Pandemic could wipe 600,000t off 2020 global farmed shrimp production: Undercurrentnews
Tom Seaman: UnderCurrentNews
The coronavirus pandemic could see 2020 farmed shrimp production drop by as much as 600,000 metric tons, according to data presented during the Undercurrent News Global Shrimp Market Outlook webinar (watch in full here, or ar the bottom of the story).
However, the reduction in demand coming at the same time, due to the COVID-19 pandemic hitting foodservice hard, means prices are unlikely to increase, according to panelists on the webinar.
“The real question is, is production going to be down sufficiently to offset the demand drop? And from our perspective, we’re not seeing that happening,” said Jeff Sedacca, CEO of Sunnyvale Seafood, a US distributor owned by China’s Zhanjiang Guolian Aquatic Products.
“For the last 20 or 30 years, the market’s been driven by raw material supply. You have a pretty clear picture of what’s going to happen because it’s kind of one dimensional…Your demand is going to remain, and your supply is going to grow, but you didn’t know how much,” said Sedacca (see a video clip of him from the webinar below).
Aside from the crash in 2013 from early mortality syndrome, production has been rising, said Sedacca. Now, there’s a situation where supply will drop, but possibly not as much as demand, especially in foodservice, he said. As previously reported by Undercurrent from the webinar, stocks are high in China and the US, with the outlook for demand over the winter in Europe also not especially positive.
Then, on the other hand, demand for retail products from India is booming, but labor is too short to meet orders.
So, there’s basically “two markets” developing; an abundance of head-on shrimp with short foodservice demand and tight demand and low supply of peeled products for retail, due to lower production and labor shortages in India, said Sedacca. “We’re going to have a real shortage of product coming out of India to cover the retail business.”
Overall, the drop in production coming in 2020 is not as big as was suspected as COVID-19 hit demand in foodservice for producers in Ecuador, India, and Indonesia, Sedacca and other panelists said.
Robins McIntosh, a senior vice president at agribusiness giant Charoen Pokphand Foods (CP Foods), shared a forecast during the webinar of 2020 shrimp production coming in at around 3.17 million metric tons, a drop of 16% on his estimate of production in 2019. That’s for both vannamei and black tiger, with the latter making up around 220,000t of the level forecasted for 2020, or about 7%.
The McIntosh/CP Foods forecast is for Asia production to come down 16%, to 2.24m metric tons, a drop of 17% y-o-y. The big driver of this is India, in which the forecast has dropped 31% to 530,000t. Around 30,000t of this is black tiger, according to the McIntosh/CP Foods forecast. Then, China is forecast to drop about 20% to 500,000t, with around 20,000t of the volume black tiger.
Of the other major producers, Vietnam could be down 6%, to 500,000t, according to the McIntosh/CP Foods forecast. Around 100,000t of this is black tiger. Then, Indonesia could drop 3% to 310,000t, with 30,000t of this black tiger. Thailand also looks set to fall, with the forecast for 270,000t of production, which would be down 7%. Only around 10% of Thai production is black tiger.
For the Americas, the forecast is for production to drop 17%, to 815,000t. Ecuador is by far the biggest producer in this region. For 2020, the
McIntosh/CP Foods forecast has production dropping 8% to 540,000t.
Speaking during the Undercurrent webinar, McIntosh said he didn’t see a drop of this size in global production as exceedingly bearish. You can see McIntosh talk through the rationale for the forecast in the first video below, with the second video covering the presentation on production from the webinar.
The 17% drop shown on the current forecast is also a moving target, due to how fast things are changing in the COVID-19 pandemic, he said.
Ultimately, McIntosh feels production in 2020 will be down 10-15%, with the recovery coming when consumption levels are more apparent, and logistics improve.
“I think everything is relative… if you compare it to a drop of 30% from EMS [early mortality syndrome, which hit in 2012]”, the possible drop coming in 2020 of between 10-15% is not quite as bad, he said.
Also, he highlighted the drop is not disease-driven, as was the case with EMS and whitespot hitting output in the past.
“It’s more [of a] predictable recovery because the drop today is due to logistics and uncertainty, it’s not due to disease and production. There’s really no productive issue in the world today,” said McIntosh.
Market uncertainty has meant farmers didn’t know whether to stock aggressively, he said. “There was also confusion as to what the consumption was going to be… and how that might impact price. There were logistical problems and getting shrimp out of the ponds and through processing plants.”
The fact the drop is not due to production means the recovery could come fast. “Depending on how the course of this event continues, it could recover very quickly, especially since we’re not dealing with anything technical or any production issues,” said McIntosh. However, until there is more clarity on the end markets, farmers will continue to be reticent to stock.
“There’s just uncertainty. Until there’s more certainty about the end markets, about the consumption patterns, farmers will continue to show constraints in terms of how they stock,” said McIntosh. “So, I don’t see any huge surge at the end of the year.”
Then, the performance of the markets over the rest of 2020 will dictate the production outlook for 2021, he said.
McIntosh and CP Foods’ forecast is notably far lower than the numbers given by the United Nations’ Food and Agriculture Organization (FAO) and the Global Aquaculture Alliance (GAA) during its annual Global Outlook for Aquaculture Leadership (GOAL) conference.
FAO’s latest numbers (see below, from the Undercurrent data portal), which are for 2018, give vannamei production of 4.97m metric tons, with black tiger at 750,605t.McIntosh and CP Foods’ forecast is notably far lower than the numbers given by the United Nations’ Food and Agriculture Organization (FAO) and the Global Aquaculture Alliance (GAA) during its annual Global Outlook for Aquaculture Leadership (GOAL) conference.
FAO’s latest numbers, which are for 2018, give vannamei production of 4.97m metric tons, with black tiger at 750,605t.
The forecast at the 2019 GOAL conference, held in Chennai, India, was for the production of vannamei and black tiger to move past 5m metric tons (see below).
Forecasting shrimp production is notoriously tricky due to the lack of accurate government data even for the previous year.
Although McIntosh’s data set has “no absolute guarantees, I do believe the world is not producing the amount reported by GAA or FAO”, he said.
To put them together, he uses a “mixed bag of sources and, sometimes, judgment”, he told Undercurrent. “What I am really trying to capture is upward and downward moves versus exacting quantification.”
Even a shrimp sector veteran like McIntosh, who has close to 40 years of experience in shrimp in Latin America and Asia, can also be surprised sometimes.
Two years ago, McIntosh was “made aware of a large extensive area” in the north of China, “which could be producing over 200,000t of various kinds of crustaceans.
“For the most part, it was off my radar screen,” he said. So, this could indicate the actual Chinese numbers might be correct or closer to correct, “they just are not penaeid shrimp”.
The Chinese data is likely putting all shrimp together, which is then taken as purely vannamei [penaeid], he said. This could be “one reason the [Chinese] number is so large”.
Then, government numbers from some countries “just are not very credible”, he said. “The government numbers from Thailand, Malaysia, the Philippines, India and Ecuador, are accurate and based on real systems to collect that data and accurately report.”
Last year, McIntosh tried to do a balance to check his low numbers. This involved taking the sum of all the imports to the US, China, Japan, Europe, and any other countries where available, then adding in local consumption numbers and production of wild shrimp, then seeing how it balances. “To my surprise– my numbers were within 5% of what was traded or consumed.”
Vannamei powerhouses badly impacted
Whereas Vietnam and Thailand have not been hit hard by COVID-19 and have only seen “minor logistical issues”, the two vannamei powerhouses,
Ecuador (first below) and India (second below), have been badly impacted.
The real impact of the “serious issues” with COVID-19 in Ecuador and India remains to be seen, he said.
Also, the steep drop in exports from Ecuador of 21% y-o-y to 44,593t in July, which is likely to drop even further in August, does not necessarily mean production will be down as much in the two months. Also, output for January-July is up 8%, to 392,355t, despite the recent dive due to the issues in the China market.
In mid-July, China blocked Ecuador’s largest exporter, Industrial Pesquera Santa Priscila, as well as Empacadora Del Pacifico and Empacreci, after finding traces of coronavirus in a container from the former and on packaging from the latter two. China lifted the suspensions on all three last month, with the governments of the two countries inking an agreement.
As Chinese demand dropped, Ecuador shifted its focus to the US. In July, exports to the US surged 120%, to 15,331t, as sales to China dived 76% y-oy, to 8,692t. More of the shrimp going to the US will be headless, rather than the head-on preferred by China, however, said McIntosh.
“Ecuador is starting to shift more to the United States,” he said. “As a result, farm production is not down as [much] it would appear from the exports, because maybe 20-30% of that is headless, whereas before it was head-on.
So, it’s missing some weight that it normally would have.”
Farmers in Ecuador are stocking lighter, but plan to compensate with larger shrimp, he said.
Whereas Ecuador was severely hit but seems to be through the worst, India continues to have serious issues, said McIntosh.
Jim Gulkin, the managing director and founder of Siam Canadian Group, agreed Indian output would be considerably down in 2020.
Production could be down to 500,000-600,000t, so around 20-30%, he said. “We’re looking at a big drop from India. But, it remains to be seen; it’s very opaque.”
As well as the logistical impact in India on the movement of feed and broodstock around the country, there are labor issues in factories as the number of coronavirus cases rises in the country.
With the “rapidly rising caseload”, some factories are operating at 30-50% capacity, with some closed for a while, said Gulkin.
Farmers were unable to access post-larvae due to the limits on the movement of broodstock. Then, they have also been reticent to seed due to the uncertain markets, even though the “big price crash” expected when the pandemic hit in March and April hasn’t happened, he said.
“So, they had the physical aspect of the pandemic and then the marketing and the perception of what’s going to happen to pricing”, which made farmers reluctant to seed, said Gulkin.
The impact can be seen by looking at India’s exports through May, which is the latest data available.
Exports crashed 23% y-o-y to 35,926t in March, then 26% y-o-y in April, to 31,800t. In May, exports recovered to 48,411t, but this is still down 10% y-oy.
For all of 2020, India will most likely not be down “as much as people might expect”, said Willem van der Pijl, a shrimp sector analyst and the founder of Shrimp Insights, during the webinar.
There was a “huge revival” of Indian broodstock imports after the initial heavy lockdown, he said. “So, broodstock imports have been more than enough to cater to a new production cycle.”
Then, the situation worsened than for farmers, with disease problems and other issues meaning stocking did not take place “at a full scale”, said van der Pijl. “Still, they did stock.”
In Andhra Pradesh, prices are falling for small size shrimp, due to diseasedriven harvests, said van der Pijl.
“I think that’s what we see happening now is that, due to disease, a lot of farmers harvest early. So, we have a lot of small sizes, which might cause a crash of prices for the smaller sizes.”
However, prices “are actually not that bad in India”, said van der Pijl. This is supported by data from AP on Undercurrent’s prices portal, which you can see below.
“So, farmers might be encouraged to stock for this last crop of the year… before the winter season.”
However, this crop will likely end up being in the data for next year, he said.
‘Black boxes’ in China, SE Asia
Getting accurate production forecasts from China and some other southeast Asian countries is very tough, both McIntosh and Gulkin said during the webinar.
“The Chinese numbers are always a black box,” said McIntosh. You can “plus or minus” by 20% from the 500,000t McIntosh and CP Foods are forecasting for 2020 (see chart below), he said.
Whereas the industry is “pretty clear” China used to produce over 1 million metric tons, the current level is far from clear, said Gulkin. “Some say it’s around half a million metric tons…. But it’s hard to peg.”
Production in Indonesia is equally difficult to pin down, he said.
Trying to get an accurate estimate from Indonesia is just as hard as China, according to Gulkin.
Indonesia, the world’s largest archipelago, has five major islands and about 30 smaller groups. There is a total number of 17,508 islands, of which about 6,000 are inhabited, making precise, centralized data of any kind hard to come by.
McIntosh and CP Foods (see chart below) have Indonesia dropping 3% to 310,000t (with 30,000t of this black tiger), but Gulkin is more positive.
However, not as bullish as the country’s government, which can throw out figures like 800,000-900,000t, “which don’t really make sense on any level to me or to anybody in the business”, said Gulkin.
You need to “talk to 10 people and average it out” to get an idea, he said.
Somewhere in the 400,000-500,000t range is Gulkin’s view on production from Indonesia, with a slight increase in 2020 possible. “Indonesia has been very busy with retail for the United States predominantly. So, I think the prices the farmers have been getting are lower than last year, but maybe good enough to keep them seeding the ponds.”
Big processors in Indonesia are “choc a block with orders for US retail”, for big players such as Walmart/Sam’s Club, H-E-B Grocery Company, or Koninklijke Ahold Delhaize’s US stores, he said. “That is their bread and butter. EZ-peel and CPTO [cooked, peeled, tail-on], peeled products [for US retail].”
However, just as it’s hard to get a handle on the production in Indonesia, it’s also hard to sense of the real impact of the coronavirus pandemic in the country.
Indonesia has reported close to 222,000 cases of coronavirus and 8,841 deaths, according to data released by the country on Sept. 14.
It does not seem like the government has the disease under control “at all”, said Gulkin.
Even though government policy on controlling the pandemic has verged from a lockdown to “taking a shot at herd immunity”, the seafood sector has not been badly impacted.
Processor Panca Mitra Multiperdana (PMMP) is having issues at plants in Situbondo, and Bondowoso, in East Java. There have been calls for PMMP to close down its operations, given the high case count.
“I don’t know if they’ve got it under control now or not,” said Gulkin. “But I haven’t heard of too many factories where they have a lot of cases among their workers. I’m sure there’s some because the disease is moving through Indonesia, but it is not obviously impacted the business. So, production has continued. The processors have been operating at pretty close to full capacity. So, Indonesia’s been doing okay through the pandemic.”
Vietnam doing well
Vietnam went into lockdown very early and has contained any spread of the virus across the border with China, said Gulkin.
He’s far more bullish than McIntosh (see his forecast below) in terms of Vietnamese production, giving around 750,000t as the total, with 480,000500,000t of vannamei and 200,000-250,000t of black tiger.
“It [production] actually could move up a little bit this year in Vietnam… I don’t think they’ve been impacted physically by the pandemic.”
As a result, Vietnam didn’t have factories running at low capacity or experience logistical issues with moving broodstock and feed around, like India has, he said.
Raw material prices are down year-on-year, so there has been some reluctance from farmers on seeding. However, prices are “decent enough” for seeding to allow production to by 3-5% and, at the least, stay level, said Gulkin.
As for Thailand, Gulkin said production won’t be substantially different than last year in terms of gross tonnage. There may be some differences in sizing, but production for the year-to-date is not too different to 2019.
“Unless raw material prices go up considerably and the farmers become more incentivized to seed, maybe the production will be similar,” said Gulkin. McIntosh has a Thailand dropping 20,000t, to 27,000t (see chart below).