Vietnamese seafood exporters worried about material shortages

Vietnam's seafood exports have shown signs of a recovery in recent months, but processing enterprises are worried about sharp declines in raw materials which will affect their export targets this year.

Signs of recovery

Vietnam’s seafood export turnover reached about $900 million in May, down 14% from the same period last year. The five-month figure was $3.47 billion, a year-on-year decrease of nearly 26%, compared to a drop of 30% in the first four months, Ministry of Agriculture and Rural Development data shows.

According to Le Hang, communications director at the Vietnam Association of Seafood Producers (VASEP), there were three main reasons for the sharp decline in seafood exports. Firstly, in 2022, this industry experienced overheating growth when it reached a turnover of $11 billion for the first time in history.

Secondly, demand in major seafood markets shrank as a result of economic recession, inflation, and the Russia-Ukraine conflict. In addition, raw material supplies fell due to high farming costs and reduced catches.

Kim Thu, a shrimp market expert at VASEP, said that the market has shown better signals thanks to renewed demand in the U.S. market when inventory falls. American cold storage firms are looking for new supplies, and the U.S. is still the leading shrimp importer from Vietnam.

Japan has surpassed China to become the second largest importer of Vietnamese shrimp, with a value of nearly $150 million in the first four months of 2023.

Northwest European countries, including Belgium, Germany, the Netherlands and France, also have increased demand for shrimp. They mainly opt for headless whiteleg shrimp from Vietnam. However, in order to stand firm in these markets, Vietnamese enterprises must be ready to meet strict food safety requirements.

The EU is Vietnam's fourth largest shrimp importer, accounting for about 14%.

Shrimp is Vietnam's main export product with annual turnover making up over 40% of the seafood industry’s total figure. Currently, Vietnamese shrimp are exported to 100 countries, of which the five largest markets are the U.S., Japan, China, the EU and South Korea.

According to VASEP, pangasius exports in the first four months of the year brought home nearly $600 million, down 41% over the same period last year, but down only 8% in the EU market and 10% in China. Pangasius is deemed affordable, so it has advantages in the context of the economic recession and tightened spending.

In addition to shrimp and pangasius - the two main exports, other key seafood products have also seen better signs since May.

Worries about raw material shortages

According the agricultural sectors of localities with large shrimp farming areas such as Ca Mau, Bac Lieu and Soc Trang in the Mekong Delta region, in recent times, continuously decreasing shrimp prices, prolonged unfavorable weather, complicated developments of diseases on farmed shrimp, and high production costs have made shrimp farmers hesitant to start a new crop.

Vo Quan Huy, chairman of the My Thanh Shrimp Association in Soc Trang province, said that shrimp farmers are currently in a very difficult situation because input costs, especially feed, have increased rapidly, but the selling prices have plunged, causing shrimp farmers to suffer losses and a lack of capital to reinvest in production.

The quality of shrimp is also a challenge for farmers, Huy said, adding that if they accidentally buy poor quality shrimp to breed, the success rate is very low, leading to losses. Therefore, management agencies need to set standards and label "stars" for hatcheries, while instructing them to publicize this information.

In order to remove difficulties for the shrimp industry, besides the efforts of shrimp farmers, management agencies need to promote technological renovation and digital transformation, and increase credit for shrimp farmers to reinvest in production, Huy suggested.

Sharing the same view, Ho Quoc Luc, chairman of Sao Ta Foods Joint Stock Company, said that the biggest difficulty facing the shrimp industry is the low selling prices due to falling demand and competition with cheap shrimp products from Ecuador and India. Therefore, businesses must minimize unnecessary costs to reduce prices, improve processing levels, diversify products, increase quality, and seek new markets with better prices.

"Currently, shrimp farms account for only about 10% of the total annual shrimp production. Meanwhile, small farming areas and households, with low successful farming rates, make up 90%. Therefore, small shrimp farmers need more capital support, infrastructure, breeding, and market information,” he said.

According to Nguyen Van Truong, chairman and CEO of Cafatex Seafood Joint Stock Company, due to low selling prices, processing enterprises cannot increase prices of raw materials. With such low prices, farmers do not dare to stock shrimp for a new harvest. Therefore, processing factories are likely to fall into a "crisis" of raw materials when seafood export markets recover.

The General Department of Fisheries under the Ministry of Agriculture and Rural Development said that to achieve the shrimp export turnover target of $4.3 billion in 2023, the agricultural sector is aiming for about 750,000 hectares of brackish water shrimp with an output of more than 1 million tons. However, due to consumption market difficulties and unpredictable shrimp prices in the near future, the progress of stocking new shrimp crops will be slower than planned.