SEAFOOD.COM NEWS by John Sackton – Feb 7, 2014 — With the release of the final 2013 shrimp import data yesterday, it is now clear that the overall shortfall in US supply was 4.9% for the entire year. Yet during this time, the price of a benchmark 26-30 HLSO white shrimp increased 53% from January to Dec.
Although there have been reports of declines in sales volume in the 4th quarter at retail, and foodservice has generally had two difficult months, the data do not reflect yet consumers turning away from shrimp due to its high price.
Instead, the data show that so far, demand for shrimp has been surprisingly inelastic. The chart shows that the overall year to date shortfall in volume eased during 2013, but prices also increased substantially at the same time volumes were normalizing.
We saw the same phenomenon with salmon, where rising prices in 2013 failed to dampen volume in the US market. Actual salmon import volume increased 6%.
Looking ahead, it seems the data is pointing to one of two scenarios.
The pessimistic scenario is that the impact of the price increases has not worked itself through the market, and when the new consumer level prices are fully in place, overall consumption will drop significantly from present levels. Under these circumstances, buyers caution on inventories and ordering may not be enough to cushion them from holding high priced inventory in a falling market.
But the more optimistic scenario is that shrimp demand is less elastic than it has been in the past. In this case, the rising prices have slowed demand to some extent, but not nearly as much as had been feared.
With this view, price levels will remain relatively stable until the summer when the volume of new production is evident, and will only drop if there is enough new shrimp production to lead to lower selling prices at the farm level. Although there still are disease threats, the NFI shrimp panel at thre recent Global Seafood Market Conference concluded that overall, shrimp production should increase on a global scale barring major new disease setbacks.
One of the factors that may be impacting seafood consumption – especially of the higher priced items like shrimp and salmon – is the general bifurcation of the US economy into two groups, where the top 20% is experiencing growing incomes and is spending more on all items, including seafood. Meanwhile the bottom 80% is seeing incomes stagnate or decline, and has not felt much of a recovery from the 2009 recession. These consumers are continuing to cut back their seafood purchases – either by trading down to less expensive types of fish, or by abandoning some types of seafood altogether.
So if shrimp consumption is being driven by the wealthiest 20%, they may not see much impact from the price increases, and will keep buying.
But for those types of products and sales channels that depend on the more average income segments, they may not be able to sustain spending in the face of higher prices.
We don’t know yet how well shrimp can survive as a ‘luxury’ or premium item. What we do know is that the overall size of the market for luxury items has grown significantly compared to its size the last time shrimp prices were at these levels.
As we said in an earlier article, shrimp sales during Lent will be a key indicator of just how severe any consumer reaction may be, and whether there is enough high end demand to maintain the current levels of shrimp volume and prices in the U.S.
Other news from the import data included the re-ordering of major supply countries, using shrimp of all types.
In 2012 the ranking was (in lbs)
Thailand 298,125,033
India 144,402,590
Ecuador 179,470,637
Indonesia 161,903,388
Vietnam 89,550,934
China 78,165,956
Mexico 58,249,999
In 2013 the ranking was:
India 206,105,406
Thailand 183,875,406
Indonesia 177,521,837
Ecuador 164,030,569
Vietnam 130,900,951
China 71,428,088
Mexico 40,732,924
India has replaced Thailand as the number one US supplier, Ecuador has dropped to 4th place, and Vietnam has increased its volume significantly over 2012, while both China and Mexico decreased.
This story originally appeared on Seafood.com, a subscription site. It is reprinted with permission.