Shrimp exports from India are expected to nearly double in value to $7 billion within the next five years, according to analysis from CRISIL, the Mumbai-based credit ratings information services unit of S&P Global. It reports that the market is being driven by strong demand, high quality, improved product mix, and an increase in aquaculture production area in Andhra Pradesh, Gujarat, Odisha and West Bengal – even as Asian rivals battle structural issues and rising domestic consumption.
In fiscal 2016 India became the world’s biggest exporter of frozen shrimp, topping Vietnam by about $100 million in sales. A year on, India has decisively pulled ahead, racking up $3.8 billion exports as Vietnam flat lined at $3 billion, calculates CRISIL.
Since 2010 shrimp production in Asia has been severely affected by diseases, floods, labor issues, and tightening environmental norms. Output in Vietnam has declined 40% from peak levels because of shortages of fresh water, salinity intrusion and illegal shrimp farming. Thailand, which was once the top exporter, is now ranked fifth globally after a 65% plunge in production from peak levels. And in 2016, China’s shrimp production nosedived 60% even as its consumption more than doubled, rendering it a marginal exporter. In addition, these countries have also faced significant quality challenges.
Lower-density Farms
On the other hand, reported CRISIL, Indian exporters have in the past few years concentrated their efforts on lower-density shrimp farms to control diseases, while maintaining quality across the value chain. What also helped was the use of resilient specific pathogen-free (SPF) brood-stock imported from the United States.
Consequently, between fiscal 2012 and 2017, India’s shrimp production doubled, which enabled it to seize an opportunity created by lower supplies from Asia.
India ranked as the top supplier to the USA market from January to October of 2017, exporting 174,809 metric tons (MT), according to the National Ocean and Atmospheric Administration (NOAA). That figure was up by 52,108 metric tons compared to same period in 2016.
Second in exports to the United States was Indonesia at 96,177 MT, down by 2,069 tons from January to October the year before. The remaining Top 10 suppliers ranked as follows: Ecuador, 60,923 (- 1,515); Thailand, 60,243 (-3,0960); Vietnam, 46,001 (-4,220); China, 38,161 (+10,840); Mexico, 18,155 (-757); Argentina, 9,991 (+3,960); Peru, 8,433 (+231) and Guyana, 8,035 (+579).
CRISIL rates 75 shrimp exporters, whose revenues grew at a compound annual growth rate of 9% to over $2.2 between fiscal years 2015 and 2017 billion, contributing 60% of India’s shrimp exports. Their gearing, or debt to equity ratio, has improved to under 1 time from over 1.3 times, and strengthened their credit profiles.
“As a result, between fiscal years 2015 and 2017, the average credit ratio (or upgrades to downgrades) of CRISIL-rated shrimp exporters stood at over 7,” reported Subodh Rai, senior director of the ratings company. “This is significantly higher than the average credit ratio of about 1.4 times for our entire portfolio during the same period, which underscores the structural improvements and strong tailwinds in the sector. ”
To be sure, rivals are trying to get their house in order. Improving hatchery procedures are helping Thailand recover slowly, but Vietnam is expected to take more time to sort out quality issues. China is struggling with both structural issues and surging domestic demand. Consequently, India’s primacy in shrimp exports is unlikely to be seriously challenged over the medium term.
Infrastructure Expansion
Additionally, larger Indian exporters are expanding infrastructure to cater to increasing demand for value-added products from big global retail chains and restaurants. Therefore, it is anticipated that value-added exports will rise significantly from current levels of approximately 15% per annum.
“Strong volume growth and higher proportion of value-added products will bolster the operating profitability of CRISIL-rated shrimp exporters,” said Rahul Guha, a company director. “Additionally, healthy accretions and the absence of major debt-funded capital expenditure will reduce leverage and further strengthen their credit profiles.”
Going forward, currency exchange rates and protectionist tendencies, along with increasing stringency regarding quality control among importing nations, will play major roles in export market developments.
Temporary Import Ban
Another key factor is aquaculture health concerns among importing nations, especially those that have their shrimp farming industries. Indeed, last week Thailand announced a three-month prohibition of shrimp imports from India and Malaysia because of worries about the spread of a highly contagious Myonecrosis (IMNV) bacterial infection. The following species are subject to the ban: Penaeus esculentus, P. indicus, P. chinensis, P. vannamei, P. monodon and P. stylirostris.
