop) in 2019″, he said.
“The peak of summer crop has passed and supply is expected to slowly decline. The new stocking for second crop is expected to take place soon and they are likely to harvest earlier i.e. in September. So we have to see what sizes we would have in September,” he said.
“To sum up, the total production is expected to be 25%-30% down, as compared to last year,” he said.
According to a market report circulated by Indian processors and seen by Undercurrent, the estimated material impact of the contraction in stockings is, so far, a possible decline of 100,000t of harvested shrimp.
“We would not actually be able to put a number on the extent of acreage which is affected because it has got to do with various permutations and combinations of pricing, the tonnage per crop, and the number of crops they [farmers] do, etc… [However], as now, we estimate approximately around a minimum of 100,000t across the country could be impacted.”
More conservative stockings
Since the beginning of 2019 industry sources have been talking about less enthusiastic and more cautious Indian stocking. At Thaifex in Bangkok last month, Jim Gulkin, CEO of Siam Canadian Group, voiced a widely shared view that Indian farmers had opted to seed more sporadically rather than all at one time to spread out harvests.
At the time, he said prices in India were stable and would remain “boring” in 2019.
Rajamanohar K S, co-founder and CEO of Aquaconnect, a shrimp farming technology service provider, agreed that stocking rates went “drastically down in summer culture this year across peak production states”.
However, although Indian shrimp production in Q2 could be affected, he expects farmers to react to signs of higher prices by going in for more stockings in July, downplaying prospects of a price surge.
“Between 30-35% of farmers in regions around Nellore and Bapatla in Andhra Pradesh skipped stocking in consideration of market prices and early diseases outbreaks in the months of February and March. However, we are expecting farmers will go for one set of stocking in July so this will neutralize the condition,” he told Undercurrent.
“We would like to mention that farmers are expecting a rise in prices for a prolonged period. A rise in prices could boost the stocking rate in upcoming culture,” he said.
Nair in Gujarat said production lost in the first part of the year because of a two-month delay would be difficult to recover, and he expects overall sales at his firm to be lower this year. But lack of rains was also part of the reason for lower output, and stockings have been taking place in May and June instead, he said.
“Farmers have not totally moved away, but have actually put a pause on stocking. For example, if they would have been stocking typically in April and May months, they are now postponing it to May and June; so that is the point,” said the above-mentioned report.
Even the trader source most bearish on production said the price of vannamei shrimp in India this year is “much more stable”. Large sizes of vannamei have “shown a sign of an upward trend, while prices for medium to small sizes (60-100pc) have been stable for quite some time”, which could incentivize farmers to maintain stable production levels.
The large Andrah Pradesh-based processor source also reckons prices for larger sizes will “hold steady”, although feels prices for smaller sizes should correct upwards. He rated current prices as “5.5 out of 10” for farmers in Andrah Pradesh in terms of attractiveness.
“I don’t think prices will improve for this year. It’s all up to Christmas demand from the US,” added Durai.
In Odisha, however, Dash fears that because farmers in Odisha stocked conservatively again for the second cycle, harvests in September or October will be “too little, too late”.
“In fact, what we’re anticipating is all these big exporters will come to Orissa and West Bengal and jack up the price, because they have these new factories and but won’t have the raw material.”
Processors squeezed, other factors at play?
According to latest market prices as viewed on Undercurent’s price dashboard, prices in Andrah Pradesh, Gujarat and West Bengal have all ticked down in the past few weeks.
However, they remain higher than the same time last year, and also above levels during the corresponding period in 2017 (see chart three).
Triangulating how low US import prices fits with slightly higher year-on-year farmgate prices is difficult, but suggests a squeeze on processors and other factors at play, including: possible oversupply conditions in the US market; higher production in countries such as Ecuador; regulatory pressures facing large buyers of Indian shrimp in Southeast Asia; and the possible impact of the US-China trade war on Chinese processors who buy large quantities of Indian headless shrimp for processing.