Vietnam to Resume Shrimp Production to try to Meet Demand

Before the complete resumption of agricultural production in Vietnam, which officially started on the first day of October this year, all southern provinces had to implement social distancing according to an official government mandate this past July when the impact of COVID-19 was unpredictable.

A Gradual Process to Restored Production

During the recent social distancing period, shrimp producers, traders, and processing enterprises faced difficulties in the production and trading of shrimp. In addition, farmers, worried that the COVID-19 outbreak could affect prices, were forced to reduce their production significantly. Because of this, The Vietnam Association of Seafood Exporters and Producers (Vasep) forecast a significant shortage within the next three months affecting international sales.

The process towards restoring labor in the processing fishing areas was a three-month-long gradual process according to the government’s “3 on-site” plan. The plan specified that from mid-July to mid-August 2021, processing plants could only maintain 40% of their capacity and the workforce will limit contact with potential sources of COVID-19 infection. This first step was extended until the 1st of September, forcing plants to operate under half of their capacities. However, from the beginning of September, with the ease of social distancing, plants gradually increased their capacity to 80%. By the end of September, most of the producing plants were back at 100% capacity.

In 2016, the Vietnamese government set out to boost shrimp production and double exports to reach USD 10 billion by 2025. For this year, VASEP had previously forecast exports to reach USD 4 billion at the beginning of the year, a 3% increase from the previous year. However, due to the COVID-19 distancing measures, it is unlikely that shrimp exports will reach the expected growth this year.

Workers at a Vietnamese shrimp processing plant after Social Distancing Period /Foto: VNA/VNS

Slow Recovery of Exports Might be Late to Meet Demand

According to VASEP, seafood production and exports will recover slowly and will continue to face difficulties until the end of the year due to a lack of raw material, laborers, and an increase in costs of labor and transport. Although processing plants are currently working at full capacity to fulfill international orders, there is still a lack of raw shrimp from the farms as volume was significantly reduced during the last three months. Furthermore, there has also been a substantial increase in transport within the local supply as well as for international sea freight, which will be another challenge exporters will have to face for the rest of the year.

According to Catie Bui, Tridge’s representative in Vietnam, shrimp exporters are worried that production in the factories will not meet the demand due to a large number of orders. The sizes that are currently being contracted are sized 10 - 45 pcs/kg, which are sizes that might be scarce at this point due to the prolonged social distancing measure.

A Great 2021 year was on the Way

In the first half of 2021, Vietnam's shrimp exports reached USD 1.7 billion, up by 13.7% over the same period in 2020. Exports to all main markets increased except for China. The demand for frozen seafood products is expected to rise sharply in most markets by the end of the year. Thus, it was anticipated that shrimp exports would close the year with extraordinary numbers. However, the social distancing measures got in the way, and a decrease in exports is expected to reflect that.

Despite the decrease in production over the last months, Vietnamese processors will accelerate the recovery process to prepare exports for international demand at the end of the year. To prepare for this, Ms. Bui noted that exporters would need to stabilize production as soon as possible to compete for the end of the year demand amidst competition from other major producing countries.

Source: ITC Trade Map, Tridge

The situation in Other Producing Countries

Despite setbacks caused by the COVID-19 pandemic, all shrimp-producing countries had a recovery year in 2021. India, whose production and exports fell during 2020 due to lockdowns and supply-chain disruptions, had recovered this year, and exports are forecasted to grow 20% from the previous year. India is likely to remain the most competitive supplier of value-added shrimp to the world due to its low labor cost and the scale of economy it has managed to achieve by becoming one of the largest global producers of farmed shrimp.

Ecuador’s shrimp exports demonstrated solid growth in 2021 after struggling in 2020. Within the first nine months of the year, shrimp exports exceeded USD 3.47 billion, a 29% increase year on year. Ecuador remains the biggest threat to Asia’s shrimp export trade, and evidence of that can be seen in the fact that it increased its share of US and European markets compared to its total exports last year, posing a challenge for Asian competitors in the retail sector.

Indonesia has set an ambitious goal of growing its shrimp industry by 250% by 2024. Although the country does have the potential to increase its production significantly, Indonesia had a similar production setback this year as the one in Vietnam. However, Vietnamese shrimp will have a more competitive price for the end of the year than Indonesia, as Indonesian shrimp will have higher prices due to a more significant shortage of production materials.

Sources:

• Vietnam Plus. "Agriculture sector ready to resume production."
• VN Express. "Seafood Companies Fear Lack of raw material."

• VASEP. "Seafood enterprises accelerate the recovery process after the COVID-19 pandemic."

• Tridge Local Insight. Vietnam shrimp exporters worry they cannot reach demand.
  

• Tridge Local Insight. Vietnam shrimp production needs to be stabilized.