18:34 | 13/05/2015 Trade
The demand for Vietnamese shrimp fell sharply in markets around the globe in the three months leading up to April as over production has led to a glut in an already saturated market— causing prices to tumble.
For the first quarter of the year, Vietnam shrimp exports plummeted 28.1% on year to US$798 million with exports to major markets such as the US and Japan falling off by 55.8% and 27.6% respectively.
Shrimp prices in the US market went into a serious free fall, particularly the prices for white-leg shrimp fuelled by an appreciation of the US dollar against the Vietnamese dong making imports less expensive.
Official statistics show that though total worldwide US shrimp imports in January and February jumped 5% in volume they dipped a hefty 11% in value.
From an average price of US$12 kg in the last quarter of 2014, they fell to US$11 kg in January 2015 and dropped further to US$10 kg in February.
Supplies simply far outpaced demand, while imports in 2014 were historically high resulting in a glut of shrimp in the US domestic distribution chain that was already holding large inventories of frozen shrimp.
As of the end of March, Vietnamese shrimp exports to the US declined to US$116.3 million, compared to US$263.3 million for the corresponding period a year earlier.
Peeled frozen shrimp has traditionally accounted for over 50% of the US import market. Vietnam is now the 3rd largest supplier, after Indonesia and India.
Leading market analysts think prices have bottomed out in the market given that US shrimp distributors have worked their way through excess holiday inventories and now predict the US market to rebound and return to normal buying patterns through the remainder of the year.
They also have noted stabilization in Vietnamese, Indonesian, and Indian shrimp prices since the end of April and believe this is a positive sign the industry has begun to bounce back.
One analyst noted that prices from Vietnam have been firming up leading to buyers in the US sensing a bottom in the market— but there still are some uncertainties in the marketplace and buyers like major restaurants and retailers will likely hold off for a few weeks to see what happens.
With deficits starting to appear in US distributor inventories, purchasing has nowhere to go but to start picking up, most likely in May and June, they said.
Vietnam also recently signed a free trade agreement (FTA) with the Republic of Korea, which is expected to be a boon for exports in general and seafood exports in particular to the Korean market and more than double bilateral trade over the next five years.
For shrimp, the FTA provides the RoK will exclude a quota of 10,000 tonnes of product from import duties, which increases to 15,000 tonnes over the next five years.
The agreement with Seoul is among a series of trade deals the Vietnam government has been pursuing as part of its ambition to become a regional manufacturing and agriculture dynamo and attract investment to strengthen its economy.
Vietnam is also expected to sign FTAs soon with Russia, Belarus and Kazakhstan and could conclude talks on an FTA with the European Union in the very near future, which would all positively impact shrimp exports.
At a recent seminar Nguyen Hoai Nam, general secretary of the Vietnam Association of Seafood Exporters and Producers (VASEP) said the best strategy to counter the recent negative developments in the industry is a good offense.
The Vietnam shrimp industry has turned the corner but needs to persify its customer base and reduce the risk of over dependence on any one or two markets such as the US and Japan if it is to be prosperous and achieve sustainability, Nam stressed.Source VOV News