India's Avanti Feeds is hopeful going into the 2020 financial year, with price stability restoring some confidence amongst shrimp farmers, it said.
The first quarter of the new business year in India saw shrimp raw material output down by 10-15% year-on-year, due to a delay in stocking back in February and March 2020, Avanti said in its Q1 conference call, held on July 25.
However, "it is expected that the culture will pick up in the second crop, with confidence that the shrimp prices and climate conditions being favorable", it said.
"Having experienced subdued shrimp culture activity in , this year is on the path of recovery with export price stability and farm gate prices also improving to re-instate confidence in farmers to resume shrimp culture more vigorously."
At the end of June, Undercurrent News sources reported Indian shrimp farmers have stocked ponds with 20-30% less shrimp larvae so far this year, in an assessment which could have significant ramifications for global shrimp markets.
Avanti predicts 2019's total shrimp output from India will be roughly on a par with 2018, give or take 10%.
Export price improvement in Q1 has been marginal compared to Q1 2019, but has helped to provide "much-needed confidence to the farmers", the firm said.
Prices have also risen quarter-on-quarter, and are expected to continue rising, Avanti said.
"The export business has increased from 55% in Q1 FY 2019 to 79% in 2020 in volume terms, indicating that the export business has improved significantly," said C. Ramachandra Rao, Avanti Feeds' managing director and CFO.
"International shrimp prices for bigger sizes...have improved, while the smaller size remained stable when compared to the prices of Q1 FY 2019 and are expected to continue improving."
The stocking for the second season of the 2019 calendar year is taking place now, said Alluri Nikhilesh, director of Avanti Frozen Foods, the company's processing venture with Thai Union Group. "So right now we cannot tell what is the current crop output, but the confidence in the farming community is very high. So we expect a good and stable second crop."
Avanti expects a 5-10% increase y-o-y, if the momentum remains good.
Undercurrent News recently reported Avanti can expect to see shrimp processing and export become a larger part of its business, with shrimp feed demand set to be flat.
During Q1 2020 the firm saw shrimp feed consumption fall 10-12% y-o-y, though its market share increased. It remains confident of maintaining its present market share, it added.
It still anticipates its new shrimp hatchery will begin commercial production by the end of the 2019 calendar year, producing 200 million seed shrimp. Its new processing plant at Yerravaram, with an additional capacity of 15,000 metric tons (bringing the group total up to 22,000t) is now fully operational, it said.
The combined capacity utilization in Q1 FY20 is 60%, with 51% in Yerravaram and 78% in Gopalapuram. The overall exports are increased by 48% over Q1 FY19 in value terms.
A continued focus on export of value-added products is bearing results, which accounted for around 29% of its total exports in Q1 FY20; up from 14% in 2019.
Answering questions from analysts, Rao noted feed raw materials including fishmeal, soya, and wheat have been increasing in price as Q2 2020 begins. However, Avanti is reluctant to lift its feed prices, given the precarious situation farmers have been in recently, he said.
If this is the type of prices that continue, definitely...we can increase the price, provided the farmer is happy with the price. Very, very important, sustaining the shrimp culture is the primary importance for us.
Nikhilesh went on to address the US market in more detail, noting that export prices there have picked up considerably over past eight-to-10 weeks, primarily on 30-40 count shrimp.
Over the past eight-to-12 weeks there had been strong demand from the US market, which is predominantly supplied by Indian shrimp. So if there [was] lower output in the first crop to the US, theres a strong demand for product right now. So if this trends, I think for the next eight-to-10 weeks going from here, there would be still strong demand. Until the second crop comes, then people would reevaluate their positions on stock and feeds.
Meanwhile, he said, the European market is paying a little less well than the US, and while Chinese demand is high, it is being cautious on trading there due to issues with transparency.
But there is definitely strong demand, a lot of Chinese inquiries, much more than the past several years. So it looks like a very promising market.