May 18, 2016
Brazilian aquaculture's long awaited sunrise
An eFeedLink Hot Topic 
  • Despite having water resources and temperatures comparable to Southeast Asia, aquaculture growth has not yet exceeded the fall in wild catches, or kept up with seafood demand
  • Production is concentrated along Brazil's long Atlantic coastline, with freshwater cultivation in northeastern Amazon tributaries and freshwater lakes, ponds and reservoirs in its inland Cerrado states
  • High value species such as tilapia and shrimp were initially export driven but a coincidence of currency inflation, production problems and growing demand in Brazil has made them domestically oriented
  • Locally consumed round fish species have not been as impacted by the above factors but despite exceeding shrimp output by a factor of three, they yield less revenue
  • With cheaper plentiful feed inputs than its competitors, a large domestic market and vast untapped water resources, Brazilian aquaculture should experience the growth rates comparable to those of its beef and poultry sectors twenty years earlier
Although it is Latin America's undisputed protein exporter, Brazil's aquaculture sector has been somewhat of a laggard. On one hand, it is blessed with 8,500km of warm water coastline and 4.2 million hectares of inland freshwater raising area, much of it deep inside the Amazon Basin or within its Cerrado savannah lands.
Water temperatures and climate conditions range from cooler areas comparable to southern China to extensive tropical regions comparable to Southeast Asia, where 85% of global aquaculture is produced. All this makes Brazil the best place in the world to expand aquaculture output in the manner that Southeast Asia did in the twentieth century and early 2000s. With Southeast Asia's own marine acreage already exploited to the fullest extent possible, Brazil should be leading a Latin American surge of farmed seafood exports.
On the other hand, while its 9% growth rate exceeds that of its vast beef and poultry sectors, it remains a non-player in the world seafood market. One reason for this is because Brazilian aquaculture started from a low production base and is still a small fraction of its livestock sector's size and scale. But there are also deeper reasons for this disappointing growth over the last fifteen years. Perhaps the most important is how due to a variety of circumstances, Brazilian aquaculture has not yet made a net positive contribution to the country's protein supply, let alone the world market.
From a peak of a million tonnes in the 1990s, wild catch has fallen to 500,000 tonnes in recent years. By comparison, from 94,000 tonnes in 1994, aquaculture expanded at a 10.3% annual rate, totaling 600,000 tonnes in 2014, though it did so at a slightly slower 7.9% pace in the 2004 to 2014 decade. The problem is that while its expansion was impressive, aquaculture merely made up for declining wild catch –it was not a net positive addition to Brazil's overall seafood protein supply.
While aquaculture has expanded by over 14% annually at times, dragged down by falling wild catches, total seafood production rose at an anemic 2.4% rate over nine years; from approximately a million tonnes in 2000 to 1.25 million tonnes in 2009. With domestic demand rising by 6% annually, this has turned a region that should be a seafood exporter into a net importer.
Since the turn of the decade, aquaculture output rose at an 8.7% annual rate from an FAO estimated 415,640 tonnes in 2009 to an estimated 630,000 tonnes in 2015. On the other hand, with wild catch output falling by 27.3% or 225,000 tonnes in the years after 2009 at approximately 1.25 million tonnes, total production of farmed and wild caught seafood was no higher than in 2009. As a result, the difference between seafood supply and demand was bridged by an estimated 420,000 tonnes of seafood imports in 2015.
Moreover, the past three growing seasons has seen drought afflict Brazil's northeast coast and reduced the expected harvests of shrimp and tilapia, which are the top farmed species in these two regions. While coastal farms were not affected, inland lakes and ponds in Brazil's northeast have dried out, making it impossible for some regions to continue farming these two high value species.
Amounting to an ACQA IMAGEM, at an estimated 260,000 tonnes in 2014, tilapia is Brazil's most widely cultivated aquaculture species and accounts for approximately 43% of all farmed fish output by volume. From just under 32,459 tonnes in 2000, its production grew at a 14.9% annual rate through to 2014 –but this strong upward trends hides difficulties later in the period. After 2009, output still rose at a still very strong –but significantly slower– 9% rate. While several years of economic and political crises held back consumption, supplies were also constrained by the above mentioned dry conditions, particularly in inland regions.
Tilapia is mainly pond cultured Western Paraná state, while cage culturing predominates in reservoirs of northeastern Brazil, which tend to be freshwater bodies situated near the Jaguaribe River (Lakes Castanhão and Orós) or the San Francisco River (Lakes Sobradinho, Itaparica, Moxotó and Xingó). In southeast Brazil, cage-based tilapia production occurs in lakes along rivers such as the Rio Grande, Paraná, Tietê and Paranapanema, which run through the states of São Paulo, Paraná, Mato Grosso do Sul and Minas Gerais. These areas have also had their output constrained by arid conditions in recent  years, though not nearly to the same extent as inland northern regions.
Although round fish species such as tambacu and pirapitinga (a.k.a "tambatinga") have the second highest production volume of 198,000 tonnes in 2014, by value, they generate far less revenue than tilapia. In fact, shrimp, despite having less than a third of round fish production volume, exceeds it in economic value. In that way, round fish are Brazil's seafood equivalent of eggs –a protein line whose consumption flattens out as incomes and consumption of higher-end protein rises.
Pacific white shrimp (Litopenaeus vannamei) is the third most cultured species in Brazil, with 90,000 tonnes of output in 2014. Shrimp cultivation is mainly found in coastal regions of Ceará, Rio Grande do Norte, Bahia and Piauí. These are complimented by inland, brackish water shrimp farms in interior regions Paraíba, Ceará and Rio Grande do Norte. Last year, due to a nasty white spot outbreak, output again slumped below its 2003 peak, falling to 76,000 tonnes. This setback, though unfortunate, does not do justice to Brazilian shrimp farming's longterm potential.
Even with production barely a third that of round fish, the revenue shrimp generates exceeds that of round fish. The problem is that 2014's 90,000 tonne shrimp output volume that was achieved in 2003 and took over a decade to match, and will not be exceeded in a significant manner until at least 2018.
Ironically despite its current net importer status, cultivation of higher value added species such as shrimp and tilapia started off in an export-oriented manner, but with unfortunate results. For example, in 2003 when shrimp output peaked at 90,000 tonnes (a level not seen again until 2014), over 60% of production or 55,000 tonnes was shipped abroad. A large proportion of the output of tilapia and some shellfish was also exported at that time.
However, from 2003 through 2008, the real appreciated by 60% against the US dollar, making Brazilian shrimp too expensive compared to its Chinese and Southeast Asian competition. Its currency peaked in value during the late 2000s, just in time for America and the EU to go into a serious, late decade recession. Around this time, floods disrupted production, forcing the industry to break even its declining shrimp and tilapia export commitments to both western importers and neighboring Latin American markets.
As a result, 2014 finally saw production equal its 90,000 tonne 2003 peak. Unfortunately, with wild shrimp catches declining and domestic consumption rising, only 5% or 4,500 tonnes of this volume was exported. Compared to the early 2000s when over 100,000 tonnes of aquaculture output was exported, 2014 saw Brazil import 400,000 tonnes of seafood and export only 34,000 tonnes.
The good news is that despite such problems, the industry has at least a decade of 10% annual growth and several decades thereafter of 6% to 8% growth ahead. At a Global Aquaculture Alliance estimated 7.4kg, Brazil's per capita seafood consumption is only 20% to 30% of the level found in China or Southeast Asian countries blessed with similar climates or coastlines, where per capita seafood consumption ranges from 25kg to 40kg.
However, only 3kg of this 7.4kg per capita consumption is accounted for by domestic aquaculture production; with 2.4kg accounted for by flat or declining wild catch production and 2kg by imports.
Nevertheless, even during the last recession hindered decade, domestic seafood demand and per capita consumption have grown by 6% and 5% respectively –and should rise more rapidly once the country's economy emerges from its current downturn. Much like Indonesia where seafood demand is rising at a similar rate, Brazil's aquaculture production can easily rise at twice this rate. The difference is that Brazilians have much higher personal incomes than Indonesians but eat 5.3 times less seafood per person. When multiplied by Brazil's 205 million population, this creates an opportunity similar that of its poultry sector in the late 1980s: A country of 205 million people with the feed resources to simultaneously meet booming domestic demand domestic market while enjoying ten to 15 years of double digit export growth in the world market.
Alongside faster growth when its economy improves, the industry needs to make up for falling wild catch production. To this can be added that if domestic production rises faster than demand, it can be substituted in place imports of species such as tilapia, where demand is still partly met by imports from China.
Finally, whereas currency inflation killed off last decade's nascent export boom, the real is now at the same low level it was when exports accounted for a majority of shrimp and tilapia production. All this means that once Brazil's economy recovers, just to satisfy domestic demand, just to make up for falling wild catches and substituting local seafood in place of imports, Brazilian aquaculture is destined for years of growth exceeding 10%.
Moreover, by the early to mid-2020s, once its aquaculture production pushes imports out of its domestic market, we can expect Brazilian shrimp and tilapia to begin giving serious competition to ascending suppliers such as India, Indonesia and Ecuador. With untapped warm water resources comparable to that of Asia in the 1980s, cheaper more plentiful feed supplies than America and per capita consumption under 10kg, the 2020s should see Brazil's aquaculture sector flourish in the manner that its livestock lines did twenty years earlier.

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