March 18, 2014

US shrimp buyers mixed on end users' demand

Challenging widespread industry talk last year of a looming collapse in demand, the high prices in the US on shrimp are still not causing buyers to back away.

"It certainly hasn't collapsed," a source at one of the top five shrimp buyers in the US, wishing to remain unnamed, said. "Our end user demand is holding up."

Of course, whether this demand will hold is a point of discussion among buyers, and they remain mixed on whether it will.

Two top shrimp buyers in the US, both with branded sales into retail, had differing views on whether end users will remain loyal to shrimp despite continued high prices.

Although the full extent of last year's price increases across suppliers and origins – not to mention the continued increases this year - have yet to hit consumers, the second source has an optimistic outlook.

Prices to the end user may easily increase. Although raw material prices have begun to come down, with prices cooling on product out of Thailand this week, the raw material prices for product that is currently in inventory may be higher than that in stores today, indicating prices to the end user may keep increasing.

It is possible that consumer sentiment will keep prices from increasing to the end user, said the source, who predicts prices will come down in the second quarter.

Both sources said demand for shrimp has exceeded their expectations, but that doesn't mean they have avoided challenges.

"Severe weather out of the Northeast has certainly impacted demand, but demand for the larger sized, more expensive sized, shrimp is lacklustre," the first source said, adding that overall, "prices are 50% higher than where they were this time last year, so that's a big cost difference, and customers in general - end users - are downsizing."

As end users shift down to smaller sizes, it is getting harder to find small shrimp to meet demand, and larger sized shrimp demand is waning, the source said.