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April 11, 2015
The Challenge of Lower Prices
Daniel Gruenberg (firstname.lastname@example.org): Shrimp farmers in Thailand are struggling with multiple diseases on their farms and now face a new, formidable challenge—crashing market prices. Actually, they face a triple whammy: low survival, slow growth and record low prices. We haven’t seen prices this low since before EMS.
The price drop is hitting small shrimp especially hard, and this is about all that farmers can produce because of the disease situation.
The timing for all of this couldn’t be worse because we are now getting into the main stocking season. It remains to be seen if farmers will be willing to gamble what little cash they have left to stock their ponds when prices are so low.
At these prices I think most farmers production costs are higher than the current market price.
Don Berger (email@example.com): Hello Daniel, in the last 10 years, the minimum price for 60-count per kilo, head-on, white shrimp in Thailand was $2.46. The maximum price was $8.60, and the average was $4.15.
In any given market, prices often go higher and lower than expected.
When evaluating market prices, we should look at the long-term trend. Our sense of values and prices tends to be short term and can be distorted. It is a mistake to look at the last 24 months. Admittedly, looking back fifty years may also be problematic. I think you have to look at average prices, maybe a moving average, to gain a sense of their range. The price is now $4.91, the 10-year average is $4.15 and the 5-year average is $4.76.
Kurt Servin (firstname.lastname@example.org): Daniel, I totally agree with you. It’s happening in Mexico, too. Production costs are much higher because of the increase in the value of the dollar, feed ingredient prices are increasing, and postlarvae prices have increased by 20%.
Daniel Gruenberg (email@example.com): Don, comparing 60-count prices is not really indicative of the entire situation because 95% of farmers in Thailand are growing 100-count shrimp and having a hard time producing anything larger than that.
On April 9, 2015, 100-count shrimp were at $3.07 kilo, a 15% drop in two days. Yes, we should not look at two-day prices, but my point is that market prices are below production cost. Farmers are out of cash due to EMS losses. Over the last two years, farmers could make some money with 10-gram shrimp. EMS is not just about mortality. Growth is down; the feed conversion ratio is up, so costs are up. I am saying that these low prices are coming at a critical time, and I think many Thai farmers will go bankrupt if they stock now. Farmers who stocked early this year will be rewarded with a loss when they sell their product.
Farmers will have to adapt and pay attention to production costs as we go through this crisis, and I will say many farmers will not make it unless prices firm up within the next month or so. Buyers who play the waiting game, hoping that prices will continue to fall, are playing a dangerous game because that could cause a semi-permanent loss of production.
I don’t understand where all the “over-supply” is coming from. Vietnam’s production numbers are distorted by imports from Ecuador and India, and I doubt if either of them will be able to maintain their production levels. Thailand, Malaysia and China are continuing to struggle and diseases are spreading both in Asia and possibly in Latin America.
Attilio Castano (firstname.lastname@example.org): Let me put my two cents into this discussion:
I started growing shrimp in Ecuador in 1984. When whitespot hit Ecuador in 1999-2000, it destroyed the industry. More that 50% of the players left the business, and the industry was left without capital and credit. The technology to grow shrimp in the presence of whitespot was available a few years later, but the farms had been run for years without maintenance, and the facilities where not up to par.
It took 18 months of rising prices for the industry to raise the capital to improve the farms and clean up its finances.
So I can relate to what’s going on in Asia, I have spent the last 12 years working my way out of whitespot.
I am afraid that Daniel is correct, the damage to the industry in Asia is not evident yet, and the lower the price of shrimp goes, the more difficult is going to be for the industry to get back on its feet.
Just an opinion from a simple shrimp farmer.
Source: The Shrimp List (a mailing list for shrimp farmers). Subject: Thailand’s New Challenge/Price. Daniel Gruenberg, Donelson Berger, Kurt Servin and Attilio Castano. April 10, 2015.
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