Moneycontrol PRO
Upcoming Event : LeapToUnicorn - mentoring, networking and fundraising for startups. Register now
you are here: HomeNewsBusiness

Costly feed and freight rates spoil seafood industry’s efforts to cash in on higher shrimp production

A cash crunch has forced aqua farmers in several states to go slow in stocking seeds in their farms.

September 11, 2021 / 07:34 AM IST
The production of aquaculture shrimp, which accounts for over 70 percent of the nearly $6 billion yearly seafood exports from India, dropped.

The production of aquaculture shrimp, which accounts for over 70 percent of the nearly $6 billion yearly seafood exports from India, dropped.

Higher feed prices on top of logistics hurdles have thwarted efforts by Indian seafood exporters to capitalise on the increased output of farmed shrimp this year.

The production of aquaculture shrimp, which accounts for over 70 percent of the nearly $6 billion yearly seafood exports from India, dropped 19 percent to 650,000 tonnes in 2020 from the previous year. The output has been better in 2021 and overseas demand steady but farmers, processors and exporters complain that steep increases in aquatic feed price and freight rates have deprived them of the benefit.

“Production is up by 10-15 percent this year, but the profitability went down with soybean prices escalating from around Rs 40 per kg to over Rs 100 per kg, pushing up the feed prices sharply,” said S Muthukaruppan, former president of the Society of Aquaculture Professionals. “Farmers also got poor prices for the shrimps with the exporters facing a liquidity crunch due to a container shortage and freight rate increases,” he added.

A cash crunch has forced aqua farmers in several states to go slow in stocking seeds in their farms. Among the coastal states, only Andhra Pradesh, which has the largest number of farms, is doing well. Stocking in Gujarat has been severely impaired, and cyclone and floods have ruined the prospects of West Bengal and Odisha, major shrimp aquaculture states, Muthukaruppan said.

Feed prices have eased a bit now, with the central government permitting import of genetically modified soybean. “Soybean prices have fallen from Rs 105 to about Rs 99 per kg, which is still on the higher side. Failure of the crop in Brazil and the speculative trading in soybean in the commodity exchange in India had led to a surge in the commodity price,’’ said CR Rao, joint managing director of Avanti Feeds Limited.

Prices may not touch the level of last year, but may stabilise around Rs 70 per kg in a couple of months because of the import shipments and better prospects of the new crop.

“We expect the first import shipment earliest by the third week of September. As for the new soybean crop. the acreage has increased and the monsoon has been good,” Rao said.

Although seafood shipments for the Christmas and New Year season are underway, exporters are handicapped by a working capital shortage in the light of higher freight rates.

“I ship around 30 containers a month for which I needed $75,000 earlier. But now I need $300,000 as freight rates have gone up by four to five times. Since we get the payment after 60 days, we are facing an acute shortage of working capital,’’ said exporter Kenny Thomas, managing director of Jinny Marine Traders in Gujarat.

The container shortage is another problem. “We get about 15 containers for export a month. So, we are saddled with a higher inventory and the banks are reluctant to extend credit limits. Unless the government advises the banks to raise the credit limit by 25 to 30 percent, exporters will find it difficult to continue with the shipments,’’ he said.

Transport rate hikes have raised seafood prices from India, which counts the US, China and Europe as the top three buyers. Demand is steady in the US, the largest buyer of Indian seafood with a share of 41 percent.

“Since the consumers in the US are mostly upper class, the price increase has not affected the consumption. But the middle-class consumers in Europe may shift to cheaper chicken and pork as seafood becomes costly,” Thomas said.

Indian exporters have also confronted rejection of consignments by China since the latter started testing inbound shipments for the coronavirus. Shipping delays and payment problems have also affected exports to China.
PK Krishnakumar is a journalist based in Kochi.
first published: Sep 11, 2021 07:34 am