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COMMENTARY & ANALYSIS


January 7, 2019
 
Booming Ecuadorian shrimp output takes up the slack from faltering India
 
Top customer China now encourages the importing of Ecuadorian shrimp in a legal, direct manner. Its sustainable business model is on track to ship over 600,000 tonnes by 2020.
 
By Eric J. Brooks

An eFeedLink Hot Topic
 

While the 2018 shrimp exports of number one supplier India fell by 15% or more, second-ranked Ecuador's shipments just keep on climbing. According to the country's National Chamber of Aquaculture (NCA), January to November shipments totaled 461,790 tonnes, compared to the 384,600 tonnes in the first eleven months of 2017.
 
Based on the above-mentioned trade momentum, Ecuador can be expected to ship approximately 502,000 tonnes of shrimp with a value exceeding US$3.1 billion in 2018. That is an 18.5% increase over 2017's 426,000 tonnes is significantly above its 10-year average 12.1% rise in annual export volumes. It is also a cumulative 314% increase over the 122,000 tonnes it shipped ten years earlier, in 2008.
 
This is far beyond the NCA's expectations: Two years ago it predicted 2018 output of 390,000 tonnes: This figure was exceeded by nearly a third or at least 120,000 tonnes.
 
John Sackton, editor of www.seafoodnews.comattributes Ecuador's continued strong growth to "Higher Pond Survival [rates], lower feed conversion ratios, higher pond yields and shorter [growth] cycles." He also opines that despite this country's stubborn adherence to low stocking densities, "Ecuador has higher shrimp production potential than India."
 
Blessed by the Guayas River, which forms the largest estuary in the South Pacific Ocean, the clashing of exceptionally warm equatorial fresh river water and cooler, saltwater Humboldt current creates ideal shrimp growing conditions. Consistent equatorial weather means that Ecuador can harvest three shrimp crops yearly, whereas most of its Asian rivals can only produce two.
 
Alongside with enjoying more undeveloped frontier regions with an ideal growing climate than India, Ecuador is also distinguished by a unique business model that stands out from its export rivals. Ecuadorian shrimp is produced with probiotic elements, which do not affect the product, the environment or people. Its industry association proudly boasts that "since transitioning to sustainable natural growth promoters in 2005, no alerts for the presence of antibiotics or controlled substances in Ecuadorian shrimp have been reported."
 
Asia drives the lion's share of Ecuadorian shrimp export expansion, with Europe playing a secondary role. According to Ecuadorian government statistics, January to November shrimp shipments to the EU increased 6% in value, totaling $498.65 million and on track to exceed US$550 million. With shrimp prices down, shrimp exports to the EU rose a higher 11% by volume, mostly due to unexpectedly strong demand from Italian and Spanish buyers. An estimated 80,000 tonnes in EU sales were complimented by approximately half as many exports to non-EU European countries.
 
While exports are booming, their destinations are undergoing a rapid transformation. From over half of exports ten years ago, America now only buys 14%. On the other hand, Asia accounted for 23.5% of shipments in 2013 but by 2017 this proportion had risen to 57.8%. Based on official January to November trade statistics, the proportion of Ecuadorian shrimp exports procured by Asian buyers will have risen to over 61% in 2018.
 
Prior to this year, a majority of Asian destined exports were shipped in a rather discreet and indirect manner. They were imported into the Vietnamese port of Hai Phong and thereafter be smuggled into China. While Indian shrimp is also smuggled into China this way, Ecuadorian imports exceed those of India by two to three times.
 
This was done to avoid a 5% import tariff and sales taxes ranging from 9% to 11%. In December 2017, China reduced its shrimp import tariff to just 2%. It thereafter made repeated, well-publicized crackdowns on shrimp smuggling and mass arrests of illegal traders.
 
The result has been a sudden surge in direct, legal Ecuadorian shrimp shipments to China and leveling out of once booming Vietnamese re-export volumes. For example, 2017 saw Ecuador ship 218,472 tonnes of shrimp to Vietnam, with 60% to 70% of this sum re-exported to China. That year's direct shipments of Ecuadorian shrimp to China only totaled 15,042 tonnes, which was 93% less than what was exported to Vietnam.
 
From January through November 2018 inclusive, shrimp exports to Vietnam totaled 191,821 tonnes, 1.4% less than the 194,500 tonnes shipped in the first eleven months of last year. –But January to November exports to China skyrocketed to 81,454 tonnes. That is approximately 492% more than the 13,772 tonnes of Ecuadorian shrimp that was formally imported by China in the first eleven months 2017 and an exponential increase on the 1,500 tonnes shipped in 2010.
 


Based on present trade flows, Vietnamese imports of Ecuadorian shrimp (which were mostly re-exported) are set to fall 3% to slightly over 210,000 tonnes. On the other hand, 2018 direct exports to China will jump by approximately 500%, to over 90,000 tonnes. At close to US$600 million, China now accounts for approximately 18% of Ecuadorian shrimp exports by both value and revenues.
 
Going forward, some Ecuadorian traders have said they expect all their exports destined for China to be shipped directly starting this year. While this is too optimistic a forecast, we can see at least a majority of Ecuadorian shrimp destined for China going there directly by the end of 2020.
 
While the most aggressive export expansion is occurring within Asia, Ecuador has also adapted to shifting western hemisphere trade flows. A decade ago, America absorbed over half its exports and bought 88,000 tonnes as recently as 2014.
 
In recent years, neither US nor European shrimp demand increased by much, but in January 2018 EU instituted a strict sanitary inspection standard: Due to repeatedly finding unacceptably high antibiotic levels, all Indian shrimp imports are automatically detained for a strict, thorough veterinary inspection. The new rule discouraged blocked Indian shrimp exports from entering European nations.
 
European buyers subsequently substituted Ecuadorian imports in place of Indian supplies. With so much Ecuadorian shrimp now going to Europe, American buyers were forced to substitute Indian shrimp imports in their place. The net result is that in less than five years, US imports of Ecuadorian shrimp have fallen by 22% while European imports from Ecuador have increased by roughly a third from the levels of five years ago.
 
Going forward, the Global Aquaculture Alliance (GOAL) projects that through 2020, world shrimp production will rise by 5.7% annually with Ecuador leading the way with growth rates significantly above this average figure.
 
However, unlike Asian countries, Ecuador must achieve its target without raising stocking densities. John Tinsley, emerging markets technical director for Biomar (which produces 12% to 15% of Ecuador's shrimp feed) notes that this nation's shrimp farming is keynoted by "relatively low stocking densities, semi-intensive and extensive farming, with a focus on genetic selection." Unlike East Asian producers that seek pathogen free breedstock, Ecuadorian farmers seek out whiteleg stock that may have been exposed to pathogens but which are genetically resistant to disease.
 
Can Ecuador's low stocking density model achieve another two consecutive years of 10% growth GOAL's forecast implies? Long-term forecasts are always at the mercy of everything from a price crash to unexpected disease outbreaks. Even so, there is reason to believe that Ecuador will grow over 600,000 tonnes of shrimp in 2020.

In particular, Ecuador's government is extending the country's electric power grid to the remote regions where most shrimp cultivation occurs. The substitution of abundant, easily expandable grid-based electricity in place of scarce diesel generator based power will enable the automation and mechanization of the country's shrimp farms.
 
Alongside a marginal increase in pond area, the productivity gains that will be reaped from integrating shrimp farms with Ecuador's national power grid will ensure at least two years of near 10% production increases. Conservatively speaking, 600,000 tonnes of Ecuadorian shrimp exports with up to 400,000 tonnes being shipped directly to China by 2020 looks increasingly possible.
 


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