FBA Issue 34: September / October 2010
Booming aquaculture output, faltering fishmeal & the search for a renewable feed
by Eric J. BROOKS, based on reports by Gemma C. DELMO in Manila
With an average annual growth rate of 14% since year 2000 aquaculture is the world's fastest growing, yet most problematic agribusiness line. It is vitally important to Asia's protein equation, as 90% of the world's fish farming occurs here. Moreover, neither this growth nor its shaky feed input scarcities are a short-term affair.
Figures from the UN Food and Agriculture Organization (FAO) show that global aquaculture production grew from 16.8 million tonnes in 1990 to 72.1 million tonnes in 2009, an increase of approximately 330% in less than 20 years. Yet, fishmeal, its main natural feed input, has watched its yearly output dwindle throughout this time.
Despite such difficulties, this year, for the first time ever, the sector accounted for over half of global seafood production. Moreover, even as production tapers off in maturing Asian markets like China and Thailand, it is accelerating in equally large nations such as India, Bangladesh or Indonesia.
China towers above all other nations, growing six times more sea food than India, the world's second largest producer. Yet, led by South Asia, a raft of Pacific rim nations are poised to expand their aquaculture output over the next decade as China did in the late 20th century.
As we shall see, this growth momentum rests on shaky, uncertain assumptions that the industry will break its dependence on wild catch feed inputs.
Shrimp, tilapia, lead the way
Speaking at a recent conference on aquaculture in Manila, Philippines, Dr. Michael Cremer, the American Soybean Association (ASA) technical director for aquaculture revealed that rising aquaculture production raised global aqua feed demand by 4 million to 4.5 million tonnes since 2005.
At the same time, fishmeal, its primary feed input, has fallen by several hundred thousand tonnes over this time.
Among the species that posted the highest gains last year, Dr. Cremer cited shrimp production. From 2005 to 2009, it was up 18%, to 3.43 million tonnes, with ASEAN being the largest production region, accounting for 1.35 million tonnes.
China however, remained the largest single shrimp producer with 1.25 million tonnes while Thailand and Vietnam were the biggest ASEAN producers with 445,000 tonnes and 418,000 tonnes respectively.
He also mentioned notable increase in world tilapia production which gained 30% to 2.6 million tonnes with China as the largest producer, accounting for 1.1 million tonnes. Egypt was the second biggest tilapia producer with 220,000 tonnes followed by Indonesia, Philippines and Thailand with a total output of 150,000 tonnes. Over a longer scale of a decade, tilapia farming has nearly tripled since 2000.
With fishmeal prices detaching from soymeal and hitting record highs, Cremer shared that China, the world's largest producer and fishmeal importer, is actively adapting to the emerging animal protein meal shortfall. According to him, for the last three years, China has been using all-plant protein fingerling feeds such as soy protein concentrate in place of fingerling feed's traditional 8% to 20% fishmeal conclusion.
India follows in China's footsteps
Yet, even as China's fishmeal dependence tapers off, another giant is hiking global demand. Mirroring Chinese aquaculture's growth of the late 1980s and early 1990s, India's aquaculture production grew 45%, from 2.31 million tonnes in 2003 to 3.35 million tonnes in 2007.
From traditional, manure-based production, Indian aquaculture farmers have moved to the adoption of feed-based technologies and thus ignited expansion of its extrusion aqua feed milling capacity in the past five years. As of 2010, India has already six aqua feed mills with each plant operating at a 150,000 tonne-capacity. Indian aquaculture production, feed demand and fishmeal imports should all double or triple over the next ten years. With all this comes industry standardization industry, increased use of feed, a higher proportion of feed that uses fishmeal, and growing global demand for wild catch protein input.
Up until 5 years ago, aquaculture's protein meal crisis was averted by minimising the amount of fishmeal fed to livestock, leaving more available for aquaculture. However, with scarcity know at hand, with few options, the industry has chosen a plant-based safety value. According to World Aquaculture Magazine, for aquaculture to continue expanding at its leading rate, it assumes that soy protein use will grow from meeting one-third of aquaculture protein needs at present to supplying 50% of it by 2020.
It estimates that, "The market value of soy proteins is projected to quadruple to US$4.7 billion by 2020, with SPC accounting one third of its value." Cremer boldly projects that soy protein concentrate output will amount to 2.5 million tonnes by 2020. In the meantime, fishmeal set a new price record of US$2,000/tonne early this year, and looks set to hyperinflate again in the fourth quarter of this year. Below, we see how various Asian countries accommodate breakneck expansion in fish farming against unshakeable backdrop of protein meal scarcities.
Fishmeal's day of reckoning arrived?
The industry has long expected falling fishmeal output and flat, declining South American catches to cause a protein input crisis. It may finally be upon us. After barely falling by 20% during the 2008 crash (compared to 50% to 70% for other feed inputs), fishmeal recovered with the global economy. By late last year, it had well exceeded its pre-crash highs and closed 2009 heading over US$1,400/tonne.
In the first half of this year, depleted Chinese inventories intersected with an El Nino diminished catch and a Chilean earthquake, which devastated that country's production. Prices zoomed to US$2,000/tonne by the second quarter. By late third quarter, a post-earthquake recovery in Chilean production and Chinese restocking tempered the price to a still extremely very high US$1,400/tonne.
In his weekly blog, Wayne Bacon, president of Hammersmith marketing notes that, "Looking at the available supply of fishmeal it just moves lower every week as business is booked and fishing is limited to areas in Southern Peru." He concludes that, no one is expecting lower prices in coming weeks as stocks are used and demand continues.
Barring an exceptionally bountiful late year South American fishing season that takes everyone by surprise, prices look set to re-touch their early 2010 highs by early next year. Asia single-handedly eats up roughly 85% of Peruvian fishmeal exports, with China accounting for over 50% of this total. Aquaculture's to get past its fishmeal supply constraint –or inability to do so –will profoundly impact Asian aquaculture, and with it, the entire world.
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