[title element=’h2′ color=’fff700′]Questions swirl over Rabobank’s ‘strong’ characterization of US shrimp market : December 24, 2014[/title]
Jeanine Stewart – UNDERCURRENT NEWS
Rabobank’s global shrimp market report hit last week at a tumultuous time in the US shrimp market, and the words “strong” and “US market” side by side leapt off the page as a glaring contradiction to the current state of affairs.
However, the report’s characterization was not meant to define the state of affairs last week but rather that of 2014 as a whole, which was — by the numbers — was a strong year, considering US shrimp import levels hit records in both value and volume.
Nonetheless, the report’s release set off arguments over what exactly is the state of affairs in the US and the globe when it comes to the shrimp supply-demand balance.
One of the most pointed criticisms of the report came from Ken Salzinger, owner of the shrimp-focused seafood brokerage firm KenMar Sales and Marketing, who questioned Rabobank’s characterization of the US market as “strong”.
“…After speaking to many of my colleagues in the shrimp industry, I cannot concur with their [Rabobank’s] views,” Salzinger, whose business is based 50% on shrimp sales, said in his weekly email newsletter “Ken’s Catch.”
In the report, Rabobank referred to strong demand in the US and said, “US buyers appear to absorb the high prices with ease, with imports growing in both volume and value” and that the high and volatile price environment will hold at least in the medium term.
These predictions do not seem likely to Salzinger, who told Undercurrent News the high levels of shrimp inventory in the US and a lack of product movement show a very low level of demand in the US persists currently.
“You could go to any cold storage facility and find a ton of shrimp unsold,” Salzinger said. “People are sitting on millions and millions of dollars of product, and they are just frustrated.”
Another industry veteran with a major shrimp importer agreed.
“It’s very very weak,” the source told Undercurrent, later adding that the market overall in 2014 was strong until October. Since then, pricing in general has come down 8% on the most popular sizes, and compared to the same time last year, prices are on average 18-19% on average lower than last year.
“I think there’s a lot of panic, a lot of worry. It might recover back soon, but everyone is worried about the market after the holidays,” the source said.
Rabobank’s prediction that prices will be stable in the mid-term is on par with the source’s prediction, as the current situation subsides.
Right now, the company itself has huge inventories and never expected the price to come down as it has.
“It’s all happened so fast, and it doesn’t make sense. Everyone [importers] stops buying and buyers are hesitant to take a position because they think prices will keep coming down….but I think we have reached the bottom,” the source said.
Based on how much product there is in the market, people [buyers] expected a much better Christmas season than they have experienced, Salzinger said on Tuesday, when he said business was extremely slow across species because of high prices.
Salzinger’s claim of high inventory in the US affirms statements made by the second source, as well as a Dec. 1 report by Undercurrent that US companies were seeing high inventories and low demand.
Yet earlier this month, retailers seemed quite bullish on the level of demand for shrimp this year.
Another news report stated that retailers have upped the number of promotional offerings on shrimp 61% this year, but that they are doing so at higher prices than last year, giving a boost to margins.
Salzinger surmises consumers have not responded favorably to these high prices points, given the high inventory levels that remain.
Retailers’ decision to keep pricing high is notable considering that the raw material costs are actually down considerably over last year, at least for popular specifications such as16/20 count headless shell on (HLSO) shrimp, which is selling at $6.75-$6.85/lb. according to Urner Barry this week, down from $7.70/lb. last year.
Prices will “absolutely” continue to drop in the near-term due to low inventory, Salzinger said.
Yet another US-based shrimp importer said that the market for Asian shrimp — the most large-volume source to the US market — is “tight” and has been picking up over the last five to six weeks thanks to the softening price trend.
A source at the company, wishing to remain unnamed, attributes the pick-up to the more attractive prices.
Prices have been declining or holding steady each week for popular Asian shrimp specifications every week since November, data from Urner Barry shows.
In contrast to Salzinger, this source said prices are likely to hold until the summer, at which point they may come down.
Ecuadorian sources see market strength long term
Long term price outlook is another issue raised in the Rabobank report that sent questions swirling.
Ecuadorian shrimp producers are a bit more in agreement with each other on the outlook, but they are not in agreement with Rabobank’s report in either the short or the long term.
Sandro Coglitore, general manager for major Ecuadorian shrimp producer Omarsa, also said the market is tight worldwide and objected strongly to the Rabobank report’s prediction that recovery of production and prices is coming in 2015.
“Recovery? There is no such recovery on the horizon,” Coglitore said in a comment posted at the bottom of the story on Rabobank’s report, referring to price recovery.
He went on to cite the price drops of this year not lasting longer than 60 days and the expectations of recovery in Thailand being extremely premature.
“Until August next year, you will not see such shrimp,” Coglitore said, “and it will hit the market maybe in October…Speculation [on shrimp prices dropping] will not last once people need to buy shrimp…and there is no shrimp,” Coglitore said.
Another Ecuador-based shrimp exporter agreed that prices aren’t likely to fall simply based on production increases.
“It is true there is going to be more shrimp,” the source told Undercurrent. “But there is also more demand…more people in the world want to buy and eat shrimp.”
Ecuador in particular has benefited from increasing demand from China, and producers have increasingly ramped up production in order to meet the growing demand.
Production forecasts show increase
Predictions from producers and governments in major producing nations around the world support Rabobank’s statement that production will increase next year, and that there will be some recovery from early mortality syndrome (EMS) in Thailand.
The most major suppliers of shrimp to the US — India, Ecuador, Vietnam, Indonesia, Thailand and China — are all likely to increase production next year at least slightly, if not more.
India, widely seen as becoming the leader on shrimp production worldwide, is expecting to increase its overall seafood export value by 20%, from $5 billion in 2014 to $6 billion next year, according to its Marine Products Export Development Authority (MPEDA).
Farmed vannamei production is set to increase at the same rate, according to a major importer of Indian shrimp.
“Just comparing the farmed vannamei production from last year 2013-14 (March to April) to this year 2014-15 (March-April) the increase would be about 20%,” the importer told Undercurrent, adding that this supply increase will come slowly in 2015.
Ecuador, meanwhile, could see production rise nearly as much.
“A 14% increase is possible if market conditions motivate our exporters and producers to do so. We are ready but expectant to what happens with the market,” Jose Antonio Camposano, president of the National Aquaculture Chamber, told Undercurrent.
Meanwhile, Thailand’s production forecast is better for next year as well.
Jim Gulkin, managing director of Thailand-based supplier Siam Canadian Group, told Undercurrent he sees continued recovery ahead for Thailand.
This is similar to his comments at the beginning of 2014, which he concedes did not fully come to fruition.
“I think the predictions for 2014 were jumping the gun to some degree, my own included,” Gulkin said. “Assumptions on the recovery of EMS did not pan out and not enough was understood about EMS at that time…A lot of progress has been made since then, so 250,000t-300,000t seems achievable for 2015.”
Gulkin’s figures work out to an 11% to 33% production increase over this year’s production total, which he says is 225,000t.
A news report from The Nation shed some light on this year’s figures. It said China’s production increased 33% this year, but the projections are not clear for a nation that Rabobank described as “the region with the most uncertainty”.
The Nation said Indonesia’s production this year has increased 11% to 200,000t, Vietnam’s increased 50% and India’s increased 48%.