The gradual recovery of Western economies from post-COVID recessionary pressures is set to revitalize global shrimp markets, according to Rabobank. Demand, which has been subdued, is expected to bounce back, lifting prices in the sector. However, the road ahead remains complex, as biological and market challenges continue to shape the industry’s landscape.

Shrimp Prices at Historic Lows

The shrimp industry has faced its toughest pricing environment in over a decade. The first half of 2024 saw historically low prices, driven by an oversupply from major exporters like Ecuador and Indonesia. Yet, as Rabobank’s second half update suggests, mild demand recovery in Western markets has begun to provide a much-needed boost to shrimp prices. The decline in supply from Indonesia and Ecuador in the early months of 2024, paired with gradual economic recovery in Europe and the US, has helped stabilize the market.

Demand Drivers in Key Markets

The improving economic outlook in Western markets, especially Europe and the US, is anticipated to drive a steady recovery in shrimp demand throughout the remainder of 2024. Rabobank notes that demand in these regions is on an upward trajectory, although the rebound remains gradual. However, China, one of the largest seafood importers, continues to face macroeconomic challenges that may dampen its import demand for shrimp and other seafood products.

This shift in global demand dynamics is likely to keep shrimp prices in check, preventing a significant surge. Despite the supply tightening, the concerns over China’s import appetite will act as a counterbalance, ensuring that shrimp prices remain relatively stable.

Feed Costs and Biological Challenges

A key concern for the shrimp sector remains the cost of feed, which has been elevated due to tight supplies of fish meal, a critical ingredient in shrimp feed. However, Rabobank predicts that feed costs should ease in the second half of 2024, as fish meal supply recovers and inventory is replenished. This is expected to offer some relief to shrimp farmers who have struggled with profitability amid high input costs.

Nevertheless, biological challenges, particularly in shrimp farming, persist. Despite these issues, the largest and most technologically advanced shrimp farms—particularly in Ecuador, India, and Vietnam—are expected to drive supply growth in the second half of the year. Yet, profitability in shrimp farming remains concentrated among the biggest players, accelerating consolidation within the industry.

Consolidation of Shrimp Farming

With profitability shrinking for smaller and less efficient farmers, the shrimp farming industry is increasingly dominated by large-scale, technologically advanced operations. Rabobank predicts that consolidation will continue as only the largest producers can maintain profitability in an environment of low prices and high production costs.

The improved supply from major shrimp-producing countries will help stabilize global markets, but the benefits will be felt unevenly. Smaller farms, lacking the resources to invest in advanced farming techniques or weather the storms of biological challenges, are likely to exit the market or be absorbed by larger competitors.