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Top Species: Farmed shrimp

Roller-coaster year of challenges had prices, supply on the move

By Joanne Friedrick
February 05, 2011

An oil spill in the Gulf of Mexico, disease in several producing countries and a still-rocky U.S. economy created a roller-coaster year for farmed shrimp supplies and sales.

Rather than one major event impacting business, Ernie Wayland, executive VP at International Marketing Specialists in West Newton, Mass., says the up-and-down year was attributed to a convergence of factors.

“It has been a confusing year in the shrimp business,” he says. The BP oil spill impacted Gulf shrimp production and pushed prices higher. Although the U.S. shrimp catch represents only about 10 percent of the total supply, the spill, combined with supply problems elsewhere in the world, forced farmed prices higher.

“Mexico was a disaster,” says Wayland, referring to white spot disease in the spring. “We had Mexican buyers in Latin America buying,” he says, as well as Asian buyers going to Latin America to supplement their purchasing needs.

In Southeast Asia, Malaysian shrimp farms lost production because of infectious Myo necrosis virus (IMNV), says Wayland. And climate changes from the switch to La Niña from El Niño produced rain well before the usual monsoon season in Thailand, causing severe flooding. Through all these issues, prices rose and fell with the fluctuations in supply and demand. “Buyers began pulling back [as prices rose], and then importers dropped their price,” says Wayland.

In late November 2010, prices had softened to $4.80 a pound for block raw headless shell-on 26-30s versus $5.30 a pound a few weeks earlier, and 31-35s fell to $3.95 to $3.85 a pound, down from $4.45. “There are too many mid-size in the pipeline,” says Wayland, which also accounts for the drop in price.

The weak U.S. dollar also plays a role in the shrimp market, says Wayland, adding that efforts by the U.S. government to keep inflation down could result in higher import prices this year.

Looking ahead, Wayland is hopeful 2011 will be more stable, for both pricing and inventory. “Traditionally, December forward is the lowest period of inventory and production,” he notes, with efforts ramping up in the summer months. 

New and changing producers

There are several countries coming on as producers, adds Wayland. Malaysia, with its vast coastline, is an emerging player. Through October, Malaysia had produced nearly 43 million pounds of shrimp, most of it in the 31-40 and 61-70 sizes.

“India is making waves,” he says, adding Pacific white (Penaeus vannamei) shrimp to its black tiger production. And the Philippines, which is a small producer now, could enter the market on a larger scale soon, he says.

Wayland also notes that China, which has traditionally exported farmed shrimp, “is becoming more of a consumer in the domestic market. China does ship some product here, but I see a shift of China becoming a net importer rather than an exporter.”

Eric Bloom, president and COO at Eastern Fish in Tea-neck, N.J., agrees that China is retaining more of its shrimp, and that Latin American producers have concentrated on supplying European buyers rather than the U.S. market.

“When Europe stops buying [in late October] then we see a shift to the American market,” says Bloom. “But I think it’s somewhat temporary based on the usual European buying habits.”
As a result, prices have risen, he says, and consumers are going for different options in their seafood purchases. Fourth-quarter sales slowed, he says, as restaurants and retailers keep their inventories light.

“The general consumer sees prices going up, and restaurants are raising their prices,” he says.

Beaver Street Fisheries in Jacksonville, Fla., has witnessed the vagaries of the farmed shrimp market, says Steven Frisch, head of purchasing, who called 2010 “the craziest year ever.”

Frisch says the market began to stabilize late in the year, but producing countries still had trouble keeping up with demand. “The most in demand are EZ peel, but they are non-existent in Thailand,” he says. “They are harvesting the ponds as quickly as possible.”

Both Thailand and Indonesia are producing about 15 to 30 percent less product, he says, attributing problems to white spot disease in Thailand and IMNV in Indonesia.

Fortunately, says Mark Frisch, Beaver Street’s VP, “we haven’t had to increase prices too much because we bought in at the right time.”

Beaver Street buys shrimp mainly from Thailand, Indonesia and Vietnam, with some product also coming from India. But India is moving away from black tigers to Pacific whites, which can be harvested more frequently.

“The demand for tigers just isn’t as big, so producers are switching to vannamei,” says Mark Frisch.

The value-added factor

Buyers are moving toward more value-added product, adds Mark Frisch, and so Beaver Street continues to research the flavors and forms consumers want most. “We sell mostly value-added; more P&D tail-on, EZ peel and breaded versus block.”

Wayland says EZ peel still leads among value-added products, followed by cooked shrimp. But both were harder to obtain last year.

“Farmers and processors took a lot of contracts and had to scramble to find raw material,” he says, which cut into spot sales.

And that influenced the price increases in September, he says, “because of the difficulty in getting Asian stocks, which were diverted to fill contracts.”

Eastern Fish’s Bloom acknowledges that customers continue to look for new products in the shrimp category. “But value-added may not be just in the form, but also in the packaging,” he says. Although he declined to be specific on what is in the works, Bloom says “packaging that lends itself to be more user-friendly” is in the pipeline. He also sees more focus on shrimp as part of meal solutions, teamed with different sauces and vegetables.

Farmed on the menu

Within the foodservice segment, restaurateurs such as King’s Fish House, which operates restaurants in California and Arizona, have had to deal firsthand with the changes in supply and price for farmed shrimp.

Matt Stein, chief seafood officer at King’s, says farmed shrimp “has always been part of our plan,” used in several dishes, while also buying wild shrimp for other entrées. The type of shrimp used is printed on King’s menus.

Although he has seen prices for Mexican farmed shrimp increase by as much as 25 percent, Stein says the restaurants haven’t raised menu prices in three years “and we fight not to do that. We believe price is the only impediment to people coming in to buy seafood.”

His decision to use Mexican farmed shrimp was based on its flavor and his ability to view the farming and processing operations in person. In addition to the Mexican white shrimp he buys, Stein also purchases product from Indonesia for popcorn shrimp.

“I’m not a fan of black tigers,” says Stein, “from either a taste or an appearance standpoint.” And Pacific whites from Asia tend to be salty or bland, he says, because of possible additives.

“With Mexico, I can travel there and go to the farm and the processing plants,” says Stein. The farms from which he sources shrimp are based near the Sea of Cortez. “I can see everything that is going on,” he says, adding that the plant “is very sophisticated and the conditions are excellent.”
Despite the higher price, Stein isn’t complaining. “I don’t want to pay $9 a pound, but I think [the price] is getting closer to where it should be. It’s more appropriate now.”

“I think we’ve pretty much seen the end of cheap shrimp prices,” echoes Wayland. “I’ll be surprised if they fall back to where they were.”

Bloom is also predicting that prices won’t fall to previous lows, nor will they remain high. “If you look back, we’ve had problems in this industry, getting prices too high. But then it cycles back.”

Contributing Editor Joanne Friedrick lives in Portland, Maine

February 2011 - SeaFood Business 

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