Ecuadorian shrimp prices to go even higher on booming Chinese demand

14-Mar-2017

Ecuador’s shrimp exporters have seen one of the first price declines this year after Chinese buyers stayed away from a hot market. The lull will be short lived, says an exporter.

Prices for ex-farm HOSO [head-on, shell-on] 40/50 count, a benchmark for the shrimp industry, fell $0.65 to $6.10 per kilo this week.

That came as Chinese buyers stayed away from the marketplace after huge price increases in recent weeks, said one Ecuadorean exporter, who doesn't expect the situation to last.

“All of the prices have dropped and this is because the few importers in China agreed to suspend purchases for a couple of weeks and force down prices,” the exporter told Undercurrent News on condition of anonymity. “In reality, there is not shrimp in the world to satisfy demand, and I estimate prices will return to trending upwards in less than a month.”

For Ecuadorian shrimp farmers clustered in the southwest of the South American country --- who escaped the damage caused by a 7.8-magnitude earthquake in April -- this has been their year.

Accumulated revenue from shipments to Asia alone totaled $362 million, putting the sector on course to break the $1 billion barrier for the first time, according to figures from the National Aquaculture Chamber (CNA).

Total exports rose to $739m between January and April, indicating Ecuador will beat last year’s export record of $2.3bn, the CNA figures showed.

Ecuador emerged as China’s preferred supplier when early mortality syndrome hit output levels from Asian nations such as Thailand and Vietnam starting in 2013. Disease and lower prices shaved $1bn off Vietnamese shrimp exports last year, according to the Vietnam Association of Seafood Exporters and Producers.

Ecuadorean prices fell in the past week by 20 cents to an average blended price -- taking into account the different shapes and sizes -- of less than $3.10 a pound, on reports that Mexico and some Asian countries will step up exports to take advantage of high prices being paid by China, another source at an Ecuadorian exporter told Undercurrent.

 

 

The same blended price was hovering near $3.40 a pound at the end of May, the source said.

 

“Prices have fallen sharply on speculation about future production from Asia, India and Mexico,” the second source said. “The price movements are a bit more changeable now, because the producers and the importers don’t have a good handle on what inventories are.”

Asia may be set for a production revival this year, as producers scramble to capture the high price scenario for China.

Major Thai producer Charoen Pokphand Foods recently said Thai farming volumes were recovering, predicting growth of as much as 40% for the year, according to CEO Adirek Sripratak. Levels of around 270,000 metric tons of shrimp production are being predicted for Thailand in 2016.

Mexico looks set to raise shrimp production this year, with production potentially rising to 110,000t, versus 100,000t last year, according to estimates provided by Mexico's National Committee of Aquaculture and Fisheries.

Honduran exporters saw shrimp revenue surge 56.6% to $17.7m in the first quarter of this year, compared with about $10m a year ago, according to the country’s central bank.

Until now, China has been willing to pay more than the EU to secure Ecuadorian shrimp, but that could change as other nations step up supply, a source told Undercurrent. Ecuador is nearing the signature of a free trade agreement with the EU, a measure that could be a threat to the stability of supply to China if importers sense that Ecuadorian supply could become scarce.

Ecuador’s earthquake wiped out about 15% of Ecuador’s production in the Manabi province on the central coast. The farms in the area were mainly dedicated to producing smaller sizes of shrimp, creating a shortage in that segment of the market, according to Veronica Dahik, CEO of Ecuadorian producer Natluk.

“It’s true that the earthquake in Ecuador damaged about 15% of the national production, but Asian demand is the principal driver of growth, there’s no doubt about that,” she said.

Exports to Asia last year totaled $985.3m, according to the CNA data. Asian exports in weight were 123 million lbs for the four months, putting the industry on course to beat last year’s record exports of 318m lb. Shipments to the US were only 48m lbs, well under target when considering last year’s US shipments were 170m lbs.

“The expectations for Chinese shrimp production are very low this year, and that’s why there’s large demand for shrimp in China,” the first source said. “International demand is at levels we have never seen before, farm prices are going up every week and sometimes more than once a week.”

A major US importer has stopped buying Ecuadorian shrimp because of its China focus, and is looking at other Asian countries such as India and Thailand, where they can get customized processing done such as skewered shrimp for less cost.

Also, Ecuador’s exporters has stopped focusing on the US market, where larger HLSO shrimp is preferred. Many Ecuadorian exporters are using other Asian countries with lower import taxes as a conduit to reach the lucrative Chinese market.

“Whatever’s left over is being sold as HLSO,” the US source said. “A lot of the HLSO [headless shell-on] is shrimp that doesn’t make high-grade that they can’t sell directly so they sell to the processing plants.

The US importer gave these ex-farm shrimp prices at the end of May: HOSO [head on, shell on] at 30/40 count between $7.20 and $7.40 per kilo; 40/50 count between $6.50-$6.70/kg; 50/60 count between $6.05-$6.20/kg; 60/70 count between $5.45-$5.70/kg and 80/100 count between $4-$4.20/kg.

For the HLSO variety ex-farm prices were 21/25 count at $3.90 per kilo; 26/30 count between $3.20-$3.70/kg; 31/35 count between $3-$3.50/kg; 36/40 count between $2.80-$3.20/kg; 41/50 count between $2.60-$3.10/kg; 51/60 count between $2.20-$2.80/kg; 61/70 count between $2-$2.50/kg; 71-90 between $1.60-$2.20/kg; and 91/110 count between $1.20-$1.50/kg

The source at an Ecuadorian exporting firm quoted ex-farm shrimp prices for this week: HOSO at 30/40 count are at $7.15 per kilo; 40/50 count at $6.10/kg; 50/60 count at $5.90/kg; 60/70 count at $5.40/kg; 70/80 count at $4.40/kg.

80/100 counts because most of the production came from the Manabi province of Ecuador which was devastated by the earthquake. Production might not cover in the Manabi area until next year, the source said.