Seafood Business

White shrimp

Soaring imports from Latin America and China are expected to drive prices down

One of the tried-and-true tenets of the shrimp business has always been that white shrimp are worth more than browns, usually a quarter or so a pound more. Not anymore.

These days, the robustly flavored browns, which have a flavor often compared to iodine, cost as much as $1 a pound more than whites. With a milder, sweeter flavor, whites are considered superior to the blander cooked tigers that dominate shrimp imports.

Click below to view charts:

At a glance

Price

So why has the world of whites gone topsy-turvy? Most people point to the Chinese.

In the late 1980s, China was briefly the largest supplier of shrimp to the U.S. market, as farmers along the country’s northeastern coast scraped ponds into the sand and jammed them with their local white shrimp, Penaeus chinensis. In 1990, at the industry’s peak, Chinese processors exported almost 60,000 metric tons of white shrimp to the United States at bargain prices that averaged about $3 a pound.

China’s shrimp boom soon went bust, however, as disease wracked the industry and production plummeted. By 1996, Chinese shrimp exports to the United States had collapsed to 7,000 metric tons.

Ecuador picked up some of the slack, as farmers there expanded their production of Pacific white shrimp, P. vannamei, a widely distributed species found from northern Mexico to Peru. Shrimp farmers elsewhere in Latin America started farming vannamei, but their production paled next to that in Ecuador, where commercial shrimp farming got its start in the mid-1970s.

By the mid-1990s, Ecuador’s farmers were riding high as the only significant source of farmed white shrimp in the world. European buyers were paying good prices for head-on shrimp, U.S. buyers were happy with headless, and Japan and Taiwan were proving to be pretty profitable markets, too.

Then China came back into the picture, this time as a buyer of white shrimp, not a seller. Although the country had stiff tariffs on imported seafood, the barons in Beijing looked the other way and let seafood slip in duty-free to meet the country’s burgeoning demand. By 1998, China was importing 10,000 metric tons of whites a year from Ecuador, 10 percent of the country’s production.

The rising tide of tigers from Southeast Asia was putting pressure on prices in the U.S. market, but at almost $5 a pound for 36/40 headless, white shrimp prices were nothing to sneeze at.

Then, in 1999, the wheels came off the shrimp wagon in Ecuador, as white spot disease ravaged the industry. The Ecuadorans had survived Taura before, but mancha blanca was another matter.

Within a few months, ponds from Esmereldas to Guayaquil were plugged with dead shrimp, and production took a nosedive.

Ecuador wasn’t alone in its struggles, as white spot quickly spread to shrimp farms in other Latin American countries. Making matters worse was the fact that the Chinese market for imported white shrimp disappeared overnight when the tariffs started being enforced.

The pain of white shrimp farmers was eased somewhat by higher prices, but then in January 2001 prices for white shrimp started plummeting, even though the production was still well below normal. What, the Latin American shrimp farmers wondered, was going on?

The Chinese were back again. But this time, instead of buying Pacific white shrimp, they were selling it.

After buying a load of post-larval shrimp from hatcheries in Hawaii in the late 1990s, the Chinese jumped into vannamei farming in a big way. By 2000, shrimp farmers from central to southern China were pulling white shrimp out of their ponds and selling it live at prices that reached as high as $6 a pound during holidays such as the Chinese New Year.

Compared to Chinese whites or tigers, vannamei are relatively easy to farm, as they can tolerate very low salinity — to the point that they can be grown even in fresh water.

And keeping the shrimp healthy isn’t that hard either, due to ample, cheap supplies of “Chinese medicine” (antibiotics).

In China, word of profits in any business spreads quickly, so fish farmers started to stock their ponds with vannamei, too, sending harvests soaring. But even if they had to freeze shrimp at times of the year when live market prices slumped, the Chinese farmers had a big advantage over shrimp farmers in Latin America: Not only were their production costs lower, but the good money Chinese farmers made on live shrimp allowed them to sell their frozen shrimp for less than farmers who had to sell all their harvest frozen.

China held its advantage at least until early this year. In January, the European Union banned imports of Chinese shrimp when some shipments tested positive for trace residues of the banned antibiotic chloramphenicol. A few months later, Louisiana’s shrewd politicians started doing their own tests on Chinese shrimp and came up with results that, while short of the Food and Drug Administration’s tolerance level of 5 parts per billion, were above the European Union’s much stricter 0.3 ppb standards.

That was enough for Louisiana to require that all Chinese shrimp be tested for antibiotics before it could be sold in the state.

When politicians in neighboring states, whose shrimp fishermen were complaining about record low ex-vessel prices, threatened to start their own testing, the FDA announced it would lower its tolerance level to 0.3 ppb and conduct more rigorous inspections of all Asian shrimp.

So far, the FDA testing hasn’t stemmed the rising tide of Chinese white shrimp imports, although more shipments are being delayed and buyers may lose their patience. In the meantime, there’s no shortage of places to find white shrimp.

Of course, there’s the wild harvest of white shrimp from the Gulf of Mexico and the southeastern Atlantic states, where U.S. fishermen land from 35,000 to 40,000 metric tons of P. setiferus, the northern white shrimp, in most years.

There’s also a lot of white shrimp showing up from Brazil, where shrimp farming finally gained traction after the white-spot crisis crippled Ecuador. Even tiger farmers in Vietnam are thinking about switching to whites. And if they do, it could be a long time before shrimp buyers ever have to pay a premium price for this premium shrimp.

Supply outlook

If you’re getting tired of tigers and you know how to sell shell-on shrimp, you’re in luck. The supply of shell-on white shrimp is soaring.

Although imports from Ecuador, the largest supplier of white shrimp to the U.S. market, were up only slightly through the first five months of 2002, to about 13,000 metric tons, look for a greater increase later this year, as Ecuadoran farmers continue to rebound from their white spot problems.

Supplies of whites from other countries are up sharply. Imports of white shrimp from Brazil, for example, were up almost 90 percent through May, to 7,500 metric tons.

Imports of shrimp from Mexico, the bulk of which is white shrimp, were also up, in this case by about a third, to more than 4,800 metric tons.

Through the first five months of 2002, U.S. imports of Chinese shell-on shrimp, mostly whites, were 3,000 metric tons, compared to less than 500 metric tons over the same period a year ago.

While that’s a relatively small percentage of total U.S. shrimp imports, it’s still enough to put pressure on prices, say importers, who fear a flood of Chinese shrimp is on the way.

While the short-term outlook for white shrimp supplies is excellent, that could change. The prices Latin American farmers are getting

this summer for medium-sized shrimp were well below production costs, so unless prices recover, look for farmers to start cutting back their production.

The supply outlook for the premium, larger sizes of white shrimp, which are only produced by wild shrimp fisheries, remains tight,

following last fall’s disappointing Mexican harvest. The July price of U-15, No. 1 Mexican whites, for example, was $11.50 a pound, up more than a dollar from last fall.

Price trends

Cheap, cheap, cheap. With so much small and medium-sized shell-on white shrimp hitting the market, it’s no surprise that prices have plummeted to unheard-of levels. This July, the price to distributors for smaller sizes (51/70) of shell-on whites had collapsed to just $2.50 a pound, while the price of medium sizes (41/50) was just under $3. Some larger sizes were also weak.

The price to distributors for 36/40s in July, for example, was $3.75 a pound, compared with about $4.50 at the same time last year, while the price for 21/25s was just $5.50 a pound, $3 a pound less than it was last spring.

Look for prices for medium and smaller sizes to stay weak until next year at the earliest. This July, Chinese exporters were quoting 51/60 product as low as $2.25 a pound, delivered, to the West Coast.

The price for the biggest sizes of white shrimp will remain high, at least until this fall, when the Mexican west coast season starts in September.

Buying tips

While the smaller sizes of whites are an incredible buy, 21/25 Mexican whites may be the best shrimp value that’s come around in quite awhile. Most of Mexico’s west coast wild catch last fall was 21/25-size shrimp, the same size Mexican farmers were harvesting then. As a result, the price for those is about $2 a pound below normal.

The best buys on white shrimp generally come in November, when Mexican processors are most motivated to generate cash from both the wild catch and the farmed harvest (Mexican shrimp farmers in Sinaloa and Sonora have to harvest all their shrimp by November due to colder weather). The U.S. white shrimp season is also over by November, and processors generally like to move their production as well.

With the low prices, don’t be surprised if your white shrimp counts are at the highest end of the size ranges, as processors try their best to squeeze by. If you want your shrimp to count out in the mid-range, make sure you check your uniformity ratios regularly.

If you’re importing whites directly from Asia, make sure your letter of credit isn’t exercised until after the shipment clears FDA inspection. These days, shipments can be delayed a month or more, so it’s no use tying up your money any longer than normal.

Looking for a way to put some sizzle in your shrimp sales? Try promoting fresh Mexican white shrimp. Shrimp farmers there are only eight hours from the U.S. border, and their shrimp has a shelf life of at least seven days after harvest.

Culinary notes

If your white shrimp has a thinner shell and a blander taste than usual, it could have been farmed in low-salinity water. As a rule, the best-tasting white shrimp come from the wild catch and from farms that have higher-salinity ponds.

Regardless, make sure you cook smaller and medium sizes very quickly, as they are easily overcooked. If you want to grill white shrimp, stick with the largest sizes.