Thursday, February 28, 2013

What Asia's shrimp crisis means for the US

Disease, looming countervailing duties, the rise of Ecuador -- what will it mean for prices in 2013 and beyond?


Avani Nadkarni

Published: 18 February 2013 02:15 PM
Updated: 18 February 2013 02:29 PM





Thailand makes up $1.2 billion (€901 million) of the $4.5 billion (€3.4 billion) in shrimp the United States imports, according to data from the National Marine Fisheries Service (NMFS), so any hits the industry takes directly affects the US market.
In the past year, the industry has been hit  by disease, possible countervailing duties and the rise of Ecuadorian production, so 2013 is sure to be a tough one for shrimp prices in the United States, Jim Gulkin, managing director at Siam Canadian, told IntraFish.
He predicts Thai shrimp production will be down 40 to 50 percent during the first half of 2013. If the country has a good recovery -- and he stressed that's a big if -- and makes up some ground in the last six months, the whole year will still be down 25 to 35 percent in production.
Although the United States is increasingly turning to Ecuador, a source familiar with both the US and Asian shrimp industries, one source told IntraFish other Asian countries are also picking up some of the slack.
"The good thing is that there are some other countries in Asia that are picking up, such as India and Indonesia,” the source said.
As for the possible imposition of countervailing duties, Gulkin said the "general consensus" in
Thailand is that it won't be affected much even if they are put in place.
"There isn't much in the way of subsidies or aid ... in the Thai seafood industry," he said. "The government is pretty much hands-off. They let business run business and they don't offer much in the way of financial support."
China does have more governmental support, Gulkin said, but there are only two Chinese processors in any position to ship shrimp to the United States.
"All the other processors' anti-dumping duties are so high that they're simply blocked from shipping to the United States," he said. "In general, the industry in China [also] won't be severely affected [by CVDs]."
As for the other Asian shrimp-producing nations, he said, there isn't much known about how it would affect Indonesia and Vietnam, but he does think India gets subsidies and, therefore, will be hit if duties are imposed.
What does all this mean for prices in the United States? In short -- they will be high, at least until the end of 2013.
The source in the shrimp sector said if CVDs are put into place, they "will create more of a confusion in the market," for two to three months, because producers and exporters will not have built the cost into their pricing. The source believes this will have a negative impact on prices and they will rise 3 to 5 percent in the summer, but "after that, by the holiday season, prices will start normalizing."
Gulkin isn't sure prices will be normal anytime this year. He said certainly, Thai shrimp prices will be higher, as will those of Vietnam and Indonesia, both of which are also having disease issues.
He called India "a wild card. We don't know how they're going to do but if they end up with a high countervailing duty, prices will be very high."
"Prices are going to be much higher than they have for the past three or four years," he said. "But historically, these prices aren't even that high; 10 to 12 years ago, prices were much higher. People are getting a little bit spoiled by these cheap, cheap prices."
As for Ecuador moving in on Thailand's turf, Gulkin isn't too worried.
"The shrimp industry tends to be cyclical," he said. "Thailand has a long history of being a very reliable producer, both quality-wise and in terms of shipping, therefore a lot of major retailers and foodservice users kind of feel more comfortable working with Thailand than other countries."
He said at its finest, Thailand produces 600 to 700 metric tons of shrimp per year and has the advantage of being able to produce hundreds of containers of a single size shrimp, something other countries cannot mimic.
"I don't think [the rise of Ecuador] will be permanent," he concluded. "When it comes back, Thailand will be back in the game. It's about being able to produce the right product at the right price."
 

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