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March 11, 2014

World Markets for Farmed Shrimp

From Seafood Source

 

The growing dynamics of rising domestic consumption across Asia and a shortage of land in China will see a growing role for third parties like Ecuador and India in supplying world shrimp demand.

 

“Growth in Chinese domestic consumption of shrimp is out-pacing all other markets,” according to seafood veteran Didier Boon, head of Beijing-based East China Seas.  He also said the shift of large Thai shrimp producers away from farming into value-added areas will limit supply growth and any significant slip in prices.

 

Boon downplayed any chance for a significant rebound in Chinese shrimp output for export in 2014, as long as anti-dumping measures remain in place in the key USA market.  Zhanjiang-based Guolian, China’s leading exporter of shrimp, has reported a record 160 percent increase in retained profits for 2013.  It reported revenues of $3.6 billion, up 52 percent year-on-year, mostly because of the rapid increase in shrimp prices, due to what the firm called the “reduction in global shrimp production” caused by early mortality syndrome.

 

Antidumping duties and disease challenges for Asian producers will continue to benefit Ecuador, believes Boon, who has a sourcing office and two factories in Ecuador.  “Ecuador has a fantastic name because [shrimp] cookers in Europe need a really perfect product….  There’s no domestic market in Ecuador, forcing shrimp farmers to maintain very high standards, whereas Chinese shrimp farmers can always fall back on domestic demand.”

 

But Boon is not convinced there’s such a wide gap in quality between Chinese and Ecuadorian shrimp: “It’s like...Mercedes cars made in Germany, China and Belgium.  The quality will be the same, but you won’t pay the same price.”  High profits for shrimp farmers in Ecuador have prompted other Latin players to enter the market.  Boon points out how Panama and Venezuela have emerged as shrimp producers, but he believes production in both will remain relatively insignificant, centered on a few big players, compared to a more widely spread and consistent growth in Ecuador.

 

Boon believes Ecuador will retain its image as a market leader in terms of quality and consistency, but demand seen in 2013 will ease off somewhat when Thailand returns to the market in the wake of the EMS disease outbreak.  But large domestic consumption and a keenness among key players like Charoen Pokphand (CP) to shift away from shrimp farming into the value-added side of the business means prices for shrimp are unlikely to fall back sharply in the post-EMS market.

 

India may prove Ecuador’s main competitor, given its ability to produce large-size shrimp.  Also, it has the advantage of having more access to land, according to Boon.  “It has a very long coastline and large coastal plains, and far fewer...tourist resorts which have restricted shrimp production in China,” said Boon.

 

There are disadvantages to being in Ecuador, such as the comparatively higher price of credit for processors.  “You pay 9.3 percent interest in Ecuador, while loans are very cheap in France…. This is why European shrimp markets prefer to cook locally rather than at source in Ecuador.”

 

Capital remains a big barrier to expanding East China Seas sourcing business in Ecuador.  “Each container costs $170,000 and you have to pay half of that before the shrimp is out of the water,” said Boon.

 

Growth in Chinese consumption is out-pacing consumption growth in most any other market.  But the prosperity driving that consumption has also proven a barrier for domestic seafood production.  Long term, a shortage of land is threatening Chinese output, warns Boon.  “Ten years ago you could fly into Shantou in Guangdong Province and all you could see for miles was [shrimp] ponds.  Now all you see is real estate.  It’s a similar situation in Hainan [Province].”

 

Yet China will stay top dog in processing, believes Boon, who arrived there in 1994 to buy shrimp for European markets.  “Over the next decade, costs in China are unlikely to rise any faster” than alternative destinations such as Vietnam or Indonesia, said Boon.  He claims that’s because of better infrastructure and a more productive labor force.

 

“The yield from a worker in Vietnam is about half of what you get from a guy in China….  The Vietnamese have adopted French ways, while a Chinese worker will work...12 hours [for] seven days.”  Bureaucracy is a “nightmare” in Vietnam and India while the state sanitary/quarantine inspection authorities in China have tightened up to ensure the quality of exports has improved, claims Boon.

 

Information: Didier Boon, Managing Director, East China Seas, B620 Nan Xin Cang Tower, Dongsishitiao No.22, Dongcheng District, Beijing, People’s Republic of China, 100007 (email didier@eastchinaseas.com, phone  +86-10-6409-6818, fax +86-10-6409 6950, Skype:didierboon, webpage http://www.eastchinaseas.com).

 

Source: SeafoodSource.com.  Editor, Sean Murphy (smurphy@divcom.com).  China Shrimp Supply, Consumption to Benefit Ecuador, India.  Mark Godfrey (SeafoodSource contributing editor reporting from Beijing, China).  March 3, 2014.

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