Vietnam’s COVID lockdown further darkens pangasius supply outlook through to 2022: UnderCurrentNews

Neil Ramsden: UnderCurrentNews

An already dif cult supply outlook for Vietnamese pangasius has been further complicated by lockdown measures brought in to try and prevent the spread of the coronavirus delta variant, sources told Undercurrent News.

As has recently been reported, many seafood processing plants have had to close, and those that have been able to remain open must do so at reduced capacity, having proven to local governments their staff are sufficiently safe.

The country has been under at least some degree of lockdown for a little over 10 weeks now, one source — an analyst based in Vietnam — told Undercurrent. Inevitably, this has seen a fall in export volumes in July, as you can see below.

“Export volumes are reducing in quantity, especially to China. What we see in association with that is prices overall have increased a little bit, but only on the export side; the farm-gate price is at still around VND 23,000 [$1/kg]. That’s because many factories are operating at lower capacity, some have even stopped to clear out inventories.”

There has been a “very small” increase in export prices, but as processors are hardly buying now, this is not being passed on to the farmers, he explained.

As can be seen from the first chart above, export volumes may be up on 2020 for the year, but remain below 2019 levels. July 2021’s year-on-year drop is likely to worsen in August, he said, and with unit prices relatively unchanged, “it will significantly affect the export performance of Vietnam”.

“The question is when is it going to be able to control this, and when can factories return to normal capacity? So far in Vietnam, we don’t see the light at the end of the tunnel. It’s not very clear when we could be reopening. Like in Europe, there are priority groups for the vaccination program. But the effects are not going to be had in two weeks.”

As Undercurrent recently reported, many of Vietnam’s important production centers around the Mekong Delta have just extended their lockdown measures, in a move that is likely to prolong the overall drop in output.

Many farmers have been restricting their feeding, trying to hold out for better farm-gate prices. Now, of course, hardly any processors are purchasing, so farmers’ only real option is to continue trying to hold out.

A high proportion of farmers have fish already at market size — around 800 grams1 kilogram — so the likelihood is that by the time the supply chain can start owing again, a large portion of the available fish are going to be harvested at over 1kg; “there is a market for these fish, but it’s smaller and less valuable”.

“There are many scenarios that could unfold in the next few weeks or months, but for sure one could see quite some trouble related to the size of the product, and maybe oversupply of these. A worst-case scenario would see a shortage of small fillets.”

This analyst also noted that some farmers aren’t restocking their ponds, “or at least, are really starting to take strong measures to reduce their production because they don’t have money and they don’t have faith in the market”. This is a rare scenario in the pangasius sector, as the growout cycle is far shorter than shrimp, for

example, where deciding to leave some ponds unstocked is not such a big deal.

This source does not anticipate a price crash once things begin to ow again, as market demand looks relatively stable. “It’s not a demand problem like last year, when Vietnam was knocking on buyers’ doors; I would hope things balance out quite quickly.”

Siam Canadian’s Vietnamese office painted a similar picture for Undercurrent, confirming that many plants had chosen to close, while those that were open had a severely reduced headcount of staff and even lower productivity because of this.

“The government talking up hopes it can control the [pandemic] by around Sept. 15 — let’s see,” said Siam’s spokesperson. “Under the lockdown, Vietnam’s packers either don’t make offers or throw out very high prices; there are too many uncertainties, such as the high costs to maintaining on-site operations, sky-high sea-freight, oversized raw material supply…”

Once lockdown ends, she said, there will be new challenges: primarily the lack of raw material of optimal size. “There will be a lack of raw material, or perhaps, a lack of small-to-middle sized fish.”

“To prevent the fish going oversized, and to avoid wasting feed, farmers are trying to dump the sh now at a lower price. We’ve seen some small-to-middle sh $0.15 higher [representing less of a price difference than usual].”

Given lockdowns, some farms will only be able to restock in October, meaning the supply of raw material between October and February “will be like a rollercoaster” as the sh take six-to-eight months to reach a size that means fillets of 170-220g.

“Sea-freight and the container booking situation make the production hiccup even harder,” she added.

Tam Nguyen — CEO of Vietnam’s largest pangasius exporter, Vinh Hoan Corporation — con rmed to Undercurrent the situation for processors now was tough, with

“very reduced production due to COVID-19” and many difficulties around making shipments.

Her company is operating at just above 50% normal capacity, she said.

” We think it may take a minimum of a month for more factories to open and some others can improve production capacity closer to normalcy, on the condition that the workforce is promptly vaccinated,” she said.

“With such uncertainty and very limited travel and transportation, farmers have not stocked a new crop for the last weeks,” she said. “If processing factories can open gradually in September, we think it would help to alleviate the turbulence in supply. Our concern for the industry is that there could be very tight supply for the next eight months when the new crop is supposed to be harvested.”

Who pays for freight?

“Chinese buyers prefer CFR — cost and freight — meaning the processor bears the cost of transport and includes it in their quotes. A lot more — but not all — American and European buyers prefer to buy freight on board, FOB. Then you have an agent that arranges transport, so basically it means the transport has not been included in the offer price.”  – Undercurrent’s analyst source in Vietnam.

Importers expect rise in export price

Don Kelley, procurement manager for US importer Western Edge Seafood, told Undercurrent he expects import prices for Vietnamese pangasius to increase once product is available again.

“Of the three facilities I talk to, two are shut and one is open at reduced capacity,” he said. “No one is quoting right now but we left off at low twos. I predict it will be

higher because everyone will be at reduced output for some time.”

In June, US import prices were $1.95 per pound, and as can be seen above, have been creeping upwards. Kelley described US inventories as “relatively tight”, rejected in US market prices also on the rise.

In the EU, one source with a major importer said the price for sh itself was “still okay” and a “little over” the $2.20/kg they had been stable at for much of 2021.

“Our hope is that factories will re-open again soon. Luckily we never stopped buying, so we still have stock and goods on the water, but for sure we will see some consequences in the coming months of these lockdowns.”

He also noted the unstable freight costs were making produce more expensive. “We are paying between $8,000 and $11,000 [per container],” he said.

Siam Canadian Group Frozen Seafood Exporters 

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