Shrimp Market Report - May 2009 - US
US economic crisis impact shrimp market
The US economy has spiralled into what many analysts see as the worst
recession and financial crisis since the Great Depression that begun with the
crash of 1929. During the last quarter of 2008, the economy contracted more
than was forecast. The outlook for the short term is that recovery should not
be expected until late 2009 or the beginning of 2010, as the beginning of
2009 the economy showed further deterioration. Layoffs and wage freezing have
made an increase in the disposable income of households unlikely in the short
term. This gloomy outlook has had an immediate effect on household and
business spending, which added further impetus to the recession, although,
according to the Federal Reserve, consumer spending showed a slight
improvement in some districts, particularly in comparison with the very low
level of expenditure registered during the holiday season. The food sector is
one of the few that has not shown such a strong deterioration. The economic
downturn has negatively affected some of the most significant areas of
seafood consumption, such as tourism and the restaurant business, with
considerable drops in sales. One of the strategies adopted by households is
the reduction of casual dining in restaurants, preferring to eat more at
home. The Consumer Confidence Index, prepared by The Conference Board based
on a survey on 5 000 households, showed another all-time low. The index was
first calculated on 1967, and in February 2009 fell to its historical
minimum. This fall in consumer confidence was accompanied by a reduction in
the Present situation index as well as a decrease in the Expectations Index. Therefore,
consumers consider not only that the actual situation has worsened, but also
that they should not expect any significant improvement in the short term.
The economic environment has changed consumer habits and confidence.
According to a report prepared by Nielsen, consumers are reducing the
frequency of their shopping trips, as well as turning to store brands, as a
strategy to increase the purchasing power of their income. Also, there has
been an increase of sales in supercenters, which
showed a minor growth in unit sales. Seafood has not remained exempt from
these changes. A report of shrimp sales from The Perishables Group shows that
retailers are reducing their promotions for high-value seafood products like
shrimp, and consequently, sales showed a reduction in terms of volume and
value, at the end of 2008. Shrimp sales are highly sensitive to promotions,
and sales during the Christmas holidays were rather disappointing, in line
with the general trends previously mentioned. However, this lack of demand
has eased the pressure on prices, as supply remains sufficient; therefore,
prices might give some space to encourage consumption in the short term. Consumers
have shown themselves responsive to price, and look for products that give a
good value for money.
New antidumping duties and no more bonding requirements
The US Department of Commerce (DOC) published the new preliminary decisions
on antidumping duties for Ecuador,
India, Thailand, Viet
Nam and China,
resulting from the third administrative review. For these countries, the
review considered sales to the US
market between 1 February 2007 and 31 January 2008, except Ecuador, for
which the period considered was 1 February 2007 to 14 August 2007. This is
because the US Trade Representative revoked the antidumping duty order on Ecuador
effective 15 August 2007. The results of the review recommended a reduction
in antidumping duties on Indian products from 110 companies, from a previous
1.69%, to a 0.79% average, decreasing to 0.39% for one of the reviewed
companies. As for Viet Nam,
the review set duties that range between 1.66% for one economic group of
producers, to 9.84% for another group, while the rate that will be applied to
the companies that were not studied was set at 25.76%. In the case of Thailand, the
two analyzed companies had their margins set at 4.25% and 4.64%, while the
remaining 134 exporters will be given a 4.51% duty. It is also worth noting
that some of these companies will not be required to make a cash deposit as a
result of the resolution of the WTO panel. Regarding Chinese exports, two
companies were examined, and their duty was set at 26.30%, while the
remaining 480 Chinese exporters listed in this review will have a 112.81%
margin, the highest tariff among the countries affected by antidumping duties
on shrimp. In the case of Ecuador,
the rate was set on 2% and 2.2% for the two examined companies, and 2.09% for
the remaining 79. The DOC compares the price of the exported product in the US market
with the price of the same product (or similar) in the domestic market or, in
case sales to domestic consumers are not significant, the largest third
country market for similar products is considered.
The other matter of conflict for shrimp exporters to the US is the
bonding requirement. Late in 2008, the US Customs and Border Protection (CBP)
gave notice that it would no longer require the bonding for shrimp imports,
after receiving comments on the proposal, and once the final resolution had
been published in the Federal Register. This policy change was brought about
by the resolution of the WTO Appellate Body, which stated that the Enhanced
Bonding Requirement practice violated WTO rules. The final resolution of CBP
will be effective after comments are received.
Despite
the economic turmoil, shrimp imports showed a slight increase during 2008
US shrimp imports totalled 564 000 tonnes worth USD 4 093 million, which
represents a 1.3% and 4.8% increase in terms of volume and value
respectively, compared with the 557 000 tonnes worth USD 3 904 million in
2007. Consequently, the unit value of imports grew 4%. This positive trend
was shown in almost all the main import categories, except other frozen
preparations and 15 or less count of headless shell-on frozen, which showed
lower trade both in volume and value.
Headless shell-on shrimp accounted for 43% of total imports of shrimp, both
in volume and value, followed by peeled frozen shrimp, with a 33% share in
both indices. 70% of the total supply of headless shell-on frozen shrimp
originated in four countries, Thailand
(24%), Ecuador (18%), Indonesia (15%), and Mexico
(13.5%). This last nation was placed as top supplier of 16/20 and 21/25
sizes, and the unit price of Mexican products of these counts increased
markedly (+15% and +13%). One of the reasons behind the good results of
Mexican exports was probably due to the larger sizes obtained last year’s season of farmed shrimp, which allowed
retailers and restaurants to offer those products as jumbo and extra-jumbo
shrimp, according to the reports of wholesalers. Imports of peeled frozen
shrimp were mainly from the Asian countries. Thailand was the main supplier but lost share,
while sales from Indonesia,
Malaysia, Viet Nam and China had all two digit growth
rates both in volume and value.
It is
interesting to note the trends in breaded frozen products. China showed a negative variation in sales to
the USA
(-18% both in volume and value). Sales from China have had several setbacks.
After having problems with the FDA in 2007, the US
government agency opened offices in China, which eased purchases from
this country. In 2008, the finding of melamine in milk caused a worldwide
scandal and increased the suspicion of Chinese food products. Thailand
again managed to increase participation in this value-added product market
niche; therefore sales of Thai breaded frozen shrimp grew 53% in terms of
volume and 34% in value. Thailand
accounted for 20% of total supply of breaded frozen shrimp and was the main
country responsible for the growth of imports of this category. It is also
worth noting that breaded frozen shrimp was excluded from the third
administrative review of the DOC previously mentioned.
Thailand remains the main
supplier of shrimp to the US
accounting for 34% of total imported volume (32% in terms of value). However,
purchases from this country fell in volume (-3%), although in terms of value
they grew 4%, with a 7% increase in unit value. Viet Nam and Indonesia
showed a very good performance on sales of shrimp to the US (+42% and +22% respectively in terms of
volume), while China
showed a minor reduction (-1%). Regarding the top five exporters to the US, four of
them are Asian nations. Asian suppliers dominate the market for value-added
products, and their exports are more diversified, while the main Latin
American exporters, Ecuador
and Mexico,
concentrate their trade in headless shell-on frozen products. This category
accounts for 78,5% of Ecuadorian sales, and 95% of
Mexican exports to the US.
Global economic downturn is changing shrimp market
The global crisis has limited the availability of credit, and access to
credit facilities has become more expensive. In a climate of uncertainty
about the future behaviour of the market, these trends increase the costs of
building stocks. Therefore, purchases are mainly to recompose the supply. On
the other hand, the Thai Shrimp Association announced at the end of 2008 that
it would reduce production by 20% in order to adjust supply to lower demand. This
should result in a lower supply of shrimp, which in turn should help maintain
higher prices.
Consumers are becoming more price sensitive, which implies that the
value-chain will have to look for ways to reduce their costs in order to
avoid a price increase. Farmed shrimp has led to a reduction in the overall
prices of shrimp. This opens a way for distributors to market shrimp as an
affordable yet luxurious product. Prices of shrimp during 2008 did not have
significant ups and downs. On the contrary, they remained fairly stable,
peaking in August for white aquacultured shrimp,
and by the end of the year, except for some particular products, prices were
near or below the level registered at the beginning of 2008.
Another opportunity has arisen in the prepared meals segment, as consumers
are cutting back on restaurant meals and increasing cooking at home. This new
turn in retail consumption could be observed at the Boston Seafood Show, were
there was an increase in value added seafood products on offer for retail
sales. This was one of the main trends observed at the Show. Another
significant observation is that many operators focus not on current problems,
but on the changes needed to overcome them, and the many opportunities for
change and innovation that are opening up.
Market Report prepared by Javier López, INFOPESCA
<#link 1#>© FAO GLOBEFISH 2009
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