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

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Rabobank F&A insights

Lian Heinhuis, Food and Agribusiness Research November 2015

Global Shrimp Aquaculture Industry Dynamics

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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

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General outlook: times of supply volatility to persist

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Key observations on the shrimp industry

High supply volatility expected to remain due to recurring disease issues Re-ranking of leading exporters Good global demand which is expected to continue Growing importance of sustainability and certification Emergence of new business models and a holistic approach to biosecurity

I II III V IV

Developments in key import markets

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Main export markets stable in volume terms – i.e. consumption per capita is not increasing

Source: Globefish 2015

Shrimp imports in volume by EU countries, USA and Japan

200 400 600 800 1000 1200 1400 1600 1800 2009 2010 2011 2012 2013 2014

‘000 tonne

EU 28 Extra EU 28 Intra USA Japan

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But there has been considerable growth in value

Source: Rabobank, FAO 2015

Shrimp imports in value by EU countries, USA and Japan (includes E8 internal trade)

2 4 6 8 10 12 14 16 18 2009 2010 2011 2012 2013 2014

billion usd

EU 28 Extra EU 28 Intra USA Japan

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Analysis of key production regions

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Total supply of farmed shrimp: tentative growth expected, but low prices will dampen recovery

Source: Rabobank 2015

• 500.000

1.000.000 1.500.000 2.000.000 2.500.000 3.000.000 3.500.000 4.000.000 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 2016F LAM Asia 3% 4% 2% 7% 5%

• 3%
• 2%

9% 6% 4%

• 5%

0% 5% 10% 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 2016F

Global farmed shrimp supply

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Bulk of industry is in SE Asia, but highest supply and export growth rate is likely to be outside of this region

91 90 268 355 496 524 India Indonesia 305 67 599 330 650 600 Thailand Viet Nam 16 5 40 55 53 54 87 84 86 Malaysia Myanmar Philippines 88 850 1100 China 2,5 4 40 Australia 25 50 33 74 281 100 118 415 127 Brazil Ecuador Mexico

2000 2012 2020E Thousands tonnes

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Thailand: a shrimp empire collapsed, but recovery seems on the way

Thai shrimp aquaculture production

Source: Rabobank, based on FAO and other sources 2015

• 100.000

200.000 300.000 400.000 500.000 600.000 700.000 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 2016F thousand tonnes

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EMS TARIFFS TIP

A perfect storm in the Thai shrimp industry

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China: light supply recovery, will not match demand

China: farmed shrimp production

• 200.000

400.000 600.000 800.000 1.000.000 1.200.000 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 2016F thousand tonnes

Source: FAO, Rabobank 2015

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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)

50 100 150 200 250 300 350 2009 2010 2011 2012 2013 2014

Thousand tonnes

Total Imports Total Exports

Source: Rabobank, Uncomtrade 2015

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Booming Indian shrimp exports

2008

in order of trade volume map shows 85%

• f volume

86%

• f value

EU (#1) 65,603 tonnes $352 million USA (#3) 21,538 tonnes $141 million UAE(#4) 6,837 tonnes $42 million Japan (#2) 28,815 tonnes $192 million

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Booming Indian shrimp exports

2013

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

• f volume

83%

• f value

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Exports to US, EU are increasing, but uncertainty remains

Source: Uncommtrade 2015

Indian shrimp exports by volume and value

0,5 1 1,5 2 2,5 3 3,5 4 50 100 150 200 250 300 350 400 450 2009 2010 2011 2012 2013 2014

Billion US Dollars Million Kilos

Processed Fresh or chilled Frozen Trade value

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Prevalence of EHP is expected to result in a 10-20% decline of farmed shrimp production in India

Source: Seafood Exporters Association of India

Total production of farmed shrimp in India

353 300,05 50 100 150 200 250 300 350 400 2014 2015f

Thousands MT

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Summary: how long will Asia be the dominant shrimp exporter of the world?

Recovering volumes but just slightly Costs are still high New business model needed Strong domestic demand Long term net trade position of Asia likely to decline

I II III IV V

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Rising Ecuadorian shrimp exports

2008

EU (#1) 72,836 tonnes $390 million USA (#2) 51,565 tonnes $293 million Chile (#4) 1,581 tonnes $9 million Colombia (#3) 1,914 tonnes $5 million in order of trade volume map shows 98%

• f volume

98%

• f value

Japan (#5) 853 tonnes $6 million

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Rising Ecuadorian shrimp exports

2013

EU (#1) 83,376 tonnes $622 million USA (#2) 73,323 tonnes $631 million Colombia (#5) 4,609 tonnes $24 million Vietnam (#3) 37,536 tonnes $301 million China (#4) 8,173 tonnes $72 million in order of trade volume map shows 94%

• f volume

93%

• f value

South Korea (#6) 3,976 tonnes $33 million

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Ecuador is export focused, was the # 1 beneficiary of the disease issues in Asia

Source: Uncommtrade 2014

Ecuadorian shrimp exports by volume and value

0,5 1 1,5 2 2,5 3 3,5 4 50 100 150 200 250 300 350 400 450 2009 2010 2011 2012 2013 2014

Billion US Dollars Million Kilos

Processed Fresh or chilled Frozen Trade value

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Ecuador’s industry shifts attention to Asia and China and becomes the link between Asian and Western markets

75,47 80,49 89,73 76,56 75,49 65,77 73,81 72,2 24,12 36,89 65,82 118,47 4,83 5,98 14,66 10,48 3,6 1,82 1,89 1,9 50 100 150 200 250 300 YTD '12 YTD '13 YTD '14 YTD '15

million lbs

Europe USA Asia Americas Africa 19,34 23,17 19,51 20,52 18,43 14,97 20,13 16,43 3,87 9,23 10,93 26,69 0,78 1,71 3,6 2,17 0,79 0,62 0,42 0,35 10 20 30 40 50 60 70 May-12 May-13 May-14 May-15

million lbs

Europe USA Asia Americas Africa

Ecuadorian shrimp exports by volume in May (left) and YTD May (right)

Source: Urner Barry 2014

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Although the latest figures show the pressure on the Ecuadorian industry as a result of recovery in Asia

Source: Central Bank of Ecuador

1,2 1,25 1,3 1,35 1,4 1,45 1,5 1,55 155 160 165 170 175 180 185 190 195 200 2015 2014

Millions Thousands MT

Volume Value

YTD shrimp exports Ecuador in volume and value (first 7 months of the year)

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Brazil: Unfulfilled promise, can this change in the current conditions?

Source: Rabobank 2015

10000 20000 30000 40000 50000 60000 70000 80000 90000 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 2016F thousand tonnes

Brazil shrimp aquaculture

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Mexico – huge potential but mysteriously stuck by EMS from the

• ther side of the Pacific Ocean

Source: Rabobank, Kontali, Subsecretaría de Pesca

• 20.000

40.000 60.000 80.000 100.000 120.000 140.000 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 2016F thousand tonnes

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Exchange rates are an important factor for the competitiveness of shrimp producers on global markets

• 21%
• 6%
• 5%
• 4%
• 14%
• 44%
• 23%
• 50%
• 45%
• 40%
• 35%
• 30%
• 25%
• 20%
• 15%
• 10%
• 5%

0% IDR VND INR CNY THB BRL MXN

2 Year change (depreciation) against USD

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LAM summary: potential for further growth

Well positioned region, with low cost But many challenges, not living up to the potential so far Ecuador seems unique LAM growth forecasts are difficult due to the unpredictable situation in Brazil and Mexico Potentially the most profitable shrimp farming region

I II III IV V

Challenges

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With the introduction of Vannamei shrimp there was increased growth, but also increased biological risk

Source: Rabobank, FAO 2015

500 1.000 1.500 2.000 2.500 3.000 3.500 4.000 4.500 5.000

‘000 MT

• f farmed

shrimp

Monodon

• ther

Vannamei

• Aquaculture starts initially with

wild juveniles

• Monodon farming drives

growth

• Global prices high
• Vannamei introduction
• Industry 400% growth
• Shrimp Aquaculture 2.0

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• Monodon culture faces

biological challenges

• Cost rise

Other

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Source: Rabobank

Why is shrimp farming a sector with high biological risk especially in Asia?

Trading Feed manufacturing Fish & shrimp processing Juveniles Fish meal and other commodities Shrimp farming Fish by-products as input for feed

Typical shrimp farming business model in Asia

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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

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It’s the youngest animal protein industry All shrimp farming is done in developing countries It’s a tropical species There are many different business models and sanitary levels neighboring each other Even with the closed system, farming is still open to the environment Shrimp is a heavily traded product, even among exporters

….and there are many other factors that cause supply side volatility

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Opportunities and concluding remarks

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Opportunities: there is shrimp farming potential also in relatively unexplored regions

Africa Australia Middle East

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Another opportunity: increased cooperation within the sector to tackle disease issues- like was done in the Chilean salmon industry

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GSI: a game-changing industry dynamic, tackling the image of salmon farming with NGOs, governments and customers

Source: GSI 2015

• Lower lice levels
• Eliminate escapes
• Reduce environmental impact of farms
• Focus on reducing marine ingredients from wild catch fisheries
• Source only from sustainable marine ingredients

Biosecurity

Standards

Feed and nutrition

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Concluding remarks

A period of high supply (and price) volatility is to persist Asian producers are challenged with biosecurity issues and competitiveness Future potential growth areas for export are especially in LAM, but also in Australia, Africa and ME To ensure sustainability of the industry, cooperation is key

I II III IV

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Important notice

This presentation has been prepared exclusively for the benefit and internal use of Gemba Consulting (or the “Company”), and does not carry any right of publication or disclosure other than to Huon. Neither this presentation nor any of its contents may be used for any other purpose without the prior written consent of the Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (“Rabobank”). The information in this presentation reflects prevailing market conditions and our judgment as of this date, all of which may be subject to change. This presentation is based on public information. The information and opinions contained in this document have been compiled or arrived at from sources believed to be reliable, but no representation or warranty, express or implied is made as to their accuracy, completeness or correctness. The information and opinions contained in this document are wholly indicative and for discussion purposes only. No rights may be derived from any potential offers, transactions, commercial ideas et cetera contained in this presentation. This presentation does not constitute an offer or invitation. This document shall not form the basis of or be relied upon in connection with any contract or commitment whatsoever.