Shrimp buyers in Europe and the US with stock are sitting off and waiting for prices to fall further, with some still having to buy to meet commitments.
Meanwhile, suppliers in Latin America and Asia are still talking somewhat bullishly on prices in the second half, with the performance of Thai farms, still feeling the impact of early mortality syndrome (EMS), being closely watched.
Several European buyers told Undercurrent News that they are sitting off and waiting for prices to decline, after some bought heavily at the start of the year. If this is a sensible or a hopeful approach remains to be seen. For those with stock, however, it seems to be the way to go, at the moment. This echoes what US buyers told Undercurrent earlier in April.
Adriaan de Leeuw, the co-founder of Solea International, an Antwerp, Belgium-based shrimp and seafood importer, said he sees a mixed response from customers in reaction to the falling prices.
Some customers are asking for prices, but once they have our offer, they decide to wait a few weeks, he told Undercurrent. This is mainly because they are hoping to be able to buy at lower prices in May and they don’t want to pay high prices now.
This, said de Leeuw, is a good strategy, if the processor has enough stock, as, at the moment, I have the feeling that a lot of Asian packers do not have sufficient pending orders anymore.
Retailers are not willing to make commitments, which then means processors are also not, said one UK-based shrimp veteran.
You are a strong buyer when you don’t need to buy. That is the case at the moment, I think there is a lot of stock in the system that needs to be sold through, as it was bought at the higher prices, he said.
Sales have slowed and we have stock, so we do not need to buy. We are getting offers from packers and I’m saying I will buy more if you discount that previous load’, he told Undercurrent.
Factories in Asia are anticipating lower farm gate prices in May and June.
The big question of course is, if the prices really will go down that much or not, said de Leeuw. The farmers have the power and I am hearing from India for example, that farmers are slowing down the harvest because they want higher prices.
On the other hand, some customers cannot wait longer to purchase new product, he said. If they wait longer they will not be able to fulfill their commitments or they will run out of stock in June, at the latest.
He sees prices dropping in the short term, but around the Seafood Expo Global trade fair in Brussels, Belgium from May 6-8, things could change. After the fair in Brussels I expect prices to stay stable, or even go up.
De Leeuw said he is assuming shrimp production countries struggle with EMS over 2014.
All this is, of course under the presumption that India, Vietnam, Thailand or Ecuador will face a new EMS problem, he said.
Jim Gulkin, managing director of Bangkok, Thailand-based supplier Siam Canadian Group, said he has seen a similar picture to de Leeuw in the markets in Europe and the US.
We have seen buying slowing down from Europe and the US in anticipation of lower prices, Gulkin told Undercurrent.
Prices have already softened in India, Indonesia, Vietnam and even Thailand, to some degree, he said.
Raw material prices in Thailand, where the EMS outbreak saw production dive to around 250,000 metric tons in 2013, from as much as 600,000t at its peak, have cooled off in recent weeks.
Prices for 80 pieces per kilogram size shrimp raw material in Thailand were THB 198/kg from April 17-19, after the closure of the market due to the Thai New Year holidays, the water festival. Prices for 70/kg shrimp were THB 220-246/kg, with no prices for 60/kg shrimp, due to a lack of availability.
Before the closure, the raw material prices for April 7-9 were THB 190-210/kg for 60/kg; THB 247-255/kg for 70/kg; and THB 258/kg for 80/kg.
The prices are, however, down considerably from the peaks, with 80/kg hitting THB 263 between Dec. 9-14 last year; 70/kg hitting THB 260-273/kg between Oct. 21-26; and 60/kg at THB 280/kg the same week.
Packers and farmers in Thailand had been trying to cool down prices, but they had jumped up again, before the latest fall.
Slower demand in the market has seen these prices follow the raw material.
I think the market will move down further, how much I cannot say, Gulkin told Undercurrent. I also believe that when the buying season starts in June to July, prices will move back up, probably quickly, and will likely remain firm for the rest of the year.
China factor
The impact of Chinese buying, which has been felt so far this year, will also be a factor in H2 prices, along with production.
Many buyers are looking for prices to drop, but part of this is speculation, said the top executive from an Ecuadorian shrimp farmer and processor.
We will have to see how it goes with Asian demand, he told Undercurrent.
Some importers are not looking deep into the market when they assume prices will drop, they are rolling with gossip and not with facts, he said.
If the Chinese continue to buy after their own production which has also been hit with EMS starts up in June, prices could rise. There are some that are anticipating a slowdown in China, however.
Sandro Coglitore, managing director of Ecuadorian producer Omarsa, is still confident on the Chinese market for 2014.
We have not seen a slowdown, with 61% of our sales going to China, he told Undercurrent.
We see a strong market at least until June and, if China demand stays strong, all year, he said.
Omarsa’s staff in Beijing are reporting stocks in China are very low and importers are worried they will run out of product. So, let’s see what happens.
An executive with an Indonesian shrimp producer is more bearish on the markets.
I see the market is very slow, driven by the cold weather in the US for the past few months, he told Undercurrent.
Because the US is very slow, Vietnam and India, which have normal early year production, have to divert their volume to alternative markets, which is the EU and Japan, he said. From what I have heard, Japan was also very slow until the end of March as they want to lower their inventory for their accounting book ending March 31, so packers can only divert the volume to EU.
As a result, we are seeing very aggressive pricing from Vietnam and Ecuador to EU, he said. I guess everybody is expecting big harvest in June and July, so packers need orders.
What is real Thailand picture?
There are already bearish views on production coming from Thailand, despite the government talking up the hopes for a strong 2014 season.
The government has cooperated with the private sector and come up with measures to combat EMS, as part of the so-called Stop EMS program.
Thailand’s fisheries department believes the recovery could boost shrimp production to 400,000t this year, 37% up from last year’s level.
Last Thursday, a report from marine ingredients supplier Sea Garden Foods surfaced which does not paint such a positive picture.
Production volume is crashing, said CEO Daniel Gruenberg, an outspoken industry stakeholder who launched an anti-EMS feed company, Acquestra, last year. What used to be 300 or 400 containers per day is now at only 60 a few days ago.
Shrimp production, riddled with EMS-induced problems for over a year, appears to be growing significantly worse than earlier in the year, at least in Thailand’s eastern region, Gruenberg revealed in an email to the Yahoo shrimp group.
Farmers Gruenberg interviewed report more than 90% mortality rates in the first 30 days, reflecting significant deterioration from the 50-70% mortality rates seen earlier in early in the year. In February, production was going well enough that Thai farmers gave very optimistic reports that the crop at the time would be successful, citing new test kits as a reason.
Not everyone agrees with the report, however, with one major citing much more stable 30 to 40% mortality rate, which is up from the normal mortality rate of 20% but a significant improvement over least year’s 60 to 70%.
PCR test kits does its job very well, the Thailand-based supplier, wishing to remain unnamed, told Undercurrent News. However, there has been a drought in the Southern region. It is not wiping out the production but it is delaying the new crop.
This is particularly significant, considering the Southern region is expected to provide 70% of total production this year, which the source said will come to about 300,000t-350,000t.
Yet there is no product to speak of available to US buyers from Thailand at the moment, Marc Nussbaum, president of long-time shrimp importer International Marketing Specialists, told Undercurrent.
[Suppliers] keep saying to me once things warm up, then we’ll have offers, but I haven’t had any realistic offers from Thailand, Nussbaum said.
Undercurrent News Limited