US Shrimp Market Remains Oversupplied; Prices Continue to Be Depressed

Published Jan 11, 2024

US import volume of frozen shrimp seems to be stabilizing at levels slightly higher than the five-year average, while prices continue falling by double-digit rates. This suggests that demand -in real terms- has fallen, but the sharp price decline also points to considerable growth from the supply side, which seems to be causing the current oversupply. Imports from Ecuador, which have the lowest price, continue to grow in share. Moving forward, current price levels are likely to result in more production cuts in major producing regions. However, ongoing growth from producers with a more competitive cost structure, such as Ecuador, could result in a more consolidated market. Overall, prices are expected to remain depressed compared to 2024.

The latest trade data from the United States Department of Agriculture’s (USDA) Foreign Agricultural Service (FAS) indicated that US frozen shrimp import volume in November grew at the fastest pace since the five-month year-on-year (YoY) growth streak started, but that is only because imports were plunging in H2-2022 (growth comes off from a weak base). On a more important note, import volume seems to be stabilizing at levels slightly higher than its five-year average, suggesting stronger demand than the recent history (taking out the anomalous 2022). However, demand (as measured by US imports) has seen a downturn relative to prices, which remain significantly below last year’s and historical levels. This means that import volume should be much higher considering current prices when using the five-year average as a benchmark.

Actual demand is down due to ongoing inflationary pressure on consumers. Inflation -meaning the rate of growth in prices- has indeed declined from levels in the past months, but remains in place, meaning prices continue to rise. Overall, higher prices leave consumers with a lower available income, in real terms, to purchase shrimp. This is despite shrimp being at lower prices in particular.

Nonetheless, a fall in demand in real terms is not the whole picture nor the full explanation behind low prices. In fact, most of the downturn can be explained by a higher growth in low-priced supply. According to the latest annual production survey from Global Seafood Alliance and Rabobank, Ecuador’s shrimp production growth in 2023 was estimated to be 14%. Ecuador’s share in the United States (US) import market has continued to grow. In fact, Ecuador's share in the volume of US frozen shrimp imports for a Jan-Nov period stood at a historical high of 32% in 2023, growing by 2 percentage points from the same period in 2022. In 2018, Ecuador's share was only 14%. Import volume from Ecuador has grown by a compound annual growth rate of 22% since 2018.

It's also noteworthy that this year, when overall frozen shrimp import volume experienced a considerable decline of 3.7% or 21 thousand metric tons (mt), imports from Ecuador managed to rise by 3% or 5.1 thousand mt. Thus, import volume from Ecuador experienced the largest YoY gain during the period, surpassing India's 1.1 thousand mt increase by far.

Ecuador’s share gain is more noteworthy considering the fact that imports from this country have the lowest price among comparable producers. From Jan-23 to Nov-23, the average import price from Ecuador stood at USD 6.70 per kilogram (kg), compared to USD 7.52/kg in India, USD 8.09/kg in Indonesia, USD 11.84/kg in Vietnam, and USD 12.58/kg in Mexico.

Thus, the real-term fallout in demand, coupled with high growth in supply with a lower export price, is what’s causing the current oversupply in the US market, which is reflected in considerably depressed import prices.

Moving forward, these price levels are likely to continue causing production cuts, as they are unsustainable for a lot of producers. In 2023, producers in India, which continues to be the largest shrimp supplier to the US despite Ecuador’s growth, started to curtail production due to this reason. This suggests prices could eventually rise until they meet current demand, which marks a level of USD 8.50/kg. Nonetheless, further supply growth is expected. While countries with a non-competitive cost structure will see their production dwindle, highly competitive countries such as Ecuador are likely to continue consolidating in the market. It’s worth noting that the same Global Seafood Alliance/Rabobank survey mentioned above estimates global production growth of 4.8% in 2024. It estimates that Ecuador’s production might grow at the same rates as 2023 (+14%). Thus, not much price upside is expected for 2024. However, the US International Trade Commission (ITC) has an ongoing antidumping investigation on shrimp imports from Ecuador, India, and other major producers which could result in new duties and cap the price potential downside.