August 28, 2015
Ecuadorian shrimp farming takes off
Taking full advantage of Southeast Asia's EMS epidemic, Ecuador's shrimp exports have doubled in volume and quadrupled by value since 2010.
By Eric J. BROOKS
An eFeetLink Hot Topic
Utilising far less intensive production methods than their Southeast Asian counterparts, Ecuadorian shrimp farming is a 21st century success story, with production rising 700%, from under 50,000 tonnes in 2000 to a USDA estimated 350,000 tonnes in 2015. The industry is maturing, production is up 3% from 340,000 tonnes in 2014 and comparable to what Thailand will produce this year.The Ecuadorian model, however, is decidedly far less intensive and by implication, less prone to disease outbreaks. According to the USDA, 60% of Ecuadorian output is produced by extensive, land hungry farming systems and feature stocking densities of 8 to 14 larvae per square hectare.
EMS a lucky break
The other 40% mostly uses varying degrees of semi-intensive farming methods, stocking anywhere from 15 to 120 larvae per square meter. Although its ample water resources mean that it never will have to resort to Southeast Asia's high stocking densities but still enjoys equatorial climate and three shrimp growing seasons per year. The USDA estimates yields at 1.6 tonnes per
It partly counteracts the disadvantage of low stocking density by growing large sized, white leg shrimp. Thus having fewer animals per square meter, but each of them growing to a significantly larger size than what is found in Southeast Asia. Even so, the years 2006 to 2014 saw cultivated area rising by 21% (from 176,000 to 213,000 hectares) while production jumped a much faster 172%.
Consequently, while Ecuadorian shrimp farming's size and growth rate is approaching maturity, it has greater potential for boosting production through low-risk intensification than any South East Asian country. Moreover, the last five years of industry growth have been particularly fortuitous: Strong US import demand coincided with the EMS-induced disappearance of Southeast Asian supplies from the world market, making Southeast Asia's large shrimp market niche available to Ecuadorian exporters.
This is not to say that Ecuador's industry is immune to EMS: The disease has already devastated shrimp farming operations in nearby Mexico and Central America. Sooner or later, it will probably hit Ecuador too but for now, its luck has held out in a very advantageous manner.Thanks to EMS, Ecuadorian shrimp exports doubled in just four years, from 148,000 tonnes in 2010 to 299,000 tonnes in 2014. Better still, shrimp export revenues increased twice as fast as volumes, going from US$0.64 billion in 2010 to US$2.58 billion in 2014. This year, with shrimp prices falling and volumes increasing at a more incremental pace, export revenues may actually drop several percent.
Asian competition, US dollar cost disadvantage
Going forward, with Southeast Asian shrimp production recovering, competition will intensify and export volume growth will taper off. Revenues per shrimp will also fall as the return of Asian supplies to the world market is already bringing down prices.
That will end the boom in Ecuador's shrimp exports, but the country will still see 2015 volumes expanding by a healthy 3%%, from 299,000 tonnes in 2014 to 308,000 tonnes this year. America and the EU accounted for 30% and 31% of its 2014 shrimp exports, totaling 88,859 and 93,271 tonnes respectively.
There are however, several weak spots in Ecuadorian shrimp's trade performance. First, Vietnam, which absorbs a quarter of its exports, is itself a rival shrimp exporter. Though a combination of EMS outbreaks and aquaculture financing problems have made Vietnam's seafood sector depend on Ecuadorian shrimp exports, its shrimp exports to this country are poised to fall sharply over the next decade. It needs rapid export growth in other markets to make up for the possible loss of the 25% export share which is currently absorbed by Vietnam.
Second, Ecuadorian shrimp production costs are higher than those of Thailand and other Southeast Asian countries –and there's not too much Ecuador's aquaculture industry can do about it either. –That is because Ecuador uses the US dollar, a currency known for having a high value, especially relative to the currencies of its Southeast Asian competitors. The short-term implications are particularly nasty: During the current world liquidity crises, the US dollar has risen up to 40% against Southeast Asian currencies and, if anything, could rise yet further.
This makes it especially difficult for Ecuador to export its shrimp to East Asia, where producers in Thailand, Vietnam and Indonesia all have strong transport cost advantages to begin with. For this reason, the USDA noted that Ecuadorian shrimp, "Remains unable to effectively compete with lower cost Asian processed shrimp product manufacturers; relegating Ecuador to mainly exporting frozen, uncooked shrimp."
Moreover, Ecuador's choice of the US dollar as its currency inflates its labour costs, especially compared to Southeast Asian countries like Thailand, where well capitalized integrators like CP have long mastered the art of low cost, high value-added processing of shrimp into ready-to-eat meals. All this is one major reason why the country's shrimp exports are mostly frozen, uncooked and have very little value-added to them. Just 15,000 tonnes or 0.5% of its 2014 shrimp exports were cooked, and these were in a very basic, minimal value-added manner.
Low cost, quality feed, access to US market
But having said that, Ecuador's industry also enjoys certain strategic advantages. First, it has most favoured nation access to the US market is complimented by its close geographic proximity: Its transport cost for shipping shrimp to the US are some 80% lower than those of its Southeast Asian rivals.
Second, by its 100% substitution of higher quality US soymeal in place of traditional fishmeal in feed rations, significant cost savings are realized. This is particularly at this time, when fishmeal costs 4.8 times more than soymeal. American wheat is also used as an agglutinant and feed protein levels are kept at approximately 30%. According to the USDA, "Faster shrimp growth cycles are possible with high-protein feed formulated with U.S. inputs."
There is however, a deeper reason for using US feed ingredients. Aside from the fact that its use of the US dollar insulates the industry from the risk of foreign exchange rate fluctuations, it helps cement a natural business relationship: US congressmen are far less likely to shout for trade sanctions against shrimp imports grown with exported US feed grains and protein meals.
Given its proximity to the large US market, risk-free access to US feed inputs and abundant but underutilized equatorial water resources, Ecuador may be destined to replace Thailand as a top shrimp exporter to the United States. Along with India, Bangladesh and Central America, it represents a new generation of shrimp exporters that increasingly challenge Southeast Asian dominance of this seafood line.
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