In today’s Finshots, we dive into India’s shrimp trade and how it’s trying to defend its global position amidst the many problems plaguing the industry.
The Story
In 2003, an association of shrimp farmers from 8 southern states of the United States filed an anti-dumping petition against 6 countries including India.
Their allegation was simple. These countries exported shrimp to the US at dirt-cheap prices and did so fully knowing that they were selling shrimp at below-normal prices. They were dumping excess produce in the US and affecting the livelihood of American fishermen. India, China, Vietnam, and Ecuador — They were all alleged to have played a part.
And while these countries protested their innocence, the US Department of Commerce began its investigation nonetheless. They notified the International Trade Commission (ITC) of their decision and the ITC agreed that there was sufficient evidence to back the allegations. They admitted that local industry may have been hit hard by the cheap imports flooding its borders and the investigation eventually culminated in a range of duties.
Meaning cheap shrimp from India wasn’t exactly cheap anymore and it dealt a body blow to India’s flourishing shrimp industry. Farmers in Kerala reduced their catch by nearly 45%. And the lack of demand had a veritable impact on prices. Shrimp prices crashed from ₹280 to ₹100 per kilo after ITC’s decision. And farmers in Tamil Nadu and Andhra Pradesh were even selling their produce below cost price.
Also bear in mind this was happening at a time when Indian farmers were dealing with a spread of a virus that affected their output. The White Spot Syndrome decimated the cultured shrimp population within a matter of days and India soon lost its tag as one of the top shrimp exporters globally.
But how did it even get there in the first place?
You see, India began modern shrimp farming in the late 1980s at a time when demand for shrimp was on the rise. This demand mostly came in from the US and the government began framing policies to promote seafood exports. This also helped companies pool in capital to build hatcheries, farms and processing plants.
And shrimp farming suited us quite well. Our production costs were low. Labour — readily accessible and we also had huge land parcels. Rice farmers along the coasts of Kerala and Andhra Pradesh could rotationally engage in shrimp farming and it was only a given that shrimp farming would take off in a big way considering the massive coastline we boast.
The Indian government also doubled down on this optimism and offered subsidies so farmers could invest in processing facilities, equipment and local breeding programs.
But then in the 2000s, there was the virus and the US anti-dumping investigation and it threatened to throw India off its perch. Now this sounds pretty bad. But here’s what we didn’t tell you. Despite all this, India continues to remain the second largest shrimp exporter globally after Ecuador.
So you have to ask — How did India manage to navigate this crisis?
Well, a stroke of luck and a little bit of government intervention.
A disease breakout in 2009 named the Early mortality syndrome (EMS) ruined Black Tiger Shrimp farms all over China, Thailand and Vietnam — who happened to be the largest producers at the time. In the same year, the Indian Government allowed for the cultivation of a “new” variety of shrimp called the Vannamei (Pacific White Shrimp). These new shrimps were more disease resistant than their black tiger counterparts and could be cultivated using less feed, significantly easing the burden on the Indian shrimp farmers. This move prompted a nationwide shift in shrimp cultivation as more farmers got in on the act. Soon shrimp exports started rising and today, they contribute nearly 67% of India’s seafood exports as compared to just a tiny percentage in FY10 when the white leg prawn culturing had just begun. Unfortunately, the story doesn’t end here either.
Even though we are still the second-largest exporter of shrimp in the world, things have been a bit topsy turvy these past few years. There’s been a steady increase in shrimp feed (shrimp food) prices. There are supply chain troubles. And production costs have been going up. In fact, in Surat production costs have gone up by 35% while shrimp prices have gone down by about 25%.
This is problematic because India used to be the top exporter of shrimp globally until FY19. However, we’ve lost that tag since the pandemic reared its ugly head. Freight costs went up. We couldn’t send out shipments to the big markets (like US and China) and countries like Ecuador pounced on this opportunity.
The upside is that many people believe the tide may turn soon enough.
For instance, CRISIL believes that the industry could start bouncing back after analysing 98 shrimp exporters that account for two-thirds of the industry’s revenue. They anticipate an uptick in global shrimp demand and they think India can capitalize on it. However, if we really wanted to claim the top spot again, we should probably be doing a few things differently this time around.
For starters, if we want to capitalize on the renewed demand, we need to address the matter of underutilised land.
Take Gujarat for instance. Gujarat alone has 3.75 lakh hectares of land suitable for shrimp farming and yet only 2.5% of the land is used to cultivate shrimp. However, if we optimized the figure a little bit, Gujarat alone has the potential to produce more than 3.4 lakh tonnes of shrimp a year.
Then there’s the issue of market diversification. If India wants to keep its top spot, it needs to tap into other markets outside of China and the US. It wasn’t a good idea to depend on one country back in 2003 and it isn’t a good idea in 2023 either. So hopefully we learn from our mistakes in the past and emerge as the top shrimp exporter globally soon.
Until then…
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