November 18, 2020
Hard choices, post-COVID-19 tradeoffs ahead for Indian shrimp farming
Stocking density issues, disease management problems, low returns to constrain future output growth.
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Is Indian shrimp facing a similar day of reckoning? In the decade years before the coronavirus struck, India's impressive output growth came at the cost of steadily worsening problems with stocking densities, disease management, and low returns. It grew a record 770,000 tonnes in 2019, up sharply from 150,000 tonnes ten years ago. 2019's production increase had powered a 9% export surge, from 614,000 tonnes in 2018 to 672,000 tonnes in 2019.
Domestic and foreign lockdowns disrupted Indian shrimp farming, export shipments, and foreign demand, especially from the US and EU restaurant sector. Bureaucratic restrictions transformed a 30 day lockdown into more than 55 days without shrimp broodstock imports.
Consequently, by mid-year, leading Indian shrimp growers reported pond stocking 40% to 60% below 2019 levels. Hatcheries were operating at 20% of productive capacity. COVID-19 created labor shortages at many farms and halted crucial broodstock imports for more than 55 days. India lost almost a third of its yearly shrimp production to lockdowns and input shortages.
June saw six hatcheries sponsor chartered flights to mass import broodstock from Hawaii, and later Florida. The mid-year revival in broodstock imports enabled a gradual restarting of shrimp production. Uncertain of US and EU demand, many growers only restocked only after mid-year monsoon rains lessened.
Faced with a falling quantity of shrimp available for export, India exported scarce supplies to China, which allowed for easier COVID-19 transport logistics and higher returns. India briefly filled a supply vacuum created by Beijing's temporary banning of Ecuadorian imports. Two months later, armed border clashes between Indian and Chinese troops halted shipments to China – but Ecuador had taken a lot of India's market share in America and Europe.
With Q1 2020 exports up by 17% on-year and Q2 shipments falling by 25% to 30%, India reported that H1 2020 shrimp exports fell 9% in value and less than 10% by volume compared to H1 2019. Export revenues have been a comparatively bright spot – but India's lockdown-induced shrimp farming stoppage and 55-day freeze on broodstock imports will result in steeply lower Q3 exports.
Consequently, Indian shrimp output and trade fell in Q2 and possibly into early Q4. Pond restocking dramatically accelerated in late Q3 but won't be enough to prevent the biggest output and export decline of any large supplier.
Some forecast Indian shrimp output falling more than 35% to below 500,000 tonnes. We believe a sharp Q3 revival will result in a 30% decline to 540,000 tonnes, with exports falling 26%, to 500,000 tonnes. Provided COVID-19 is brought under control, we see a strong Indian recovery, with 2021 output totaling 600,000 to 700,000 tonnes.
Going forward, Indian shrimp farming's fortunes beyond 2021 and beyond the 800,000 tonnes of annual output already achieved appears problematic.
After an early 2020s recovery to previous 800,000 tonne highs, future output growth depends on how much shrimp prices and farming profits recover - and if India learns to prevent stocking density related disease outbreaks: At this time, with shrimp prices depressed, returns are too low to expand into frontier ponds that don't have an accumulated buildup of pathogen spores. The rising disease risk level of aging ponds require prices high enough to justify stocking beyond previous levels.
Consequently, barring a technical innovation that transcends these physical limitations, Indian shrimp farming may face a future of fast rising marginal costs, with each additional 100,000 tonnes of production becoming less biologically and economically viable than the previous one.
As marginal costs increase, only a few options are available: Unless a technological fix is found, either the government will have to reduce the cost of bringing a dwindling supply of frontier ponds into production, or prices need to rise far enough above present levels to make investing in them profitable. The only other alternative is a Chinese or Thai style overstocking that risks permanently damaging the productive capacity of aging shrimp farms. We will learn which of these roads Indian shrimp growers choose in the years to come.
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