With feed responsible for at least 50 percent of the production cost of an average shrimp farmer, global commodity prices have massive implications for the formulation of shrimp feed and on the cost of feed sold to the farmer.
“Sustainability is not free,” executive director Agri-Commodities Markets Research at Rabobank Carlos Mera told delegates at last week's Global Shrimp Forum in Utrecht, Netherlands.
“Food stocks are like bank accounts, if you look into them you will usually find a little less than you expect.”
The global commodity market is experiencing a period of turbulence as rising costs of feed ingredients such as grain, maize, wheat, soy, fishmeal and fish oil begin to impact consumers.
Mera outlined some of the issues looming on the horizon, including the fact that we have now had two consecutive La Niña events.
These tend to make South America and the United States dry, he explained, which in turn negatively impacts crops. Compounding the issue, the area of wheat planted outside of Ukraine and Russia actually contracted prior to the war.
Meanwhile, biofuel demand has exploded. This is normally a good thing because it is helps fill the demand gap for standard fuel, Mera explained, but it does increase the price of food, and crucially of vegetable oils.
It is an impact being strongly felt in India.
Still by far the dominant shrimp supplier to the United States, with around a 48 percent market share, Chowdary Kunam, CEO of key supplier Sandhya Aqua told the audience that India is facing significant challenges right now, echoing the words of Indian producer Manoj Sharma, speaking to IntraFish earlier this month.
While Indian production is significant on the global stage, output has stagnated since 2017, in part due to disease, the cost of the increase in land leasing (which is around $1,500 (€1,478) per acre per year), and the high cost of financing, which is reaching levels as high as 36 percent per year across the supply chain, Kunam explained.
COVID-related inflation has made it worse. Input costs such as electricity and feed are among the pinch points. For example, Kunam noted, feed costs per kilo have risen by as much as 50 percent in the past few years.
All those higher costs have driven down farmer margins from 22 percent in 2019 to 10 percent this year.