Shrimp exports face a difficult problem

Thursday, 23/02/2023, 09:25

Shrimp exports face a difficult problem

The world shrimp consumption at the peak of the year (Christmas, New Year ...) has recently decreased sharply, world shrimp inventories are high, and the contracts at the beginning of the year have decreased sharply in both quantity and value. While the domestic price of raw shrimp has increased, it has been a difficult problem for businesses.

Promoting the advantage of the high-end segment with deep-processed shrimp is the solution to a difficult problem chosen by shrimp businesses. In the photo: A shrimp processing workshop of Sao Ta Food Joint Stock Company.

Export decreased, domestic increased

Right from the end of the third quarter of 2022, shrimp enterprises all shared the same opinion that difficulties for the shrimp industry in 2023 are inevitable when global inflation will persist at least until the second quarter of 2023. In fact, shrimp exports began to decline gradually from the fourth quarter of 2022 and by January 2023 only 169 million USD, or 46% decrease over the same period. Meanwhile, the shrimp harvest season in major shrimp farming countries in the Southern Hemisphere, such as Ecuador, Indonesia... has begun, so the difficulty will be even greater in the coming time. According to Mr. Ho Quoc Luc, Chairman of the Board of Directors of Sao Ta Food Joint Stock Company, recently some importers offered a contract price of 40 pcs/kg for delivery in the third quarter of 2023 for just over 100,000 VND/kg, while the purchase price at the factory was 150,000 VND/kg.

In Soc Trang, where there are 22 shrimp processing factories with many Top 10 shrimp exporters in the country, most of them are currently only operating at about 40-50% capacity due to lack of contracts and raw material shrimp is both scarce and expensive. Mr. Vo Van Phuc, General Director of Vietnam Clean Seafood Joint Stock Company said that: at the beginning of the year, the processing capacity was only 40% compared to the previous year. Shrimp processing and exporting activities at the present time are only to retain workers and customers, not profit. As for the paradox of the rising price of raw shrimp in the country, shrimp businesses think that this is considered a low period for raw material shrimp while factories still need raw shrimp to maintain operations, others still fullfiling the old contracts, plus the high consumption of domestic market creating competition for raw materials, pushing up shrimp prices.

Will there be selecting from the market?

Currently, the biggest competitor of Vietnam's shrimp industry is no longer India, but Ecuador, and both of these competitors have the same strength of large volume and low selling prices. In particular, Ecuador has the biggest advantage, when the price is low and close to the US market, they can sell up to 2 USD/kg lower than Vietnamese shrimp. In Western Europe, Ecuador's export turnover from 3.5 billion USD in 2020 to 5 billion USD in 2021, accounting for 18% of the market share and nearly 7 billion USD in 2022. They only have 220,000 hectares of shrimp farming but 40,000 hectares of ASC standards, so their penetration into the European market is very easy. Meanwhile, Vietnam's shrimp market share in this market will decrease from 10% to only 8% in 2021.

Not only competing with other powerful shrimp countries, domestic shrimp enterprises also have to compete directly with each other in markets and even with traders purchasing and consuming domestic goods. The fact that domestic enterprises offered low prices to entice customers took place in the context of the COVID-19 pandemic in 2021, now they have added a big discount to reduce inventories and turn capital in the context of inflation from the fourth quarter of IV-2022 makes difficulties even more piling up. With the difficult situation both inside and outside will continue as forecasted, a question arises as to whether there will be a natural screening, causing some businesses to leave the game as happened in the economic crisis period 2007-2008 or not? And the answer is yes, and most likely to fall in small businesses.

Solve the difficult math

Because it was forecasted early and inevitable, right from the fourth quarter of 2022, most businesses have shifted to the near market (Asia, Australia...), and mainly focused on the deep processing to occupy the high-end segment in major markets (USA, EU) to avoid direct competition with low-cost Ecuadorian shrimp. As for markets such as Japan, Korea, and Australia, they are currently importing high-end deep-processed products, the transportation costs are not high, so this is the advantage of Vietnamese businesses and this is almost a private playground for Vietnamese shrimp. The reopening of the market by China and the lifting of many measures to prevent and control the COVID-19 epidemic with frozen imports is also considered a good opportunity for the shrimp industry to expand more consumption markets.

However, there is still a difficult problem for shrimp businesses in the current and long-term context, which is that the price of our farmed shrimp is still much higher than our main competitors, Ecuador and India. Therefore, the rapid implementation of urgent solutions on breeding management, environment, application of advanced science and technology in farming to improve the success rate of farming in order to reduce production costs, increasing the competition in the market needs more attention. In particular, in the immediate future, it is necessary to effectively solve the inadequacies in production, distribution of seedling and the environment in farming areas as well as support preferential credit capital for businesses to maintain production and wait for opportunities. According to businesses, in the long term, it is necessary to focus on planning and periodically reviewing investment in infrastructure of farming areas, especially in irrigation, to have a good farming environment and contribute to increase the success rate of farming. As long as we deploy early, synchronously and effectively 2 solutions on seedling and irrigation, it will also help improve the success rate of farming, thereby helping to reduce the cost of farmed shrimp and increase the competitiveness of shrimp on the world market.