No end in sight for shrimp price increases

August 20, 2013, 4:19 pm

Although the pace of price increases in the US shrimp market is generally slowing, it is unrealistic to think that those prices – even though many sizes are at records for the decade – will stop increasing, according to sources.

As of last Tuesday, six out of seven sizes specifications of headless shell-on white shrimp from Asia had hit historic highs, according to prices listed by Urner Barry. Yet the rate of price increases has generally been slowing since Aug. 8. This slowing pace of price increase continued last week for both imports and domestic supplies, Mark Abbott, with Direct Source Seafood, told Undercurrent News

“We are expecting the market to mitigate the price rises we’ve seen over the last few months as more brown and white shrimp comes to market,” Abbott said last Wednesday. “We’re feeling a lot better this week about going forward.”

Yet prices are currently even higher than Urner Barry’s quotes in some cases, Ken Salzinger, who owns the firm KenMar Sales & Marketing, told Undercurrent. He is seeing shell-on white shrimp, 16-20 count, selling in the $8 to $8.50 range to distributors in the United States, if buyers can find them.

And while the pace of increase may be slowing, it is not likely to stop altogether any time soon, Salzinger said.

“Based on everything I’ve heard, we won’t see any substantial price softening until after the first of the year,” Salzinger said.

The reason is simple – there are no market indications that it could, Salzinger argued. Supply continues to be tight, and even as buyers resist placing orders this month, they still have unmet needs for the remainder of the year.

The shrimp buying frenzy that hit in early July was enough to catch buyers up that had been holding back on buying, but it was not enough to completely fill their holiday needs, multiple sources told Undercurrent.

Buyers will have continued needs as fall and holiday season hit, said Salzinger, who distributes to buyers across the United States in foodservice. Meanwhile, Europe is becoming a more viable market as reports of economic recovery surface from newspapers such as the New York Times.

Recent events, such as astronomically high shrimp duty rates placed on five major producing nations, are likely to exacerbate the problem. Ecuadorean shrimp producers are likely to try to minimize the blow from US CVD taxes by focusing Europe and Asia rather than the US; and it seems certain Malaysian producers, who received a 54.4% duty rate, will drastically reduce US shipments.

Another US buyer, wishing to remain unnamed, said he expects prices to reach a tipping point once the EMS crisis subsides. This supports findings from a recent report from Rabobank, which said prices will plummet as the industry recovers from EMS, and as the supply chain starts reacting to the high prices. Prices could fall to even below production costs, said the bank.

A close to the EMS crisis, however, has yet to come into view. Large sized shrimp is particularly difficult to find, and the gaps in prices between sizes are up to $0.25, according to Salzinger, who said the typical gap is $0.10 to $0.15.

“I think large size shrimp is going to stay very very firm and they may go up,” the US buyer said. He expects more small sized shrimp to hit the market, but currently, the CVD duties are “creating problems already,” as he has to tell some customers that prices may have to go up.

“They’re not too receptive to that because they had all their menu planning done a long ago,” he said.

Demand to remain strong on low supply

In July, US retailer Hy-Ve warned that consumers have already been growing tired of the high prices of shrimp, the US’ most popular seafood item. However, there are no reports of consumers significantly rolling back purchasing so far.

Meanwhile, suppliers in Thailand are not giving any indication that production will increase much in the second half of the year, Salzinger said. He pins Thai production at 110,000 pounds for the second half of the year, and although that is up from 90,000 pounds the first half, the increase represents nothing more than the typical better growing period during the second half of the year.

During the first half of the year, Thailand’sexports to the US were down 46.5% from the prior year.

As for US imports from all Southeast Asian suppliers combined, they were down 20% for the first half of the year. Southeast Asia represents 229.6m pounds of the total shrimp imports, which is just under half.

Other regions are of little help. The other major producing region – South America – also saw its sales volumes to the US slide during the first half of the year, with a decrease of 12.7%.

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