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International Sourcing: Mexico

Shrimp farming a larger part of the country's seafood landscape

By Chris Anderson
July 01, 2007

Like agriculture, the fishing industry in Mexico remains an important part of the fabric of life in many rural, remote areas of the country, notably in the northwest regions where the arid land has locals turning their eyes to the sea for a food source and to make their living.

The highest volume of fish landings are concentrated in the pelagic species and much of this ends up canned, never to see the U.S. market, says Rafael Ruiz Moreno, president of Grupo del Rey in Tampico, Mexico, and president of the Cámara Nacional de la Industria Pesquera, a government organization that helps set fishing policy and regulations. Quoting government statistics, Moreno notes that in 2006, Mexican fisherman caught more than 1 billion pounds of sardines and more than 220 million pounds of tuna. Of that amount, between the two species, only 55,000 pounds entered the United States last year.

Instead, Mexican exporters long have found a willing and growing market to the north to feed Americans' voracious appetite for shrimp. In terms of Mexican seafood imports in the United States, there is shrimp at No. 1 with all other species combined running a distant second. According to National Marine Fisheries Service data, Mexican shrimp of all sizes and forms brought into the U.S. market last year totaled 331,350 pounds, or 41.7 percent of the country's total gross weight seafood imports for the year. But the real story is in the dollar value of that shrimp, which rang up 2006 receipts of nearly $18 million, or 62 percent of the total dollar value of U.S. Mexican seafood imports.

By comparison, the next most lucrative species exported from Mexico was grouper, but at only 70,500 pounds and a value of $1.85 million, it represented only a little more than one-tenth of shrimp. Snapper, the only other species that topped more than $1 million last year, has remained steady over the last 10 years, despite a small drop in 2002, with a typical annual export quantity of between 60,000 and 80,000 pounds.

Overall, despite a strong market for shrimp, Mexican seafood imports over the past decade have seen a steady decline. Total gross weight exports in 1997 registered 13.5 million pounds, which has dropped to roughly 60 percent of that amount, or 7.9 million pounds in 2006. In terms of total dollars, Mexican seafood imports fell 38 percent over the decade to $28.8 million from $46 million.

But much of this decline can also be traced to shrimp's overwhelming portion of the pie. Ten years ago, Mexican shrimp exports covered the entire range of sizes including smaller sizes like 51/60s, 61/70s and 70-plus. These totaled about 30 percent or about 1.3 million pounds of the export total in 1997. In 2006, the same sizes accounted for only about 22,000 pounds, and in 2005 NMFS numbers show that not a single pound of Mexican shrimp entered this country in the 51/60 or 61/70 sizes.

"We focus on producing the bigger sizes for the United States market, because that is what they like," says Enrique Diaz Castro, GM of shrimp producer Diazteca, based in Mazatlan. "The smaller sizes we will sell in Mexico or in other markets because we can get a better price."

 

The move to farmed shrimp

Farm-raised shrimp didn't take off in Mexico until the late 1990s. Prior to 1994, private interests and companies were prohibited by law from running aquaculture operations to raise shrimp.

"Before the law was changed it was only cooperativas (large government-sponsored cooperatives) that could have aquaculture for seven species and shrimp was one of them," explains Moreno. "When the law was changed, then it made it possible for private people to come in and make investments and that is when [shrimp farming] started growing."

Private interests began building shrimp farms, first in the state of Sinaloa in northwest Mexico on the eastern edge of the Sea of Cortez. But the early years of raising shrimp were not particularly kind to the new investors. Broodstock for the operations was caught in the wild - a practice that has since been outlawed by the Mexican government - and yields from these were not particularly high. Many operations, like shrimp farms in other parts of the world, struggled with infections and bacteria that killed significant portions of the shrimp before they were big enough to harvest.

"There was a learning curve," Moreno notes. "It was expensive to start the farms and the shrimp quality was not as good as from other parts of the world."

But the struggles lasted only a few years. In the late 1990s, shrimp farms began migrating north into the state of Sonora, and with this surge came a commitment from the farmers to document their best practices not only for how to raise shrimp, but how to do so using methods that were environmentally responsible.

One such effort was coordinated by the Pacific Aquaculture and Coastal Resources Center at the University of Hawaii at Hilo, which counted a handful of project partners from Mexican aquaculture groups, government agencies and local universities. The program also sought out and brought to Mexico managers and technicians of shrimp farms in Ecuador - one of the first Latin American countries to develop a sustainable shrimp aquaculture industry.

Such activities have today 
translated to a vibrant and sustainable industry.

"We are much better at finding disease early and treating it," says Castro. "And the broodstock is getting stronger genetically, is more resistant to disease and that helps increase yields."

 

Fighting the price battle

While the shrimp farmers have overcome early struggles with the farms themselves, a new challenge has emerged: pricing.

Fueled by increasing U.S. demand for shrimp, other countries around the world, including Thailand, Vietnam, Brazil and Ecuador, have flooded the market with large volumes of inexpensive shrimp that could spell trouble for the Mexican shrimp farmers.

While prices have been creeping a bit higher in recent months, "I think you are going to have to wait and see what happens, two months doesn't make a trend," says John Filose, VP of sales and marketing of Ocean Garden Products in San Diego, a major importer of Mexican shrimp.

The folks at Diazteca, which three years ago opened an office in Rio Rico, Ariz., to sell its farmed shrimp direct to U.S. distributors, have felt that pinch.

"The prices right now for 16/20 shrimp are 45 percent lower than they were just a few years ago," says Castro.

The sheer import volume from competitors whose operations are cheaper can be daunting, but it is not impossible to overcome, says Tonatiuh Carillo, manager of Consejo Mexicano del Camaron (Mexican Shrimp Council). "Shrimp producers have been getting less and less due to the competition with other countries like the Asian countries," he says. "Everyone is growing shrimp now, but that doesn't mean it is the same quality."

For that reason, the Mexican Shrimp Council is educating U.S. retail and foodservice buyers on the quality of Mexican shrimp compared with some of the shrimp produced by the high-volume importers.

"Our shrimp doesn't have any chemicals [or] shrink less when you cook it so it has a higher yield and is produced in a way that is not as intensive as in other countries," adds Castro. "Selling quality is one way for us to get a little better price for our shrimp."

Diazteca hopes to accomplish this by creating distinct brands for specific segments of the market, including the Tekila brand that will feature its highest quality shrimp and by targeting upscale markets. It has also instituted, as have other producers and importers, a more stringent quality-control process that will follow the production of the shrimp from larvae through harvest and processing.

"We are placing a team of 10 new quality inspectors in Mexico," says Rod Diaz, VP of sales for Diazteca. "We want to be able to tell the farmers that how they raise the shrimp and the quality is one way we can get them a higher price."

But even with a push toward providing the message that Mexican shrimp is of higher quality, the competition has at least slowed the growth of new shrimp farms.

"If it is growing, it is not growing very much," says Carillo. "Right now it is a bit of balancing act."

Castro's view is more pessimistic, adding that some farms this year have empty ponds because the price decline has been so severe.

While selling quality can help boost the price by a few cents here and there, Jim Salierno, owner of Crystal Cove Seafood in Floral Park, N.Y., says Mexican shrimp producers need to take another step to get a higher price: Begin selling value-added products.

"The quality of Mexican shrimp is really very good; it's second to none," says Salierno. "But they are still selling it as a commodity. What could help them get a better price is to spread production out over more than just a few months and to add some value to the product."

Ocean Garden last year successfully introduced a Pride of Mexico value-added retail brand, which includes raw IQF farmed shrimp in 1-pound bags in both shell-on 21/25 and P&D, tail-on 26/30s.

While Ocean Garden has made inroads with the brand in upscale markets, other seafood companies face significant hurdles to providing value-added product.

"The season for wild and farmed is about four months in the fall each year," Salierno notes. "Then what are they going to do with it the rest of the year?"

Moreno, whose Grupo del Rey exports about 30 percent of its wild shrimp to the United States, says it is not directly a question of money as much as it is credit. "We don't have a lot of things you have in the United States and one of them is access to financing," he notes. "It is hard to get and very expensive."

While the price struggle may continue, everyone believes that Mexico's shrimp farms will find a way to survive and thrive. Ocean Garden's Filose says that 10 years ago he bought roughly 10 percent farmed to 90 percent wild shrimp. Today, that figure stands 60-40 in favor of the farmed product.

And Moreno, whose company only handles wild shrimp, shows that he is perhaps hedging his bets on the wild fishery: He and eight other partners recently invested in a small 60-acre shrimp-farming operation on the Sea of Cortez that should produce its first shrimp this year.

 

Contributing Editor Chris Anderson lives in Scarborough, Maine

 

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