Depending on size and location, shrimp prices are starting to fall from their high levels with some raw material now 17 percent lower than it has been, a source with one major European shrimp supplier told IntraFish, prompting buyers in major markets to be cautious about committing to purchases.
The source, who did not wish to be named, said that prices are dropping “quite significantly” particularly in India, Thailand and Vietnam.
According to the supplier, a number of factors -- including uptake of Indian shrimp, new antidumping measures against certain countries in the United States and the rise of VAT in Japan -- are “affecting everybody’s mood” at the moment and despite the fact that the shrimp season is really just beginning, “there has been a wait and see attitude [among buyers]."
On a raw material basis, prices have been dropping back, depending on size and location, anywhere between 10-17 percent, according to the supplier.
“I don’t see this as a collapse by any means as they are coming from such a high level, it is more of a correction in the market,” he added.
Many major importers, processors, and distributors are still working with old contracts, so for the time being they have not been able to lock in new levels.
“Inventories are low generally, eventually something has to give and people are going to have to start making new contracts and I think that is the point we might see prices level off again," the source said. “For the moment, though, there are a lot of buyers out there just waiting to see where it is going next before they take the plunge.”
UK demand slips as prices take toll
Understandably, while prices have been high, demand has fallen back in certain markets.
In the United Kingdom for example, the volume of warmwater shrimp consumed fell 9 percent to 14,614 metric tons over the 12 months to Feb. 20.
The value also fell 5 percent to £207.9 million (€251.2 million/$345.8 million) while at the same time, the price per kilogram climbed 5 percent to £14.23 (€17.2/$23.7) per kilo.
These figures are all according to the latest numbers from market research company Nielsen.
Simon Smith, sales and marketing director at Icelandic Seachill, confirmed that high shrimp prices have been hitting consumer demand in the United Kingdom for the past couple of years and for the company’s products that do that contain shrimp, it has been challenging.
“What we have seen in shellfish overall in the last 52 weeks is 2 percent value decline and a 7.6 percent volume decline. So that’s 1,000 tons volume decline in the past year,” Smith told IntraFish.
To combat the impact of inflated prices are having on consumer behavior in general, Smith said that Seachill and other companies are looking to develop alternatives.
“In our Saucy Fish range we have specifically developed and replaced salmon and shrimp products with other products over the past year, otherwise you end up being priced out of the market,” he said.
In the foodservice sector on the other hand, the high prices of shrimp have not had as big an impact as was expected, Mike Berthet, director of fish and seafood for M&J Seafood, a subsidiary of Brakes, told IntraFish.
Berthet and his team estimated volume would drop around 20 percent, but instead, things held relatively stable.
“It is such a big selling product people have got to have it on their menus and of course it is not that easy to make the switches off the menu that quickly," he said.
“Maybe there has been a few cutbacks, smaller sizes, but we’re not seeing any reduction to speak of which has surprised us."
One other private label supplier, who also declined to be named, said that retailers take the decisions they need to take to make things work, and that obviously there has been a slight drop in consumer demand as prices have increased.
“But we don’t think it is as severe as people felt it would be,” he said. “For food in general, prices have gone up so people are starting to expect it: higher prices are the reality."
Promotional activity falls off
One way in which retailers in the United Kingdom have been attempting to tackle the higher prices, and one which would have an ultimate consequence on consumption, is cutting back on promotions.
“A year ago we would see a lot of multi-buyer promotions, or ‘2-for-the-price-of’ type promotions, but retail strategy over the past year has shifted strongly in favor of lower price points which reflect the way people want to shop," Seachill's Smith said.
“People don’t want to load up their fridge with a lot of fish that will go off, they want to have a good price on something they will eat that night."
The supplier also said that it was natural for retailers to respond to price hikes in this way, by cutting back on promotional activity and instead offering products in smaller pack sizes, for example.
“The upshot of less promotion of course is less volume, but they haven’t damaged the general sales price [of shrimp],” he said.
Furthermore, if and when prices will normalize, promotional activity will increase and in turn so will consumption.
Outlook: Better, but not great
One thing all the suppliers who spoke to IntraFish agree on is that prices will come down again soon enough, but they will not come back down to the levels they were at before 2012.
As for supply, no one has a crystal ball and there are a lot of variable to take into account before anyone can predict what will happen over the remainder of the year.
“Supply this year in some countries like Thailand will be the same or worse looking at the seedings of the first crop,” one of the suppliers told IntraFish.
Other countries like India, in Central America and possibly Vietnam, on the other hand, might see a small increase in production, he said. But China is "the big unknown," the supplier said.
“They suffered last year so have become big importers buying from all over the place," he noted. "It will depend very much how they survive this year, if they become more self sufficient, then there is less pressure on other areas.
“My gut feeling is this year will see world supply up by anything between 5-10 percent, and from that point of view I think everyone will be buying more cautiously this year,” he said.
Seachill’s Smith, meanwhile, is not expecting any major changes in prices or demand in the United Kingdom over the rest of the year.
“I don’t think there will be a sudden increase in availability or sudden rise in consumer demand. Prices are about as high as they can go and the market won’t wear it any higher so I don’t think we will see higher prices, but similarly we will not see any sudden increase in demand either,” he said.
According to the Nielsen data, total shrimp consumption in the United Kingdom, including coldwater and warmwater, in the 52 weeks until Feb. 20 reached 29,442 metric tons, a drop of 2 percent compared with a year earlier.
Value, however, was up 2 percent to £371.7 million (€449.2 million/$618.3 million). Price per kilo was up 4 percent to £12.63 (€15.3/$21) per kilo, the figures said.
Other figures from UK seafood trade association Seafish show that in 2013, the country imported 26,248.9 metric tons, worth £177,2 million (€213.9 billion/$294.4 billion). In 2012 this was 25,953.7 metric tons, worth £150.5 million (€181.9 million/$250.4 million).
In January 2014 alone, the United Kingdom imported 2,244.5 metric tons, worth £17 million (€20.5 million/$28.3 million) compared with January 2013, when the country imported 2,146.2 metric tons, worth £11.9 million (€14.4 million/$19.8 million).