By Ibi Idoniboye, Editor - EMEA News
The export value of farmed Ecuadorian shrimp contracted by $364 million (-5.5%) year-on-year (y-o-y) in 2023 to $6.29 million, according to Ecuador’s National Chamber of Aquaculture (CNA). This contrasts markedly with $3.0 billion (+84.2%) in estimated revenue growth recorded from 2020-22. Weak market prices, alongside high input costs, have weighed heavily on sales margins. CNA estimates that the Ecuadorian shrimp market lost $1.5 billion in profits y-o-y in 2023.
Supply factors have become increasingly impactful to stakeholders in Ecuador, the world’s top exporter of white leg shrimp (vannamei). High feed, labour, and processing costs, political risk, adverse weather, and capital constraints are some of the factors negatively impacting industry performance during the last year. Moreover, a reliance on China as the main export market has raised concerns, as China seeks to improve its own self-sufficiency in domestic shrimp farming.
Many stakeholders believe that the Ecuadorian shrimp industry is undergoing a structural adjustment, in response to an increasingly competitive global market. This gives rise to important considerations that will shape the pace and direction of industry growth.
Rapid Growth of the Ecuadorian Shrimp Industry
Ecuadorian vannamei supply has grown exponentially since the turn of the century, from roughly 40,000 tonnes exported in 2000 to an estimated 1.2 million tonnes in 2023, according to CNA data. The country became the world’s largest producer and exporter of farmed shrimp in 2022, respectively supplanting China and India in the process. A small domestic market size contributed to the development of an export-oriented sector. Indeed, approximately 90% of Ecuadorian shrimp is sold overseas, primarily to China, which accounted for 59% of exports in 2023, according to CNA, followed by Europe (18%) and US (17%).
Gabriel Luna, owner of Glunashrimp consultancy, has over 20-years’ experience within the Ecuadorian shrimp industry. He has worked for some of the country’s largest seafood suppliers, and as an independent trader with ties to Ecuador’s largest export markets. He is a founding member of the Global Shrimp Council (GSC), which was established in September 2023 to help promote farmed shrimp globally. Luna says that Ecuadorian vannamei have natural superiority over competing origins.
“Vannamei are native species of Eastern Pacific Ocean, meaning that they are well suited to the local environment, and more productive than Asian farmed vannamei,” says Luna.
Ecuadorian shrimp are shrimp pathogen resistant (SPR), meaning they are exposed to diseases that help bolster immunity, making them more robust. Conversely, Asian vannamei are shrimp pathogen free (SPF), meaning that they are not exposed to pathogens in the same way, thus less able to resist attacks.
Ecuadorian farms also benefit from low stocking densities, “We typically farm 15-25 animals per sqm in Ecuador, compared to 25-30 per sqm average for Asia,” The relatively low intensity allows year-round harvests, which is not possible in competing regions. This helps maintain shrimp health, which is more at risk from higher density stocking,” adds Luna.
The growth of the Ecuadorian industry has been facilitated by technological advances in shrimp genetics and feed, as well as institutional and structural development. A large Ecuadorian shrimp producer stated, “We have been blessed with the correct climate, level of investment and scale to grow so fast.”
Luna adds, “Ecuadorian shrimp have developed a good reputation for quality, which has contributed to their success. If we match competing origins on price, we feel that buyers will always choose our shrimp,”
Constraints to Ecuadorian Shrimp Sector Growth
The value of Ecuadorian shrimp exports has shown almost constant y-o-y growth since 2010, exhibiting a compound annual growth rate (CAGR) of 17.9% from 2010-2023, with two notable exceptions. In 2020 export value contracted by 1.1% y-o-y, which can be explained by COVID-19 lockdowns, disrupting supply chains globally, and impinging on Chinese demand. Average export prices declined by 6.6% y-o-y, while shipments to Asia fell by 8.1% during this period. The industry recovered, leading to strong revenues and record profitability over the next two years.
However, total shrimp export value fell by 5.5% y-o-y in 2023, while sector profits also plummeted. Despite being the most efficient shrimp producing country, there are several challenges hampering industry growth.
Low shrimp prices are a primary factor, which is backed up by national trade statistics showing that the average export price per tonne of Ecuadorian shrimp declined by 17.4% y-o-y in 2023, to the lowest level since 2010.
We spoke with domestic stakeholders on what they consider have been the major constraints to shrimp sector growth, which are listed below:
Rapid supply growth. “Ecuador was exporting around 0.5 million tonnes of whiteleg just five years ago,” states Luna. “Compare that to approximately 1.3 million tonnes exported in 2023, which has increased global supply pressures.
High inflation in 2023 curtailed shrimp demand across global markets, particularly in restaurants, bars, and other out-of-home eateries. Luna says, “Shrimp is often marketed as a higher-end animal protein, so demand has naturally taken a hit as households’ incomes have tightened.
Consolidation. The larger farms with economies of scale have increased market share at the expense of smaller farms that have either gone out of business or been acquired by the larger entities. The rationalisation of the Ecuadorian industry has constrained industry growth by concentrating output among large firms, thus raising barriers to entry.
Disease. Shrimp-specific pathogens, such as white spot syndrome, presents significant and continued risk to local production by raising farm mortality rates. China has implemented several shrimp import bans in recent years, due to the virus being reportedly detected on cargoes from Ecuador.
Political risk. We spoke to a spokesperson for one of Ecuador’s largest aquafeed producers, who mentions political instability as a growth deterrent, due to the increased presence of organised crime operating in shrimp farming areas with kidnappings and extortion and “a wave of violence and insecurity adding difficulty to the sector.”
Demand uncertainty presents another conundrum for Ecuador’s shrimp farmers. The sector is overwhelmingly reliant on exports to China during a period when China is actively trying to become more self-sufficient in shrimp production. “The pandemic, and other disease outbreaks have led China to try to focus on securing a greater proportion of its shrimp needs through local output,” says Luna.
Lack of downstream processing. While Ecuador has a competitive advantage in the production and export of head-on shell-on (HOSO), and headless shell-on (HLSO) vannamei, comparatively high labour and processing costs prevent it from developing a competitive value-added industry.
Coming next week is the second part of our look at the Ecuadorian shrimp sector, focusing on the recent challenges of the domestic aquafeed industry.
