Seafood Portals talk about Vietnam low Vannamei prices, but what is the reality on the ground?

A well-known seafood website coverage of the Vietnam shrimp situation recently greatly ‘announced’ a ‘dipping raw material price for shrimp’. The facts on which the report is based were questioned by large buyers. We find the article misleading and we give you facts checked on the ground and an alternative explanation.  

According to the article, the price of Vannamei in Vietnam has been coming down strongly. It is a result of both factories reducing their production capacity to apply the “3TC” strict lockdown rule, as well as the annual peak harvesting time of Vannamei season. Farmers continue to harvest in big volumes, pushing raw material prices to go down.   

This article has provided only one angle of the current seafood situation in Vietnam, not the complete picture. The price or raw material has dropped, but factories cannot collect the raw material and make saving on existing contracts or new competitive offers due to following reasons, commented by Mr. Do Ngoc Tai, owner of Taika Seafood group: 

  1. The 3TC regulation has reduced the number of workers in the seafood factory greatly to 20-25%. In addition, not all staying-workers are employed in processing (machinery, water, cold storage keepers,)  so processing capacity is overall reduced to 20%; 
  2. There are less workers, so factories give priority to big sizes production to utilize the labor force. No factories want to receive small size raw materials and farmers have to sell out at loss or they can only dispose of those quantities.  
  3. The Covid19-related expenses have raised the factory costs strongly: 
    • Pay 70% of basic salary for workers staying home. 
    • Full board (3 meals daily and accommodation) for the staying-in workers. 
    • Covid test every 3 days for staying-in workers. For example, a 200- worker Covid test is about usd 4,700/ every 3 days. 
    • Higher fixed cost per kg as overall production has reduced.  
    • 30% increase in cost of packaging and materials due to logistic and capacity disruption. 
    • High inventory of finished products that can’t be shipped out due to the shortage of containers which froze the financial liquidity of exporters plus adding more bank interests. 
    • Overall 104 seafood factories have closed down out of 449 processing workshops, while the top 20 are working at described low capacity.  
    • With current loss in price, farmers won’t have money to put more post-larvae (PL) into the pond. We expect there will be a strong shortage of shrimp in the next 1.5 month, with farming volumes  dropping 50-70% compared to pre-Covid.

In the first 6 months of 2021 reached 371 thousand MT (up 12% over the same period in 2020), of which black tiger shrimp reached 113,000 Mts and Vannamei reached 258,000 Mts. However, in the 2nd crop, this number will drop significantly under Covid’s turmoil.  

In normal conditions, every month 7bil PL and 150,000 Mts of feed meal are transported from Central Vietnam hatcheries and plants to the Mekong Delta farms. 

Transports have been totally disrupted since Jul-Aug so many big farmers have no chance to restock for 2nd crop (assuming they have managed to harvest the 1st crop under current restrictions), or they simply let the shrimp grow in the farm until the logistics and workers situation improve.  

Cat Lai Port, HCMC’s largest port, has suffered a container jam for over 90 days. The shrimp producers have been facing rocket ocean freight plus expenses of local transportation. They also find difficulty finding containers for export. 

All big factories have been fully booked with orders before Covid’ time, so now they only use their limited capacity to process for pending contracts. Madame Phi Anh, owner of TP seafood confirmed they won’t offer for new shipment till end October or early next year, depending on their pending contracts balance, and price will be much higher.  

So with the above factors and more, the drop of raw material price won’t be reflected in export price and in fact we expect new offers post- Covid to be much higher than pre-Covid time. 

Do you need more details of the Vietnam situation?

Feel free to drop us a line!

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