Global shrimp industry – the Indian dynamics

• Global demand and supply
• Indian industry dynamics
• Industry outlook

The global fisheries and aquaculture industry are a major part of the global food industry with a total global production volume of 171 Million tonnes and an industry value estimated at USD 362 billion.  The industry constitutes two production types, i.e., capture fisheries and aquaculture production. The global production through aquaculture has been growing at an average annual growth rate of ~6% during the period 2001-16 and has, thereby, improved its total share of production in the global fisheries and aquaculture industry from ~25% to 45%  during the same period due to the overfishing of natural inland and coastal waterbodies. Shrimp production forms a sizeable 7% of the production volume of the global fisheries and aquaculture industry and is classified as a high value species with large global trading volumes. In this blog, we have covered the trend in the global shrimp market, India’s rise in the segment, key characteristics which contributed to the country growth alongside the medium-term outlook for the sector.

Global Demand and Supply

The global shrimp production has increased at a CAGR of 3.2% during the period 2011-2017. The top 5 producers are from Asia namely, China, India, Indonesia, Vietnam and Thailand account for more than 80% of the total global shrimp production.

The boom in aquaculture production methods post the 1990s has led these regions to gain a dominant share of world shrimp production as they have access to a large coastal belt, ambient climate and temperature to cultivate shrimp. The domestic consumption in these countries is heterogeneous with China and other South East Asian countries having a comparably high demand base per capita for shrimp. This leaves them with a reduced stock to supply to other regions post domestic consumption. However, India has low level of consumption for shrimp and exports more than 80% of its production to large markets around the world.

This has enabled India to become the largest exporter of shrimp globally with a 23% share of the total global export volumes. The global demand base for shrimp largely constitutes of the major developed regions and countries. USA, Europe and Japan have the highest per capita consumption of shrimp due to its high appeal in food consumption and its nutritional benefits. These countries together account for more than ~63% of total global shrimp imports as they have a large and growing demand base and insufficient production sources domestically.

This has provided a large and growing market to Indian shrimp exporters. The country is currently the largest exporter of shrimp to the US, the second largest exporter to Europe and the fourth largest exporter to Japan. More than 70% of the total Indian shrimp production is exported from the country to these markets.

Indian Industry Dynamics

The Indian shrimp industry has gained in relative importance globally during the past 10 years with the share of global exports rising from 6% in 2009 to 23% in 2018.  The industry has seen a strong production growth during the period 2010-18 at a CAGR of 27% from a level of 97 thousand tonnes to 690 thousand tonnes. The total industry value in 2018 is estimated at USD 4.3 billion. 

Positively, the total area under cultivation during the aforementioned period increased at a very small pace from 102 thousand hectares to 152 thousand hectares (2009 to 2018) indicating that the stellar rise in production was backed by strong leap in productivity from 1 tonne per hectare in 2010 to 4.5 tonnes per hectare in 2018. 

The productivity increase can be attributed to the following:

1. Growing number of modern aquaculture farms – Capacity expansion and use of modern facilities by large organized players along the vast Indian coastline particularly in the state of Andhra Pradesh which has a large access to brackish water has significantly improved productivity. These facilities have improved disease control protocols compared to traditional aquaculture farms which gives them a significant advantage in production.
2. Growth in production of L. Vannamei species – L. Vannamei shrimp species is one of the most popular shrimp breeds in the world. The breeding of the species is significantly easier than other breeds like Tiger Shrimp as they can be reared in higher densities in the same amount of area and have a higher level of tolerance to different levels of water salinity. Production share of L. Vannamei shrimp in India which constituted less than 5% of total volume in 2010 has jumped to ~90% in 2018.
3. Use of High-Quality Feeds – The industry has utilized high-quality shrimp feeds made by large domestic organized players which helped the shrimp industry maintain high quality standards and improving productivity.
4. Government Support – The Marine Products Export Development Authority (MPEDA) has been providing the industry with a supportive policy framework, initiatives and environment to help improve the industry’s productivity and quality. Going forward, the body has set a target to grow the value of the industry to USD 10 billion.

These productivity improvements have helped the country establish itself as the second largest aquaculture producer in the world.

Industry Outlook

The rise of the Indian shrimp industry has propelled it to take a central role in the global industry supply. However, the fast growing exports from India have resulted in a decline in price realization of shrimp in global markets by ~10-15% depending on the grade and size. Another major cause of the declining price is the slump in demand growth in major developed markets as a result of lower consumer offtake in these countries during the last few years.

The large organized players in India are expected to further expand capacity going forward in line with the target set by the MPEDA to grow the industry to USD 10 Billion. This can play a party pooper and has the potential to spoil the balance in the global market, leading to price declines in the global market.

However, we expect demand to turnaround in the medium term, in light of the growing trend of health consciousness. Shrimp demand is expected to see an uptick in developed markets due to its high appeal in the seafood basket and nutritional value. Furthermore, amongst the large exporters, increase in domestic demand in China is expected to shrink the surplus production available for export and the major South East Asian exporters are expected to grow exports, only marginally, in line with the overall industry growth. The slowing of exports from other major supplying markets should arrest the current downward trajectory in prices and can stabilize the same.

In light of the same, we believe that Indian exporters will be able to fill a larger share of the expected demand growth in the medium term. The large Indian shrimp manufacturers are also complying with the stringent quality standards globally which can help them export a greater volume of exports to other developed and emerging regions globally. This indicates that the future can bear a major role for the fast -growing Indian aquaculture industry in fulfilling global shrimp supplies.