The global shrimp market is set to witness oversupply issues in the second half of 2023, according to Gorjan Nikolik, chief seafood analyst at Rabobank. He reiterated how the lack of retail price drops in the US and minimal reductions in the EU mean consumer demand has not rebounded, despite falling wholesale prices.

Nikolik said, “This is concerning because demand recovery depends on retailers first bringing prices down to stimulate consumption. So far, US retailers haven’t pushed the price down of shrimp, or it’s very minimal, over the course of the entire 2023. So, what needs to happen is retailers first need to bring prices down. Then still the question is how long does the demand take to respond? It may or may not be that we see recovering demand this year. But it’s unclear when retailers will decide to pass on the lower cost.”

Given the huge levels of stock, particularly in China, Nikolik predicts the market will not recover without cuts in 2023. He believes that declining demand among protein groupings, high unemployment, and real estate issues will keep Chinese demand weak in the absence of strong government stimulus actions.

As a result, farm-gate prices are low, as evidenced by the comparison of 60-count vannamei from China, Ecuador, India, Indonesia, Thailand, and Vietnam below from the pricing dashboard.

With the exception of the higher-priced Chinese product, which receives a premium because of the country’s live market, the lower valuing for the export-driven suppliers of Ecuador, India, Indonesia, Thailand, and Vietnam is more visible.

“Until we get a stimulus package from China — which could happen — it’s difficult there. Maybe in two months, Beijing is going to announce something huge. But unless they do that, then demand will be really sluggish,” Nikolik observes.

According to Nikolik’s predictions, the output of shrimp in India is anticipated only to decrease in the latter part of 2023, presumably falling between 10% and 15% for the entire year following a flat first half.

Based on Nikolik’s contacts in Ecuador, the increase of the country’s production could likewise drop, averaging 20% in the first half before dipping to 10% or less in the second period for full-year growth of about 12-13%.

As a result of declining demand from prominent importers like Japan, Korea, and the EU, Vietnam’s more expensive prawn market has suffered, according to Nikolik. When processing value is taken into account, even at cheaper prices, the US still offers better pay than China. Producers still seem to be replenishing their ponds, according to Nikolik, which could result in persistent surplus situations.

“Even though they notice that there’s oversupply and they’re getting a lower price, producers still ended up producing the same or more in the next cycle. So it’s taken a while for them to actually really respond [to the market],” he adds.

Due to the slower supply reaction, Nikolik thinks prices won’t increase before the end of 2023. “We don’t expect a price increase in a material way this year,” he emphasized.