Indian shrimp production to benefit from rebalancing of global seafood supply and demand: Rabobank

India’s shrimp exports could benefit as China’s dominance as a seafood exporter is set to gradually diminish, says Rabobank. 

China has been the main contributor to seafood supply for the world, but it will, over the coming years, become the largest importer or, at least, lose its positive net trade position, said Gorjan Nikolik, aquaculture industry analyst, Rabobank’s food and agribusiness research and advisory division.

“This is the single biggest dynamic in the seafood industry today,” he told us. 

The Chinese aquaculture industry and seafood reprocessing is slowing down, at best, or, at worst, contracting - there are concerns with its competiveness in the export and domestic market due to increasing labor costs and disease, said Nikolik.

While its aqua feed output is now the biggest in the world, that too will start to decelerate, he said. 

China is one of the most rapidly ageing nations - its population growth slowing down due to single child policy: “From now on, there will be three to four million working population less every year in China, so it won’t have the labor force necessary to support expansion of its domestic aquaculture sector," said Nikolik. 

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China is the most advanced online market, further opening opportunities for marketing seafood, noted Nikolik. 

Chinese consumers are looking for more variation in seafood purchases when buying online - interest is growing in lobster, for example, and farmed fish not common to China, he said.  

Rising income, still growing at 8% per year and higher then nearly any other country in the world, has seen food expenditure in China predicted to hit over $500bn by 2025: “Chinese consumers have the willingness, ability and opportunity to buy seafood, especially imported seafood more then ever before. This will only increase."

Food scandals have also undermined the domestic food industry and support import demand, especially for fish and proteins – a recent incident where 40-year-old frozen meat was illegally smuggled into China has only served to underline that lack of trust in domestic food production, he said. It followed other incidents - in 2013, 16,000 dead pigs were found floating in a Chinese river.

“Pollution of water and land further undermine domestic supply and ability to export especially in terms of farmed seafood. The government is getting tough on pollution in aquaculture,” said Nikolik.

Though a suitable supply chain is still lagging to store and distribute large quantities of seafood imports, improvements are on the way: “China’s cold chain infrastructure is growing by 15-30% annually," said the analyst.

Who will step into China shoes?

Eventually, this transformation will lead to new, dominant seafood export countries. There will be a great rebalancing of global seafood supply and demand, predicted the analyst.

However, which countries will, in the main, benefit?

“The first to become major seafood exporters are other developing Asian countries with large aquaculture sectors including Vietnam, India, Thailand, and Indonesia. However, long term, Brazil will also play a big role,” said Nikolik.

Vietnam, as the current backdoor to China in terms of ‘unofficial’ seafood imports due to China’s import tariffs on seafood products, would be a direct beneficiary. Pangasius, shrimp and tilapia production in that country is growing: “And this year alone China is expected to be Vietnam’s largest pangasius market,” said Nikolik.

Indonesia will indirectly benefit through more sales to Europe and North America, he said.

China is likely to become India’s third market for shrimp exports after the US and Europe: “It has been difficult to calculate what the actual levels are of seafood imports into China after years of inflation of domestic seafood production numbers by the Chinese government, but it is likely to be 50% self-sufficient in shrimp,” said Nikolik.

Although China is a major producer of shrimp, probably still the biggest in the world today, especially if freshwater shrimp is included, they have been only a mid-size exporter, added the analyst.

"In shrimp, China is mostly losing their own domestic market to imports, including Indian product, but Ecuadorian or wild Argentinian shrimp have major exports to China. In tilapia, they are the number one exporter and in frozen fillets had 80% of the export market just a few years ago. In that sector, the Chinese industry is losing their market share in export markets such as in the US - here Vietnamese pangasius is the key competitor," he said.

Shrimp boon in India 

Indeed, India might be the biggest shrimp producer in the world in the next two years, said Nikolik.

Renewed global demand for disease-free, healthy shrimps from India, over Southeast Asia, has made Indian shrimp exporters revise their projection for a year-on-year export revenue growth of 15-20% in FY17, writes the Business Standard.

India, it noted, has benefited as shrimp production in Vietnam, Thailand, Indonesia and China has been hit by diseases, labor and production issues. 

States such as Andhra Pradesh and Odisha have also opened up opportunities for aquaculture farmers to bring more areas under shrimp production, according to the article.

report from the USDA found demand for shrimp feed in India has grown with the spurt in cultured shrimp production there during the last few years. Shrimp feed sales volume in 2015 was estimated at around 800,000 MT, said the USDA citing industry sources.

“Extruded floating feed has become more popular with farmers than pelleted feed. Its advantages include better feed conversion ratio, improved digestibility, and near-zero wastage. According to industry estimates, the total current production capacity for shrimp feed manufacturing is around 1.33m MTs per annum. Shrimp farms generally get feed conversion ratios ranging from 1.4:1 to 1.8:1.”

Thai shrimp challenges 

Thailand’s shrimp production is facing more disease challenges.

Six months ago, analysts believed recovery was well underway in that shrimp market following the impact of early mortality syndrome (EMS), but the industry is now contending with EHP disease, said Nikolik.

“Around 350,000 tons of shrimp production was forecast for 2017 compared to 219,000 tons recorded in 2016, as the industry had got EMS under control or could deal with it better.

“However, EHP disease has become a problem so recovery will be more gradual - around 300,000 tons of shrimp is now forecast for Thailand in 2017.”