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« May 2007 Table of Contents

Top 10 Species: Farmed shrimp

Demand for imported vannamei grows unabated

When Americans buy shrimp in a restaurant or supermarket nowadays, there's an increasingly good chance it's white shrimp cultivated beyond U.S. borders. And though sales of farmed black tigers and wild shrimp remains significant, it's clear that farmed Pacific whites, Penaeus vannemei , have become the leading option.

Indeed, P. vannamei now accounts for roughly 60 percent of farmed-shrimp production worldwide, compared with around 25 percent for black tigers ( P. monodon ) and 12 percent for freshwater prawns ( Macrobrachium rosenbergii ).

"And white shrimp is projected to be almost 70 percent of production by the end of this year," says William R. More, VP and director of the Aquaculture Certification Council in Kirkland, Wash. "That's versus about 43 percent in 2004."

That explosive growth stems from places like Thailand, the leading exporter of farmed shrimp to the United States, which has shifted production from black tigers to vannamei.

Why? White shrimp, though generally smaller than tigers, cost less to feed, are more resistant to disease, have higher survival rates, tolerate higher stocking densities and they grow faster.

"When you add all these things up, the risk of farming white shrimp is a lot less than that of farming other species," More says. "And [producers] can get multiple crops of vannamei per year, whereas with tigers they only raise one crop."

In turn, he adds, major shrimp purchasers such as Red Lobster and Wal-Mart have gone to farmed whites because they're cheaper than other shrimp species and are more readily available in large amounts.

"If you look at menus, you don't see near as many black tigers anymore," More says. "A good example is Red Lobster; most of what you see on the menu is white shrimp."

Fishery Products International in Danvers, Mass., an importer and processor, brings in about 30 million pounds of shrimp a year, the bulk of it from Asia.

"The economics are such that the Asian farmers are doing much better raising vannamei," says Mark Leslie, FPI's executive VP.

For example, Thai Union Feedmill in Samutsakron, Thailand, a subsidiary of Thai Union International of San Diego, has partnered with a shrimp-broodstock provider in Hawaii to broaden its shrimp-farming and exporting businesses. The $11 million joint venture is already producing pathogen-free Pacific white shrimp broodstock.

"Being able to come up with a strain of vannamei that grows a little faster, that has a better survival, that's all big money," Leslie says.

Choice Canning, a shrimp producer and importer in Edison, N.J., and a subsidiary of India-based Choice Trading Corp., is another player that handles an ever-increasing amount of vannemei from Asia.

"It used to be 21-25 headless shrimp was the largest vannemei you could find," says Thomas Jacob, senior VP for the company, which makes the Tastee Choice line of shrimp products and frozen Asian and Italian skillet meals. "Now, 16-20 headless and 21-25 cooked tail-on vannemei are coming out of Thailand."

Though the majority of U.S.-bound Pacific whites hail from Asia, other key shrimp-production countries are Ecuador and Mexico.

Ocean Garden Products in San Diego, the primary importer of Mexico-cultivated Pacific whites, is best known as a foodservice company, supplying restaurants coast to coast. But it has a retail hit with frozen, 1-pound bags of farmed Pacific whites sold under the Pride of Mexico brand.

Available since late 2005, the bags come in two varieties - peeled, deveined, tail-on 26-30s and shell-on 21-25s. Pride of Mexico is sold in upscale grocers, including Whole Foods Market stores in New England and the Northwest, as well as Uwajimaya locations in Washington and Oregon.

Ocean Garden also sells plenty of wild shrimp, albeit that percentage is changing. For the 2001-02 season, farmed Pacific whites represented 40 percent of Ocean Garden's shrimp sales. For 2006-07, it's 60 percent.

"Our focus is on increasing our supply of Mexican shrimp," says John Filose, the company's VP of sales and marketing. "The wild fishery [in Mexico] is stable, so that increase has to come from aquaculture."

Tiger tale

Black tigers still have a place at the table, of course. They're generally larger than Pacific whites and, given the plethora of vannamei, are fetching higher prices for producers in countries such as Vietnam, India and Bangladesh.

"Most of the farmed [we use] is the vannamei," says Davy Lam, president of Tai Foong USA in Seattle, the maker of the Royal Asia and Northern Chef brands. "But monodon are still active on the bigger sizes."

Tai Foong sources shrimp from Asia and Latin America, primarily serving retail customers like Wegmans, Costco and Whole Foods, plus private-label accounts.

In late March, the wholesale prices for black tigers from Asia were holding steady at $9.95 to $10.05 for U12s, $6.90 to $7 for U15s, $5.85 to $5.95 for 16-20s, $5.30 to $5.40 for 21-25s and $4.75 to $4.85 for 26-30s, according to Urner Barry Publications in Toms River, N.J.

Conversely, Pacific whites from Asia and Latin American were fetching just $2.40 to $2.50 a pound for 41-50s, the benchmark size.

Tariff travails

Two years ago, in response to an antidumping petition filed by a group representing Gulf shrimp fishermen and processors, the U.S. government slapped tariffs on importers from India, Thailand, China, Vietnam, Ecuador and Brazil.

But tariffs aren't the only complication altering the global shrimp industry. Under a policy that U.S. Customs and Border Protection began enforcing in 2005, importers must post continuous bonds to help prevent tariff evasion. Continuous bonds are calculated by multiplying the value of a seafood company's imported product from the previous year by the amount of the tariff. Thus, if a company imported $30 million of shrimp subject to a 10 percent tariff in 2005, it would post a $3 million bond in 2006.

In February, a World Trade Organization panel ruled that U.S. antidumping tariffs on Ecuadoran shrimp violate international trade law. The panel said the DOC inflated the tariffs using a controversial methodology called "zeroing," which assigns a value of zero to export prices that exceed normal values, instead of a negative number. That effectively increases the difference between export prices and local prices when averaged out over time. (The DOC agreed to discontinue the use of zeroing in early 2006 after the WTO deemed it unlawful.)

The WTO's dispute-settlement body is expected to take up Ecuador's case. Thailand and India have also filed petitions with the WTO claiming the DOC inflated its shrimp tariffs using zeroing, with a decision expected soon.

Not surprisingly, some industry representatives remain none too pleased by trade restrictions.

"What I find most appalling is the arbitrary nature of the bonding," says Eric Bloom, president of Eastern Fish Co. in Teaneck, N.J., which sources shrimp - the vast majority Pacific whites - from Asia and Latin America. "Companies with a 30-, 40-, 50-year history, if they want to do imports they'll have to post the bond, as if they're ready to go out of business."

FPI, meanwhile, like other seafood companies, has migrated more business toward countries that are either tariff-free, or works with suppliers that deliver duty paid (DDP).

"We were a large player in Vietnam for both our U.S. market and our Canadian market," Leslie says. "Now, we haven't bought a load of Vietnamese [shrimp] for the U.S. market in I don't know how long."

Moreover, it's no secret that some tariff countries are cooking the shrimp and converting it to other forms that have reduced duties.

"Pre-tariffs, we bought large volumes of peeled shrimp, raw IQF; now we buy large volumes of pre-dusted butterfly and small peel from China," Leslie says. "So we had to modify our whole process to maintain the supply source, but bring it in without getting hit with tariffs."

Adding value

Creating value-added shrimp also is a growing trend. "People seem to be pushing more toward marinated shrimp and shrimp skewers," says Bloom of Eastern Fish. "Those markets are gaining some inroads."

Still, the U.S. market "has a long way to go to create a brand for shrimp [that resonates with consumers]," says Lam of Tai Foong. "Private labels don't help consumers to recognize any national brand out there.

"The market has been fragmented for years, so it's going to be a challenge for any value-added products," he adds. "But it's something everybody's trying to pursue."

At FPI, the value-added lineup includes shrimp sold under the Margaritaville retail brand in several sizes and in six varieties: Calypso Coconut, Island Lime, Jammin' Jerk, Paradise Cocktail Shrimp, Sunset Shrimp Scampi and Surfside Shrimp Skewers.

"A major growth area, and challenge, is the shift of value-adding overseas," Leslie says. "The overseas suppliers see where the margins are, so you're seeing a lot of people getting involved in the shrimp value-added business."

Nevertheless, given shrimp's status as America's favorite seafood, with per-capita consumption topping 4 pounds, "the general consumer is still very comfortable, particularly at retail, buying shrimp in a bag out of a case and preparing it themselves," Bloom says. "Or buying the precooked cocktail shrimp."

Certify this

With 85 percent of the U.S. shrimp supply now stemming from imports, and global production of aquaculture shrimp in 2006 of 2.8 million metric tons - a 12 percent increase over 2005 - it's little wonder that certification, including traceability, is growing in significance.

"Environmental sustainability is probably the biggest issue right now," says More of the Aquaculture Certification Council. "It's a focal point for most buyers, certainly driven by consumers. It gives buyers assurance about a more wholesome product produced under environmental responsibility guidelines."

As part of those efforts, Wal-Mart and Darden Restaurants, collectively representing more than 5,200 U.S. stores and restaurants, are requiring shrimp farmers to adhere to the Best Aquaculture Practices. These standards were developed by the Global Aquaculture Alliance and are enforced by the ACC to ensure shrimp is farmed and processed in an environmentally and socially responsible manner.

Since its inception in 2003, ACC has certified 260,000 metric tons of product in 54 processing plants, as well as about 25,000 metric tons of farmed product from 38 farms in the Western Hemisphere, More says.

Seafood safety also remains top of mind.

"The average consumer may be aware of sustainability, but I don't think it's their primary concern," says Bloom. "They want a healthy, safe product."

Outlook

As shrimp imports continue to rise - shipments in 2006 to the United States exceeded 1.3 billion pounds, up from 1.16 billion pounds the previous year - more countries like Bangladesh are ramping up production.

"These developing nations recognize the opportunity: Shrimp is easy to prepare, it's a desired seafood, and most people can relate to it," says Bloom of Eastern Fish. "So I see consumption growing with the increased supply."

Filose of Ocean Garden agrees. "A double-digit supply increase to a mature market is substantial," he says. "The price of shrimp right now is one heck of a value for any retailer or restaurateur. If you have good supply and fair prices, it's a good time to be in the shrimp industry."

Contributing Editor Rick Ramseyer lives in Cumberland, Maine