Global Shrimp Aquaculture Industry Dynamics Rabobank F&A insights Lian Heinhuis, Food and Agribusiness Research November 2015 1
Table of contents Sections I General outlook: times of supply volatility to persist II Developments in key import markets III Analysis of key production regions IV Challenges V Opportunities and concluding remarks 2
1 General outlook: times of supply volatility to persist 23
Key observations on the shrimp industry I High supply volatility expected to remain due to recurring disease issues II Re-ranking of leading exporters III Good global demand which is expected to continue IV Emergence of new business models and a holistic approach to biosecurity V Growing importance of sustainability and certification 4
2 Developments in key import markets
000 tonne Main export markets stable in volume terms i.e. consumption per capita is not increasing Shrimp imports in volume by EU countries, USA and Japan 1800 1600 1400 1200 1000 800 600 400 200 0 2009 2010 2011 2012 2013 2014 EU 28 Extra EU 28 Intra USA Japan Source: Globefish 2015 6
billion usd But there has been considerable growth in value Shrimp imports in value by EU countries, USA and Japan (includes E8 internal trade) 18 16 14 12 10 8 6 4 2 0 2009 2010 2011 2012 2013 2014 EU 28 Extra EU 28 Intra USA Japan Source: Rabobank, FAO 2015 7
3 Analysis of key production regions 23
Total supply of farmed shrimp: tentative growth expected, but low prices will dampen recovery Global farmed shrimp supply 4.000.000 3.500.000 3.000.000 2.500.000 2.000.000 1.500.000 LAM Asia 1.000.000 500.000-2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 2016F 10% 5% 3% 4% 2% 7% 5% 9% 6% 4% 0% -5% 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 2016F -2% -3% Source: Rabobank 2015 9
Bulk of industry is in SE Asia, but highest supply and export growth rate is likely to be outside of this region 1100 2000 2012 2020E Thousands tonnes 850 650 599 600 88 305 330 China 67 Thailand Viet Nam 415 496 524 87 84 86 281 355 268 55 53 54 40 25 74 118 50 33 100 127 91 90 40 16 5 Brazil Ecuador Mexico India Indonesia 2,5 4 Australia Malaysia Myanmar Philippines 10 29
thousand tonnes Thailand: a shrimp empire collapsed, but recovery seems on the way Thai shrimp aquaculture production 700.000 600.000 500.000 400.000 300.000 200.000 100.000-2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 2016F Source: Rabobank, based on FAO and other sources 2015 11 11
A perfect storm in the Thai shrimp industry EMS TARIFFS TIP 12 12
thousand tonnes China: light supply recovery, will not match demand China: farmed shrimp production 1.200.000 1.000.000 800.000 600.000 400.000 200.000-2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 2016F Source: FAO, Rabobank 2015 13 13
Thousand tonnes Shrimp demand is strong and is being fulfilled by imports that are much higher than stated in official data China: shrimp imports and exports in volume (official figures) Total Imports Total Exports 350 300 250 200 150 100 50 0 2009 2010 2011 2012 2013 2014 Source: Rabobank, Uncomtrade 2015 14 14
Booming Indian shrimp exports 2008 85% of volume map shows 86% of value EU (#1) 65,603 tonnes $352 million Japan (#2) 28,815 tonnes $192 million USA (#3) 21,538 tonnes $141 million UAE(#4) 6,837 tonnes $42 million in order of trade volume 15
Booming Indian shrimp exports 2013 80% of volume map shows 83% of value EU (#2) 52,780 tonnes $495 million Japan (#4) 19,793 tonnes $244 million USA (#1) 82,199 tonnes $1,063 million Vietnam (#3) 33,269 tonnes $366 million in order of trade volume 16
Million Kilos Billion US Dollars Exports to US, EU are increasing, but uncertainty remains Indian shrimp exports by volume and value 450 4 400 3,5 350 3 300 250 200 150 2,5 2 1,5 Processed Fresh or chilled Frozen Trade value 100 1 50 0,5 0 2009 2010 2011 2012 2013 2014 0 Source: Uncommtrade 2015 17
Thousands MT Prevalence of EHP is expected to result in a 10-20% decline of farmed shrimp production in India Total production of farmed shrimp in India 400 350 353 300 300,05 250 200 150 100 50 0 2014 2015f Source: Seafood Exporters Association of India 18
Summary: how long will Asia be the dominant shrimp exporter of the world? I Recovering volumes but just slightly II Costs are still high III New business model needed IV Strong domestic demand V Long term net trade position of Asia likely to decline 19
Rising Ecuadorian shrimp exports 2008 98% of volume map shows 98% of value USA (#2) 51,565 tonnes $293 million Colombia (#3) 1,914 tonnes $5 million EU (#1) 72,836 tonnes $390 million 853 tonnes Japan (#5) $6 million Chile (#4) 1,581 tonnes $9 million in order of trade volume 20
Rising Ecuadorian shrimp exports 2013 94% of volume map shows 93% of value USA (#2) 73,323 tonnes $631 million EU (#1) 83,376 tonnes $622 million China (#4) 8,173 tonnes $72 million Colombia (#5) 4,609 tonnes $24 million South Korea (#6) 3,976 tonnes $33 million Vietnam (#3) 37,536 tonnes $301 million in order of trade volume 21
Million Kilos Billion US Dollars Ecuador is export focused, was the # 1 beneficiary of the disease issues in Asia Ecuadorian shrimp exports by volume and value 450 4 400 3,5 350 3 300 250 200 150 2,5 2 1,5 Processed Fresh or chilled Frozen Trade value 100 1 50 0,5 0 2009 2010 2011 2012 2013 2014 0 Source: Uncommtrade 2014 22
million lbs million lbs Ecuador s industry shifts attention to Asia and China and becomes the link between Asian and Western markets Ecuadorian shrimp exports by volume in May (left) and YTD May (right) 70 60 0,35 2,17 300 1,9 10,48 50 40 30 20 0,79 0,78 3,87 18,43 0,62 1,71 9,23 14,97 0,42 3,6 10,93 20,13 26,69 16,43 250 200 150 100 1,82 3,6 4,83 5,98 24,12 36,89 75,49 65,77 1,89 14,66 65,82 73,81 118,47 72,2 10 19,34 23,17 19,51 20,52 50 75,47 80,49 89,73 76,56 0 May-12 May-13 May-14 May-15 0 YTD '12 YTD '13 YTD '14 YTD '15 Europe USA Asia Americas Africa Europe USA Asia Americas Africa Source: Urner Barry 2014 23
Thousands MT Millions Although the latest figures show the pressure on the Ecuadorian industry as a result of recovery in Asia YTD shrimp exports Ecuador in volume and value (first 7 months of the year) 200 1,55 195 1,5 190 185 1,45 180 175 1,4 1,35 Volume Value 170 165 1,3 160 1,25 155 2015 2014 1,2 Source: Central Bank of Ecuador 24
thousand tonnes Brazil: Unfulfilled promise, can this change in the current conditions? Brazil shrimp aquaculture 90000 80000 70000 60000 50000 40000 30000 20000 10000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 2016F Source: Rabobank 2015 25
thousand tonnes Mexico huge potential but mysteriously stuck by EMS from the other side of the Pacific Ocean 140.000 120.000 100.000 80.000 60.000 40.000 20.000-2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 2016F Source: Rabobank, Kontali, Subsecretaría de Pesca 26
2 Year change (depreciation) against USD Exchange rates are an important factor for the competitiveness of shrimp producers on global markets 0% IDR VND INR CNY THB BRL MXN -5% -6% -5% -4% -10% -15% -14% -20% -25% -21% -23% -30% -35% -40% -45% -44% -50% 27
LAM summary: potential for further growth I Well positioned region, with low cost II But many challenges, not living up to the potential so far III Ecuador seems unique IV LAM growth forecasts are difficult due to the unpredictable situation in Brazil and Mexico V Potentially the most profitable shrimp farming region 28
4 Challenges
With the introduction of Vannamei shrimp there was increased growth, but also increased biological risk 000 MT of farmed shrimp 5.000 Monodon other Other Vannamei 3 4.500 4.000 Vannamei introduction Industry 400% growth 3.500 3.000 2.500 2.000 1.500 Aquaculture starts initially with wild juveniles Monodon farming drives growth Global prices high 1 Monodon culture faces biological challenges Cost rise 2 Shrimp Aquaculture 2.0 1.000 500 0 Source: Rabobank, FAO 2015 30
Why is shrimp farming a sector with high biological risk especially in Asia? Typical shrimp farming business model in Asia Fish by-products as input for feed Trading Feed manufacturing Fish & shrimp processing Juveniles Fish meal and other commodities Shrimp farming Source: Rabobank 31 31
This means a large part of the farming is done by peasant or subsistence farmers Many shrimp farmers in Asia are subsistence farmers moving into shrimp from other agricultural activities Experience and knowledge as well as control at this critical point can be low This business model is often successful for poverty alleviation but has a higher risk 32 32
.and there are many other factors that cause supply side volatility 1 It s the youngest animal protein industry 2 All shrimp farming is done in developing countries 3 It s a tropical species 4 There are many different business models and sanitary levels neighboring each other 5 Even with the closed system, farming is still open to the environment 6 Shrimp is a heavily traded product, even among exporters 33 33
5 Opportunities and concluding remarks
Opportunities: there is shrimp farming potential also in relatively unexplored regions Africa Australia Middle East 35
Another opportunity: increased cooperation within the sector to tackle disease issues- like was done in the Chilean salmon industry 36
GSI: a game-changing industry dynamic, tackling the image of salmon farming with NGOs, governments and customers Lower lice levels Biosecurity Eliminate escapes Reduce environmental impact of farms Standards Focus on reducing marine ingredients from wild catch fisheries Feed and nutrition Source only from sustainable marine ingredients Source: GSI 2015 37
Concluding remarks I A period of high supply (and price) volatility is to persist II Asian producers are challenged with biosecurity issues and competitiveness III Future potential growth areas for export are especially in LAM, but also in Australia, Africa and ME IV To ensure sustainability of the industry, cooperation is key 38
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