Marine Shrimp Farming Outlook Rabobank Group Gorjan Nikolik, - - PowerPoint PPT Presentation

Rabobank Group

Gorjan Nikolik, Rabobank Research: Food and Agribusiness July 2017

Marine Shrimp Farming Outlook

2

Toronto New York Mexico City Sao Paulo Buenos Aires Sydney Santiago de Chile Willemstad Calgary Washington DC Chicago Atlanta Dallas El Centro San Francisco Tasmania Melbourne Wellington Cedar Falls St Louis London Madrid Milan Antwerp Frankfurt Warsaw Utrecht Hong Kong Singapore Mumbai Kolkata Jakarta Tokyo Beijing Delhi Kuala Lumpur Moscow Istanbul Dublin Lubuan Amsterdam Paris Bangalore Shanghai Maputo Chimoio Beira Tete Ulónguè Malema Maxixe Nampula Kigali Asuncion

46 Countries

Over 600 Offices Over 55,000 Employees

Rabobank: Globally leading food and agribusiness lender and financial services provider

3

Food & Agri Research: global sector knowledge

• Global research platform and local knowledge provide an in-depth network and

understanding of the Food & Agri sectors – Over 80 dedicated global strategists and analysts covering 10 sub-sectors – Working closely with Rabobank’s CFA, AF, DCM and ECM bankers

• Fundamental research covering the entire Food & Agri chain and a wide array of

topics ranging from macro themes, impacting a particular F&A industry, to micro- level analysis of individual companies

• All relevant topics in each sector are monitored from a local, regional and global

perspective F&A Supply Chains

In-depth sector focus appreciated by global Food & Agri investors

Farm input companies Farmers Trading Processing Consumer foods

Company specific strategic information Global sector dynamics Local sector knowledge

Agri Commodities Farm Inputs Grains & Oilseeds Sugar Fruit & Vegetables Animal Protein & Seafood Dairy Beverages F&A Supply Chains Consumer Foods

Rabobank food and agribusiness sector research, 85 analysts

• globally. Specific focus on aquaculture, fisheries and seafood

4

0,0 1,0 2,0 3,0 MILLION TONNES OF FARMED SHRIMP All other Monodon Vannamei

The shrimp aquaculture sector witnessed a huge expansion in the 2000’s, followed by a period with disease issues

Source: Rabobank, FAO 2017 *Chinese production includes freshwater Vannamei farming . M. Rosenbergii is not included. After 2011 we make significant corrections to FAO data based on industry sources

Global Shrimp aquaculture (marine species) 1980 – 2017E 1 2 3 EMS

• Aquaculture starts initially with wild

juveniles

• Monodon farming drives growth
• Global prices high
• Vannamei introduction
• Industry 300% growth
• Consumption growth
• Period of virus diseases
• Monodon culture faces biological

challenges

• Cost rise
• Era of non-viral

diseases

5

2.620 2.640 2.660 2.680 2.700 2.720 2.740 2.760 2.780 2.800 2014 2015 2016 2017E 000’ tonnes

446 467 473 508 282 241 234 268 268 221 235 248 209 264 300 305 650 623 596 541 323 323 407 407 46 66 64 84 50 54 52 50 77 91 98 64 132 125 111 125 248 255 262 268

500 1.000 1.500 2.000 2.500 3.000 2014 2015 2016 2017E Other Asia Other Americas Brazil Bangladesh Mexico Ecuador China Thailand Vietnam Indonesia India

Currently the shrimp sector is in a gradual recovery period but many biological challenges persist

Overall NFI panel global shrimp production expectations Production expectations by country, NFI panel 2017

Source: Rabobank, NFI 2017 000’ tonnes

6

In a nutshell: Due to EMS, supply from China and Thailand has been replaced with supply from Ecuador and India

India +400k MT

Source: Rabobank, 2017

China marine shrimp -500k to 400k MT Thailand -200k MT Ecuador +250k MT Since approximately 2010 Total +650k MT Total: - 700k to -600MT

7 200 400 600 800 1.000 1.200 2006 2007 2008 2009 2010 2011E 2012E 2013E 2014E 2015F 2016F 2017F Thousands tonnes

China: Estimates are that domestic supply of marine shrimp is still contracting

Source: FAO, NFI, Rabobank 2017

China: Farmed Shrimp production Estimates based on industry expert opinion

8

Based on official data China is still a net-exporter of shrimp, but is mostly likely already a net importer if the grey channel is included

China shrimp exports 2009-2016 (HK excluded), USD

Source: Rabobank, Food and Agriculture Organization 2017

China shrimp imports 2006-2016 (USD)

• 100

200 300 400 500 600 700 800 900 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Millions Argentina Thailand Canada Ecuador India Others

• 500

1.000 1.500 2.000 2.500 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Millions USA Japan

• Rep. of Korea

EU Others

Estimates are that approximately $1.5 billion of shrimp (wild and farmed), 2x the value of the legal shrimp imports enter China via the grey channel mostly via Vietnam

9

Thailand shrimp exports show a $2bln decline as the industry suffered from EMS

Source: Rabobank, UN CONTRADE 2017

Shrimp exports of Thailand declining due to EMS Importing countries of shrimp from Thailand by volume in 2015 50 100 150 200 250 300 350 400 450 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 500 1.000 1.500 2.000 2.500 3.000 3.500 4.000 Millions USD

000’ tonnes

Volume Value

USA 42% Japan 22% Canada 5% China 4% Vietnam 4% Hong Kong 4% Australia 3% South Korea 3% UK 3% Myanmar 2% Other 8%

10

Source: Rabobank, based on FAO and other sources 2017

Thailand: The once leading producer was hit by the perfect storm, EMS, EHP and “slavery on fish meal boats”

Thailand: Farmed Shrimp production, tentative recovery 404 391 444 438 472 470 300 212 272 299 301 100 200 300 400 500 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E

000’ tonnes

11

Indian shrimp exports in 2008

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

12

Booming Indian shrimp exports in 2015

2015

USA (#1) 129,761 tonnes $1,235 million EU (#2) 82,649 tonnes $621 million Japan (#4) 32,827 tonnes $305 million Vietnam (#3) 65,383 tonnes $496 million in order of trade volume map shows 80%

• f volume

83%

• f value

13

India shrimp grew by over $2.5bln since 2010, making India the global No. 1 shrimp exporter

Source: UN CONTRADE 2017

Importing countries of shrimp from India by volume in 2016

USA 36% Viet Nam 23% EU 19% Japan 7% UAE 4% Canada 2% China 1% Russia 1% South Africa 1% Kuwait 1% Others 5%

50 100 150 200 250 300 350 400 450 500 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 500 1.000 1.500 2.000 2.500 3.000 3.500 4.000 Millions USD

000’ tonnes

Volume Value Shrimp exports of India

14

100 200 300 400 500 600 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E

000’ tonnes

Monodon Vannamei

India currently has the most rapidly growing shrimp industry in the world, with ample growth capacity

Source: Rabobank, based on FAO and other sources 2017

India: Farmed Shrimp production continuing to grow, very strong first half of 2017

Vannamei farming legalised

1 2 3 4

Low-intensity production model (for Asian standards) Implemented vannamei 10 years later (fewer mistakes) Most farms are new High level of control by government (MPEDA) Cluster farming system Low cost land, labor and feed commodities

5

Success factors:

6

15

In the US market the decline of Thailand is substituted by India

Source: Urner Berry 2017

US shrimp imports YTD (Jan-Apr) 21 29 52 60 77 77 110 50 57 52 72 87 82 83 47 60 53 63 66 51 51 22 24 24 49 35 40 31 112 86 66 39 48 49 42 50 100 150 200 250 300 350 2011 2012 2013 2014 2015 2016 2017 Million Lb. India Indonesia Ecuador Vietnam Thailand

Indian supply to the US increased by 55% YTD May 2017

16

Ecuador has also greatly expanded exports, with Vietnam (China) as the main destination

Source: UN CONTRADE 2017

Importing countries of shrimp from Ecuador by volume in 2015

Viet Nam 45% EU 26% USA 19% China 3% South Korea 2% Colombia 2% Russia 1% Chile 1% Japan 0,4% Guatemala 0,4% Others 1%

Shrimp exports of Ecuador 50 100 150 200 250 300 350 400 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 500 1.000 1.500 2.000 2.500 3.000 Millions USD

000’ tonnes

Volume Value

17

75,47 80,49 89,73 76,56 86,29 87,8 75,49 65,77 73,81 72,2 60,46 65,51 24,12 36,89 65,82 118,47 166,34 205,98 100 200 300 400 YTD '12 YTD '13 YTD '14 YTD '15 YTD '16 YTD '17 Europe USA Asia Americas Africa

In less then 6 years Ecuador's industry has shifted over 50% of its exported shrimp towards China

Ecuadorian Shrimp exports YTD (Jan-May), in thousand pounds

Source: Rabobank, Urner Barry, 2017

18

Ecuadorian shrimp exports use to be focused on EU and US

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

19

Despite the distance and many local and regional exporters Ecuador's exports are increasingly Asia focused

2015

EU (#2) 90,394 tonnes $586 million USA (#3) 81,920 tonnes $591 million Colombia (#6) 4,962 tonnes $29 million Vietnam (#1) 119,339 tonnes $760 million China (#4) 28,321 tonnes $187 million in order of trade volume map shows 94%

• f volume

93%

• f value

South Korea (#5) 5,649 tonnes $42 million

20

50 100 150 200 250 300 350 400 450 500 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 2016F 2017F Thousands tonnes

Ecuador accounts for close to 50% of farmed shrimp production Latin America, does it have a unique advantage?

Source: Rabobank, based on FAO and other sources 2017

Ecuador: Farmed Shrimp production WFE

1 2 3 4

Low-intensity production model Few large groups control the sector Distance from the Asian shrimp industry Use of probiotics Use of local genetics High level of control by government Favorable tariffs with import markets Learnings from white spot

• utbreak in 1990’s

5 6 7 8

21

Despite considerable shifts in supply, the market has remained balanced and shrimp prices continue relative stability

Source: Urner Barry, Thai Union Frozen Foods, Rabobank 2017

Shrimp prices, white and black shrimp index in the US (left axis), Thai shrimp price (right axis) 50 100 150 200 250 300 2 4 6 8 10 12 jan-09 jan-10 jan-11 jan-12 jan-13 jan-14 jan-15 jan-16 jan-17 Baht/kg USD/lb Urner Barry HLSO Black Tiger Shrimp Index Urner Barry HLSO Farm - Raised White Shrimp Index Monthly Thai White Shrimp (Vannamei), Wholesale Prices, sized 60 pieces / kg in THB

22

And relative to other major proteins shrimp is currently one of the least expensive alternatives

Source: Rabobank, Index mundi, 2017

Index of main protein sources 100=Jan 2007 50 70 90 110 130 150 170 190 210 230 250 jan-07 apr-07 jul-07

• kt-07

jan-08 apr-08 jul-08

• kt-08

jan-09 apr-09 jul-09

• kt-09

jan-10 apr-10 jul-10

• kt-10

jan-11 apr-11 jul-11

• kt-11

jan-12 apr-12 jul-12

• kt-12

jan-13 apr-13 jul-13

• kt-13

jan-14 apr-14 jul-14

• kt-14

jan-15 apr-15 jul-15

• kt-15

jan-16 apr-16 jul-16

• kt-16

jan-17 apr-17 Beef Index Whole Chicken Index Pork Index Salmon Index Shrimp Index

23

Summary: farmed shrimp is a commodity with an elastic supply but shifting to lower density production models

• Supply growth of 300%

between 2001 - 2010 Farming of vannamei shrimp grows rapidly

• EMS combined with rising

demand turn China into a net importer

• Thailand, Mexico and others

also suffer from EMS

EMS (and other diseases) emerge

• India substitutes Thailand and

China as exporters to the US and EU

• Vietnam and Indonesia fall

behind India

India replaces Thailand as leading exporter

• Ecuador exports grow rapidly

and shift to China

• Argentina exports wild shrimp

to China

• Rest of LAM below potential

Ecuador shifts exports to China

1 2 3 4

24

Final observations

• Immature industry: It is a growing sector globally with many new developing areas, but also with shifting

competiveness of regions and shifting trade flows (mostly due to disease)

• Supply is elastic: Disease will rarely have a long lasting impact on global price level (if the infection is not

global).

• Buyers market? Prices have not increased much relative to other proteins.
• Declining farming density: Replacing Chinese and Thai supply with Indian and Ecuadorian supply is major

decline in global faming density.

25

Thank you for your attention