An opportunity for new shrimp producers
A new Rabobank report says that the outbreak of Early Mortality Syndrome (EMS) in shrimp will give second-tier shrimp producing regions the opportunity to step up production and capture market share – until EMS affected countries recover from the disease.
Rabobank says that as the cause of EMS has recently been discovered, it is likely that a solution will be found soon. The report says it then expects the industry to emerge more consolidated, with larger, diversified and more vertically integrated multinational producers leading the next growth wave.
Rabobank analyst Gorjan Nikolik commented: “After a decade of explosive growth, the global farmed shrimp industry has reached a turning point. The EMS outbreak in China, Vietnam and Thailand has created double-digit yearly contraction in shrimp supply, leading to prices hitting record levels. However, regions unaffected by the disease are emerging to fill the supply void and are benefiting from this high price situation. Producers in Ecuador, Indonesia, India, Bangladesh and Myanmar are rapidly expanding production.”
However, the current shrimp supply deficit could reverse in 2014. Due to a rapidly increasing understanding of the EMS pathogen, it is likely that a solution for the disease will be found in short to medium term. Thailand is likely to be the first of the impacted countries to start recovering from the disease. A return of Thailand to the top of the shrimp exporters table combined with strong momentum in production expansion by the second-tier regions enjoying the current high prices, will create a sudden supply curve shift and a period of low prices.
For Asian exporters, a long term strategy to mitigate against volatile price swings is to export processed shrimp products that are less commoditised. However, a lack of knowledge of local markets and links with local retailers and buyers has proven to be key entry barriers for Asian suppliers to EU and US markets. Therefore Rabobank believes there will be an increase of intercontinental mergers and acquisitions to create integrated producers.
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