Despite high demand of shrimps, exporter margins under pressure

Currently farmgate prices in India high; International prices are expected to move up soon thereby offsetting the pressure on margins

While the Indian aquaculture industry has benefitted from the slowdown in production in countries like China, Vietnam and Thailand, the major global suppliers of shrimp, high demand has also induced a rise in farmgate prices. At the same time the average international prices are more or less stable as most importers tend to hold few months inventory; and this has put the margins of Indian exporters under pressure.

As per industry estimates, margins have shrunk by about 6-7% on an average. T R Patnaik, promoter of one of the leading shrimp exporters from India, Falcon Marine Exports Ltd admitted that margins of exporters are under pressure. Patnaik, who is also the vice- president of the Seafood Exporters Association of India, however, also added that margins, however, depend on how well one manages his business.

Ramakanth V Akula, CEO of The Waterbase Ltd, too admitted there is indeed some margin pressure for exporters. "Most exporters have contractual obligations. There is indeed some pressure on the margins, around 6-7% or so. This is because importers hold stock of a few months as shrimps as a product have a two-year shelf life. Hence, the international prices have remained stable at about $8.5 per kg on an average," Akula explained.

He, however, also noted at the same time that Waterbase has restarted its export business after a while, and hence, its margins would not depict a correct picture of the industry.

Farmgate prices, on the other hand, have increased in India. Akula explained that from below Rs 400 per kg (for 30-pound shrimp) in early FY16, it has now moved up to Rs 540 per kg.

Patnaik too said that the US-based importers were under the impression that despite a fall in production in China and other South Asian countries, India production is good this year, and they did not buy as much they would have wanted to. "However, in the first half of the year, Andhra Pradesh production was below expectation, and this pushed up the local prices," he said.

Exporters thus feel that US-based buyers would now have to increase their buying price, as their inventory (of about 3-months) is now depleting. Add to this, the global production too is down by about 7-8%, Akula mentioned.

With international prices going up, margins of exporters is likely to improve, and it would be a win-win for both farmers and exporters.

Production is China and Thailand are severely affected. China's production has slipped from a peak of 1 million tonnes to 700,000 tonnes at the moment, while Thailand is doing around 260,000 tonnes at the moment, down from 600,000 tonnes earlier. This has opened up opportunities for Indian exporters, and as such overall shrimp exports from the country is expected to clock a 20% growth rate this fiscal, feel exporters.

India's production has grown in the past few years, post adoption of vannemei shrimps (which now constitutes more than 90% of shrimp production in India). Akula informed that from an earlier 80,000 hectares (before vannemei), the area under cultivation is now around 1.2 lakh hectares.

Share of states like Gujarat and Odisha too have increased who now contribute to about 22% of national production from a 10% share 3-4 years back.

Overall Indian production had, however, declined from 1 million tonnes in FY15 to 946,000 tonnes in FY16. Indian seafood exports too had slipped from $5.5 billion in FY15 to $4.7 billion in FY16, and average unit realisation for shrimp exports have dipped about 20%. Shrimps constitute nearly 66% of India's seafood exports.