The shrimp industry between two pincers

The Vietnamese shrimp industry is struggling to manage as its prices

are uncompetitive in the global market and competition is increasing
in value-added products.
“Vietnamese shrimp in general, and particularly shrimp from Sao Ta, although of
very high quality, are too expensive!” said Mr. Ho Quoc Luc, chairman of Sao Ta
Foods, in a discussion with the Vietnam Association of Seafood Exporters and
Producers (VASEP) after attending the international seafood fair held in March
2024 in Boston, USA.
In 2023, Vietnam's shrimp export turnover to the United States reached $682
million, down 15%. In the market accounting for 20% of Vietnam's shrimp export
turnover in 2023, Vietnamese shrimp prices cannot compete with those from
Ecuador and India. While India still maintains the largest market share in the U.S.,
Ecuador's shrimp export market share to the U.S. increased from 12% to 27%
during the 2019-2023 period. "Inflation, recession have led to a decrease in global
demand. Supply from shrimp powerhouses is increasing, especially from Ecuador,"
Mr. Ho Quoc Luc shared via email. "The dual impacts of 'decreasing demand,
increasing supply' have led to a significant drop in consumption prices.
Market prices, according to a survey and forecast of global shrimp farming output
by Rabobank, are the biggest concern for the shrimp industry in 2024. When price
factors are prioritized, two competitively priced countries, Ecuador and India, will
have an advantage. Ecuador offers significantly lower prices for raw shrimp
compared to other countries due to their average successful farming rate
exceeding 80%, while India and Vietnam have rates of over 60% and 40%
respectively.
Due to labor shortages, Ecuador primarily exports raw frozen shrimp that have
undergone minimal processing. India, on the other hand, is just beginning to invest
in deep processing. However, competitive rivals are quickly catching up with
Vietnam's shrimp industry enterprises.
"Not directly competing with the excessively low prices of India and Ecuador, Minh
Phu will compete based on product quality and differentiation," asserted Minh Phu
Seafood Corporation in its annual report released in early April 2024. This leading
shrimp exporter sets a strategic goal of perfecting a closed-loop value chain from
breeding, processing, to distributing products to consumers. In the report, Minh
Phu's CEO, Mr. Le Van Quang, mentioned that the company has been and is
applying technology, digitizing the entire shrimp value chain, thereby enabling
source traceability and improving efficiency throughout the chain.
Meanwhile, amidst a non-competitive pricing landscape, Mr. Luc suggests that
Vietnamese enterprises need to consider "where their strengths lie, and how to
leverage them in which types of products and markets." Sao Ta, one of the top
three leading shrimp exporters in terms of export revenue, focuses on developing
value-added product lines from shrimp and selects the demanding Japanese
market - where Vietnam still holds the leading position with a 24% market share -
as a focal point.
Sao Ta has expanded its farming area and currently operates farms covering a total
area of over 525 hectares in Soc Trang province, a major shrimp farming area in the
country. According to Mr. Luc, the team has developed its own farming processes
and continuously improved them with each farming season to adapt to
environmental changes. He revealed that the success rate of their farming area
exceeds 80%, double the Vietnam average. "However, not every farm can achieve
this, as it depends on various subjective and objective factors at each farm," Mr.
Luc said.
Expanding the farming area in theory helps reduce costs for businesses, but it is not
an easily scalable solution. Each business has its own farming area, but it is difficult
to independently control a large portion of the raw materials due to limited
financial resources and land funds. "And businesses also focus more on production
and processing rather than farming," suggested an anonymous expert working at
VASEP.
A more sustainable approach is to strive to improve the success rate of shrimp
farming across the entire farming community, most of which are small-scale farms
lacking capital and proper farming techniques. With ownership of farming areas
totaling 1,200 hectares, Minh Phu advocates for collaboration with farmers to
establish concentrated shrimp farming areas and provide guidance on applying
biologically integrated shrimp farming technology named MPBiO, which has the
potential to reduce farming costs by 30-50%, developed through the corporation's
research. "This not only produces standardized Minh Phu seed sources at low costs
but also helps farmers achieve sustainable prosperity on their own land." According
to Mr. Quang, from August 2023 to January 2024, the trial shrimp farming process
using MPBiO technology in 470 shrimp ponds has yielded promising results.
Improving the success rate of shrimp farming is not something that can be achieved
overnight. According to Dr. Nguyen Duy Hoa, Global Technical Director of Empyreal
and Motiv products at Cargill, this requires a comprehensive strategy regarding
breeding, feed, farming environment, and farming models, with crucial support for
practical technical training for farmers. "Funding for agriculture and fisheries
promotion should focus on practical issues, such as organizing high-fee networking
to hire technical experts from successful farms to share and guide farmers in their
surrounding areas," Mr. Hoa suggested.
According to Dr. Nguyen Duy Hoa, a significant reason for the high shrimp farming
costs in Vietnam is that farmers lack capital and rely on credit sources from agents,
resulting in accepting higher prices for inputs such as raw materials, feed,
medicines, and supplements. "This barrier can be overcome by implementing
comprehensive solutions along with effective management of the shrimp industry
supply chain, especially by eliminating intermediaries in the market, to directly
access farmers in terms of both technical knowledge and investment capital.”
While Vietnam has not yet solved the cost reduction problem, other countries are
investing in developing deep processing capabilities, an area where Vietnamese
export enterprises have strengths.
“India is the real threat," wrote Willem van der Pijl, Managing Director of the Global
Shrimp Forum and founder of Shrimp Insights, in an email. This country has lower
costs for both raw shrimp and labor compared to Vietnam. “Until recently, India
was not yet investing that much in cooking or breading capacity, but this is now
rapidly changing, and over the next couple of years, Vietnam will face fierce
competition for these products in markets such as Japan and Europe.”
According to a report on the Indian shrimp industry published by Shrimp Insights in
April 2024, leading shrimp companies in the South Asian country such as Avanti
Frozen Foods, Nekkanti Sea Foods and Devi Sea Foods have all been investing in
breading facilities. “It’s a matter of time before India’s exporters gain experience…
and start offering breaded products to the US and other overseas.”
Experts agree that it will take at least 5 years for India to catch up with Vietnam's
processing prowess, as they need time to train their workforce and develop the
market. However, the hourglass has been turned upside down. Mr. Willem van der
Pijl evaluates that, although Vietnam leads in value-added shrimp products, it still
requires additional investment in its processing infrastructure and become more
competitive in terms of costs, coupled with a strong marketing strategy to maintain
its position.
According to Mr. Luc, the short-term strategy involves product diversification,
deeper processing, and striving to address bottlenecks in the farming sector as soon
as possible. In the long term, the development strategy aims for both flexibility and
sustainability. "Clearly, time is pressing, putting heavy pressure on us," he said.