Demand for Argentine red shrimp is expected to rise in the coming months, driven by an early finish to the ongoing fishing season and the escalation of orders for the upcoming New Year's celebrations in China.
Argentine producers anticipate the ongoing fishing season to be one of the shortest of the past few years. Fishing began a month later than usual for conservation reasons, with some smaller sizes found during stock surveys.
"The [ongoing fishing] season has [so far] been -- and will be -- quite short, since it is almost a fact that it will end during the first half of October," Diego Glikman, export manager at Newsan Seafood, one of the largest exporters of Argentine red shrimp, told Undercurrent News. This year's season might end after only four months of fishing, for the first time in several years, Glikman pointed out.
Catches this year have been lower due to weather conditions and past increased fishing efforts, noted Fernando Alvarez, president of Grupo Conarpesa Continental Armadores de Pesca (Conarpesa), another of the three largest Argentine shrimp exporters. He said it was likely the current season would not last as long as last year's, although cautiously added: "that is never known until it happens, the Argentine sea is unpredictable".
Other industry operators confirmed to Undercurrent that they expected a shorter season this year, with a possible closure forecast for Oct. 2. Reports from Argentina's fishing grounds are not promising, with many operators asking the country's authorities to open new fishing areas where shrimp is supposed to be more abundant. Areas to the east of the fishing grounds are already exhausted, and while the opening of new zones may bring better catches, the consequent increase in hake bycatches could force authorities to close those new areas as well.
"All indicators point to an early closure of the fishery happening at the beginning of October," Fernando Lago, sales director at Spain’s Grupo Iberica de Congelados (Iberconsa), another key exporter of Argentine shrimp, told Undercurrent.
Another issue limiting fishing efforts is that some areas have been closed to catches due to the high presence of hake bycatch and small shrimp, after a much wider area was opened for fishing at the start of the season.
Instead of fishing from north to south as in the last seven years, fishing this year has been allowed mainly just in the northern fishing area, pointed out Federico Angeleri, commercial director with Grupo Veraz. "Catches were very good the first 50 days [of the fishing season], but in August they decreased greatly, first due to climatic issues and then due to natural issues," he said.
"Shrimp is not as abundant as in other years, or is found in other areas that are not yet open. For the fleet without freezers, this situation was very bad, since in three days some ships did not even complete their cargo. The freezer ships, on the other hand, felt less shrinkage, since they continued to take between eight and 10 [metric] tons per day, although the larger ones had been making more than 14-15t. Everyone thinks that they are catching amazingly when in truth the catch has not been good. Due to this reason, new surveys will be initiated in the next few days in areas that have not yet been explored," he added.
Angeleri concluded that "the season is very likely to end this year in October, which will further shorten catches that are already 7-8% below compared to last year".
In September Chinese buyers started shrimp orders for the upcoming New Year's celebrations on Jan. 25. Orders should be placed by early October to be delivered in time for the festival.
"During the World Seafood Shanghai (SIFSE) last week, we received many importers and distributors with growing interest in buying volumes to cover demand for Chinese New Year 2020," Lago noted.
"Last week, in Shangai, we started closing large [sales] but at lower prices than last year," pointed out Alvarez, adding that red shrimp was now competing directly with farmed vannamei.
"We saw more demand since [the start of] September," Glikman also said, forecasting a rise in Chinese orders, considering that quantities bought so far in anticipation of the Chinese New Year were still very low compared with previous years.
"Europe market has kept steady demand, although it fell under pressure from the extra stocks in Argentina. The biggest volumes are likely to be closed in September-October in the face of the Christmas season, with stable prices," Lago observed.
Chinese orders in the run-up to and during the Shanghai show also helped lift prices of Ecuadorean shrimp, but simultaneously underlined the Latin American country's growing reliance on the Chinese market.
Meanwhile, more and more US restaurant chains have started to put Argentine red shrimp on their menus, and the trend is set to continue with a decline in Gulf of Mexico wild shrimp landings.
Undercurrent understands that currently Argentine shrimp are priced at a 25% discount compared with last year's price, with L1 size costing roughly $6.50-6.75 per kilogram and L2 size $5.70-6/kg.
Current prices are approximately $1/kg below previous market expectations for this year, according to some producers.
Prices for frozen Ecuadorean head-on, shell-on (HOSO) shrimp, 40-50 count per kilogram, firmed at $5.90-$5.95/kg, CIF China, up from a recent low of $5.70/kg two weeks prior to the Shangai show, "and even $5.65/kg", a large Ecuadorean packer told Undercurrent in Shangai last week.
2019 market situation in China
Earlier this year, the market situation in China for Argentine red shrimp has been complicated due to a "price war originated by a new big operator who started dumping prices with 2018 production right after Chinese New Year", sources said.
"Large importers have created a very significant decline that has somehow generated a psychosis and dragged the entire industry; the situation is very delicate," Angeleri said.
The sharp price drop unleashed panic among Chinese importers who have remained quiet until the stock in the domestic market is virtually used up, according to sources.
"While there is talk that there are still [a stock of] 5,000t left in the market, it seems to be considerably less and many said there is not much left. The truth is that large purchases have not yet begun since prices requested [by Chinese buyers] imply a very large loss for [Argentine] shipowners," Angeleri explained.
As a result, there are currently very small volumes of red shrimp in transit from Argentina to China because just a few importers purchased volumes in July and August.
However, the very low prices have pushed domestic sales through the roof in the last few weeks, because Argentine red shrimp is currently up to $2/kg cheaper than farmed vannamei shrimp from Latin America of the same size.
This is causing stronger sales and growing demand, with both importers and distributors expecting a very hot market until November, industry sources said.
"There is not much time left and it seems to me that they [buyers] will be surprised because when everyone starts shopping, logistical problems, delays, etc. will begin and much product will not arrive in time for the Chinese New Year," Angeleri warned.
"I believe we are at the lowest price point and that the market will begin to move in the coming weeks when buyers start making purchase decisions for the [upcoming] holidays, " Angeleri also said.