Indian shrimp exports are likely to contract during the current calendar year, as global offtake of the product falls across key consuming countries including China, USA and Europe, according to a report by rating agency ICRA.
Global demand for shrimp is estimated to contract by 20 per cent due to the COVID-19 pandemic around the world followed by localised demand disruptions, it said in the report. There may be considerable volatility through the year, ICRA said.
“Demand for Indian shrimp exports will contract during the calendar year 2020 as global offtake of the product falls across key consuming countries like China, USA and Europe. Relative successes in containment of the pandemic will impact export competitiveness of countries,” ICRA Vice-President and Sector Head Pavethra Ponniah said. She said that given the multiple countries involved, local conditions and the evolving situation around the pandemic, global supply predictions will be fraught with risk. “However, there is a broad consensus on falling supply in the global markets. The interplay of falling demand and supply will decide the eventual prices, which will stay volatile through the coming months,” she added.
During May, Indian shipments to the US grew 4.8 per cent as against a 12 per cent growth in exports to the USA from Ecuador and 24 per cent growth in exports from Indonesia, she noted. The shrimp industry was first hit by the pandemic and lockdowns in China, a key player in global demand-supply dynamics, the ICRA report said adding that extended lockdowns, during the annual week-long Chinese New Year holiday, till well into February led to a global demand-supply imbalance.
Subsequently, with the global spread of the pandemic, deeper demand disruptions resulted in a sharp fall in Indian (and global) farm gate shrimp prices in early March, it added. Panicked farmers harvested their crop early, leading to an oversupply in few markets that kept the prices low till early May, the report said adding that this impacted stocking levels in several markets, including India.
Although prices have recovered in May since COVID-19-lows on the back of Chinese demand and also in other key markets of USA and Europe, demand is limited to the retail segment. Further, the report noted that developed markets source shrimp for retail and food services. Closure of food services globally has led to increase in home cooking and this has sharply altered buying patterns, it said adding that globally, retail store buying of frozen and value-added shrimp stock has increased, compared to food services earlier.
Supply constraints in other sources of protein like beef and pork, also impacted by the pandemic, switched protein consumption to shrimp, it said. Consequently, despite the weak market conditions, year-to-date May, shrimp imports by the US alone grew 3.8 per cent to 2.57 lakh tonnes, with strong offtake from Ecuador and Indonesia, the report added.
Coming to the domestic shrimp industry, the report said the shrimp farming community in India is highly fragmented and is a price taker, mostly from the larger processors. For the processors, the procurement price (from the farmer) is linked to global demand and hence buyer prices, it added.
Although demand disruption has hit processors and farmers alike, the latter has to normally bear the majority of the brunt of falling prices, the report said. However, as farm gate prices collapse, farmers stop stocking and availability of raw shrimp to processors reduces, impacting their volumes and margins, it said.
Processors have also been hit by manpower and logistics issues. Nevertheless, the low farm-gate prices in April and May led to several Indian processors procuring and cold storing the shrimp for later processing, ICRA added. It also said large processors with in-house manpower continued to function at reduced capacity, however, labour issues continued to plague processors In June also. In the coming months, labour availability will be contingent on localised lockdowns and subsequent viral flare-ups, the report said. Going forward, ICRA expects that during 2020-21, shrimp processors to report volume declines across the board.