China - Shrimp supply outlook   Published on February 4, 2002

May surpass Thailand to become leading exporter in 2002
China's economy as a whole continues to grow amidst the global economic downturn. Indeed, many have predicted that the country could post economic growth of 7.3 per cent in 2002, the same level as it achieved last year. This overall upbeat scenario contributes to the positive outlook for China's shrimp sector in 2002.

Last year, shrimp production in China rose by 14.7 per cent to about 250,000 metric tons. The main reason for this improvement was growth in the production of Panaeus Vannamei, a South American White shrimp. This variety was first introduced in China in 1997 following a disastrous period of Black Tiger (Panaeus Monodon) farming in the early 1990s due to disease problems. Shrimp farming subsequently grew in popularity among farmers, as shrimp is easy to raise, while fetching a relatively quick profit when compared with other agricultural products.

Improved production methodology and an increase in farming areas also contributed to the growth in shrimp production. A greater number of processors in China conform to international standards, such as HACCP, while labor costs there are more competitive than the country's major rivals, including Thailand.

China claims to have one of the most cost-effective production systems in the world. China's production costs stand at about US$ 2 per kilogram, while in Thailand, the world's largest shrimp exporter, production costs reach as much as $ 3.2-3.4 per kilogram.

Beijing has historically protected its domestic shrimp sector by imposing a punishing tariff totaling 52.1 per cent (comprising a 30-per cent tariff plus 17 per cent VAT) on all shrimp imports. However, following its accession into the World Trade Organization (WTO), China is forced to reduce this tariff to 10 per cent within three years.

Industry sources predict that shrimp production in China will grow 30 per cent this year in terms of volume, while the area utilized for shrimp farming is set to grow 20 per cent in 2002.

China's shrimp exports could reach new markets now that the country has been accepted into the WTO. If everything runs smoothly, China could become the number one shrimp-exporting nation this year, ahead of Thailand.

Table 1: Shrimp production 1999-2004 (farming area and output)

Although there are some bullish signs for China's shrimp industry, there are also some significant obstacles.

China currently faces a shortage of Specific Pathogen Resistance (SPR) brood stock. While the country is currently studying SPR brood stock production, imported SPR stock from the Americas remains too expensive for farmers.

Disease concerns continue to haunt farmers, particularly the threat of White Spot. The country is also underdeveloped in terms of hatcheries. China suffers from a lack of second-generation hatcheries, unlike rival shrimp producing nations in Latin America.

It seems that the growth in areas suitable for locating ponds is likely to decline again sharply in 2004. This was also the case last year (See Table 1). It is becoming increasingly difficult to locate appropriate areas with a suitable climate for shrimp farming in China. Coastal locations are limited once environmental factors are taken into consideration. Beijing is quite serious when it comes to preservation of China's mangroves. In addition, farmers face the problem of rising fishmeal prices, particularly imports from Peru.

There is a distinct lack of management expertise among China's shrimp farmers, making it difficult to plan production in an effective way.

On the demand side, export markets have become a bit wary of shrimp from China recently after the European Union (E.U.) banned shrimp imports from China, Vietnam and Indonesia after finding traces of the banned antibiotic chloramphenical. China is still preparing its guidelines on the use of antibiotics and expects to release them later in the year.

Although China's shrimp industry faces several challenges this year, it is still likely to become a world leader. The emphasis on the country's aquaculture industry will soon switch from tilapia to shrimp. The area available for shrimp farming is expected to grow in 2002, pushing up output.

Prices are expected to edge lower as supplies improve and domestic demand is met.

Processing facilities are becoming increasingly sophisticated in China, and growing number of plants have become certified to international standards, including HACCP.