Global Shrimp Aquaculture Industry Dynamics Rabobank F&A - PowerPoint PPT Presentation

Global Shrimp Aquaculture Industry Dynamics Rabobank F&A insights Lian Heinhuis, Food and Agribusiness Research November 2015 1

Table of contents Sections I General outlook: times of supply volatility to persist II Developments in key import markets III Analysis of key production regions IV Challenges V Opportunities and concluding remarks 2 2

1 General outlook: times of supply volatility to persist 23

Key observations on the shrimp industry I High supply volatility expected to remain due to recurring disease issues Re-ranking of leading exporters II III Good global demand which is expected to continue Emergence of new business models and a holistic approach to biosecurity IV Growing importance of sustainability and certification V 4

2 Developments in key import markets

Main export markets stable in volume terms – i.e. consumption per capita is not increasing Shrimp imports in volume by EU countries, USA and Japan 1800 1600 1400 1200 ‘000 tonne 1000 800 600 400 200 0 2009 2010 2011 2012 2013 2014 EU 28 Extra EU 28 Intra USA Japan Source: Globefish 2015 6

But there has been considerable growth in value Shrimp imports in value by EU countries, USA and Japan (includes E8 internal trade) 18 16 14 12 billion usd 10 8 6 4 2 0 2009 2010 2011 2012 2013 2014 EU 28 Extra EU 28 Intra USA Japan 7 Source: Rabobank, FAO 2015

3 Analysis of key production regions 23

Total supply of farmed shrimp: tentative growth expected, but low prices will dampen recovery Global farmed shrimp supply 4.000.000 3.500.000 3.000.000 2.500.000 LAM 2.000.000 Asia 1.500.000 1.000.000 500.000 - 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 2016F 9% 10% 7% 6% 5% 4% 4% 5% 3% 2% 0% 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 2016F -2% -5% -3% 9 Source: Rabobank 2015

Bulk of industry is in SE Asia, but highest supply and export growth rate is likely to be outside of this region 2000 2012 2020E 1100 Thousands tonnes 850 650 600 599 88 330 305 China 67 Thailand Viet Nam 524 415 496 87 86 84 355 281 55 54 53 268 40 127 40 118 100 16 74 91 90 50 5 33 25 4 Malaysia Myanmar Philippines 2,5 Brazil Ecuador Mexico India Indonesia Australia 10 29

Thailand: a shrimp empire collapsed, but recovery seems on the way Thai shrimp aquaculture production 700.000 600.000 500.000 thousand tonnes 400.000 300.000 200.000 100.000 - 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 2016F Source: Rabobank, based on FAO and other sources 2015 11 11

A perfect storm in the Thai shrimp industry EMS TARIFFS TIP 12 12

China: light supply recovery, will not match demand China: farmed shrimp production 1.200.000 1.000.000 800.000 thousand tonnes 600.000 400.000 200.000 - 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 2016F Source: FAO, Rabobank 2015 13 13

Shrimp demand is strong and is being fulfilled by imports that are much higher than stated in official data China: shrimp imports and exports in volume (official figures) Total Imports Total Exports 350 300 Thousand tonnes 250 200 150 100 50 0 2009 2010 2011 2012 2013 2014 Source: Rabobank, Uncomtrade 2015 14 14

Booming Indian shrimp exports 2008 map shows 85% 86% of volume of value EU (#1) 65,603 tonnes $352 million Japan (#2) 28,815 tonnes $192 million USA (#3) 21,538 tonnes $141 million UAE (#4) 6,837 tonnes $42 million 15 in order of trade volume

Booming Indian shrimp exports 2013 map shows 80% 83% of volume of value EU (#2) 52,780 tonnes $495 million Japan (#4) 19,793 tonnes $244 million USA (#1) 82,199 tonnes $1,063 million Vietnam (#3) 33,269 tonnes $366 million 16 in order of trade volume

Exports to US, EU are increasing, but uncertainty remains Indian shrimp exports by volume and value 450 4 400 3,5 350 3 300 2,5 Billion US Dollars Million Kilos Processed 250 Fresh or chilled 2 Frozen 200 Trade value 1,5 150 1 100 0,5 50 0 0 2009 2010 2011 2012 2013 2014 17 Source: Uncommtrade 2015

Prevalence of EHP is expected to result in a 10-20% decline of farmed shrimp production in India Total production of farmed shrimp in India 400 Thousands MT 353 350 300,05 300 250 200 150 100 50 0 2014 2015f 18 Source: Seafood Exporters Association of India

Summary: how long will Asia be the dominant shrimp exporter of the world? Recovering volumes but just slightly I Costs are still high II New business model needed III Strong domestic demand IV Long term net trade position of Asia likely to decline V 19

Rising Ecuadorian shrimp exports 2008 map shows 98% 98% of volume of value EU (#1) 72,836 tonnes $390 million USA (#2) 51,565 tonnes $293 Japan (#5) million 853 $6 tonnes million Colombia (#3) 1,914 tonnes $5 million Chile (#4) 1,581 tonnes $9 million 20 in order of trade volume

Rising Ecuadorian shrimp exports 2013 map shows 94% 93% of volume of value EU (#1) 83,376 tonnes $622 million China (#4) USA (#2) 73,323 tonnes $631 8,173 tonnes $72 million million South Korea (#6) Colombia (#5) 3,976 tonnes $33 4,609 tonnes $24 million million Vietnam (#3) 37,536 tonnes $301 million 21 in order of trade volume

Ecuador is export focused, was the # 1 beneficiary of the disease issues in Asia Ecuadorian shrimp exports by volume and value 450 4 400 3,5 350 3 300 2,5 Billion US Dollars Million Kilos Processed 250 Fresh or chilled 2 Frozen 200 Trade value 1,5 150 1 100 0,5 50 0 0 2009 2010 2011 2012 2013 2014 22 Source: Uncommtrade 2014

Ecuador’s industry shifts attention to Asia and China and becomes the link between Asian and Western markets Ecuadorian shrimp exports by volume in May (left) and YTD May (right) 70 0,35 300 2,17 1,9 60 10,48 0,42 1,89 250 3,6 14,66 0,62 26,69 50 1,71 118,47 10,93 1,82 0,79 200 65,82 9,23 0,78 3,6 5,98 40 3,87 million lbs 4,83 million lbs 36,89 24,12 150 14,97 30 20,13 16,43 18,43 73,81 75,49 65,77 72,2 100 20 23,17 50 20,52 89,73 10 19,51 19,34 80,49 76,56 75,47 0 0 YTD '12 YTD '13 YTD '14 YTD '15 May-12 May-13 May-14 May-15 Europe USA Asia Americas Africa Europe USA Asia Americas Africa 23 Source: Urner Barry 2014

Although the latest figures show the pressure on the Ecuadorian industry as a result of recovery in Asia YTD shrimp exports Ecuador in volume and value (first 7 months of the year) 200 1,55 Thousands MT Millions 195 1,5 190 1,45 185 1,4 180 Volume Value 175 1,35 170 1,3 165 1,25 160 155 1,2 2015 2014 24 Source: Central Bank of Ecuador

Brazil: Unfulfilled promise, can this change in the current conditions? Brazil shrimp aquaculture 90000 80000 70000 60000 thousand tonnes 50000 40000 30000 20000 10000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 2016F 25 Source: Rabobank 2015

Mexico – huge potential but mysteriously stuck by EMS from the other side of the Pacific Ocean 140.000 120.000 100.000 thousand tonnes 80.000 60.000 40.000 20.000 - 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 2016F 26 Source: Rabobank, Kontali, Subsecretaría de Pesca

Exchange rates are an important factor for the competitiveness of shrimp producers on global markets 0% IDR VND INR CNY THB BRL MXN -5% -4% -5% -6% -10% 2 Year change (depreciation) against USD -15% -14% -20% -21% -23% -25% -30% -35% -40% -45% -44% -50% 27

LAM summary: potential for further growth I Well positioned region, with low cost II But many challenges, not living up to the potential so far Ecuador seems unique III IV LAM growth forecasts are difficult due to the unpredictable situation in Brazil and Mexico V Potentially the most profitable shrimp farming region 28

4 Challenges

With the introduction of Vannamei shrimp there was increased growth, but also increased biological risk ‘000 MT Monodon other Other Vannamei of farmed shrimp 3 5.000 4.500  Vannamei introduction 4.000  Industry 400% growth  Shrimp Aquaculture 2.0  Monodon culture faces 3.500  biological challenges Aquaculture starts initially with wild juveniles  3.000 Cost rise  Monodon farming drives growth 2.500 2  Global prices high 2.000 1 1.500 1.000 500 0 30 Source: Rabobank, FAO 2015

Why is shrimp farming a sector with high biological risk especially in Asia? Typical shrimp farming business model in Asia Fish by-products as input for feed Feed Fish & shrimp Trading manufacturing processing Juveniles Fish meal and other Shrimp farming commodities Source: Rabobank 31 31

This means a large part of the farming is done by peasant or subsistence farmers Many shrimp farmers in Asia are subsistence farmers moving into shrimp from other agricultural activities Experience and knowledge as well as control at this critical point can be low This business model is often successful for poverty alleviation but has a higher risk 32 32