By Ibi Idoniboye, Editor - EMEA News
In part 1 of our look at the Ecuadorian shrimp sector, we looked at the rapid rise of the industry and its more recent yet significant growth constraints. Today, we share the point-of-view of the Ecuadorian aquafeed supplier; aquafeed constituting an important component in the overall cost of shrimp farming (50-70% according to some estimates).
We spoke to one of the largest Ecuadorian aquafeed producers, who told us that the domestic aquafeed market has developed in tandem with shrimp production over the past 5-10 years, boasting a CAGR of roughly 20%, mirroring the growth of shrimp exports. Prior to this, Ecuador was a net feed importer with a heavy reliance on feed manufacturers in Norway and China.
The development of a self-sufficient domestic aquafeed sector has been a key component in Ecuador’s rise to becoming the world’s top farmed shrimp supplier.
Ecuador’s aquafeed industry is increasingly consolidated among a small group of global players. Ecuador’s largest aquafeed producers, including Skretting, Vitapro, BioMar, and Cargill, are vertically integrated across the supply chain, from feed, to farming, to distribution and retail. They have built their advantage by emphasising technology and innovation, with many building their own R&D facilities, demonstration farms, farm management software and smart feeding systems.
Consolidation and innovation have helped Ecuador become one of the world’s most efficient shrimp aquafeed producers, with only Venezuela lower on the cost curve, according to FAO estimates.
However, the feed industry is currently faced with various challenges. Through conversations with industry stakeholders, we have summarised the main constraints below:
Low price environment. Global shrimp prices reached historic lows in H2 2023, prompting farmers to reduce stocking densities or cease farming altogether. Feed demand has subsequently fallen.
Uncertain fishmeal supply. The Ecuador aquafeed market relies heavily on raw materials derived from Peruvian anchovies and South American soybeans, which are prone to supply and price fluctuations. The volatility in raw materials prices presents challenges for feed producer costs and profits.
Inflation. Inflationary pressures have continued to support high costs of energy and labour, thus driving feed prices. This is detrimental to industry profitability, particularly during the current climate of weak shrimp prices.
Social unrest. Ecuador is currently experiencing an unprecedented wave of social and political unrest, encapsulated by public violence and security concerns. Local aquafeed players say that this environment is inconducive to production and investment.
Disease. Shrimp farms remain vulnerable to disease outbreaks, which can increase shrimp mortality rates and reduce feed demand.
Industry structure. The consolidated structure of the industry prevents smaller scale farmers to access information and resources on advancements in best farming practices. This hinders the market potential for shrimp feed in some regions.
Recent Challenges to the Ecuadorian Aquafeed Sector
“COVID-19 was the first time that we saw revenues fall rapidly, which was largely supply driven, due to logistical disruptions, port closures, and border controls, limiting raw materials supply. Demand was also impacted through limited foodservice consumption, which was partially substituted through the retail sector, as people ate at home more,” says Gabriel Luna, owner of Glunashrimp consultancy, whom we spoke to in part 1.
While the COVID situation presented significant adversities, the relatively favourable shrimp price enabled many businesses to adapt and overcome the challenges. Indeed, the average Ecuadorian shrimp export price was 3.1% higher in 2020, compared to 2023.
Luna adds, “The current climate is more difficult for local aquafeed producers because shrimp prices are lower than they were in 2023. When you add the high inflation to fuel, energy and labour, uncertain demand, geopolitical tensions, and shipping disruptions, we have a high-cost, low-price environment. This is very damaging to the industry. However, one thing about the aquafeed industry, is its ability to adapt to different circumstances.”
Indeed, the technological advancements within the sector have helped many of the Ecuadorian aquafeed producers to withstand the inflationary headwinds of the last year.
The large Ecuadorian aquafeed producer that we spoke to in part 1 noted the development of low-cost feeds as a ‘game changer’ by improving farm efficiency levels. Moreover, “the introduction of new technologies has helped improve shrimp feed quality and reduce feed conversion ratios (FCRs).” A lower FCR implies more efficient shrimp production, as less feed is required per unit weight of farmed shrimp. Gabriel Luna says that R&D in improving feed quality has reduced average FCRs from 1.3-1.5 historically, to 1.0-1.2, affording significant cost savings.
The aquafeed producer also mentioned greater adoption of data and analytics in shrimp farming to “generate better informed decisions and predict better solutions.” The use of measurable metrics, using key performance indicators, and “target weight models” means that “feed producers and farmers are able to collaborate in optimising feed solutions to raise performance levels.”
The producer adds,” Adapting processes and feed protocols to better manage the volatile pricing scenario,” as another factor supporting Ecuadorian farmers during the current climate. Feed formulations are routinely assessed – for instance raw materials and manufacturing costs – to tailor feed composition and production process, to raw material availability and affordability.
According to Luna, we are seeing a surge of sector-wide research efforts aimed at equipping shrimp producers with the tools to navigate an increasingly competitive global market. Precision formulation and automation are at the forefront of these efforts. These systems use real-time feedback from installed sensors, reducing nitrogen excretion, thus environmental harm, while also improving efficiency and productivity.
“Asian shrimp producers are doing everything they can to bridge the productivity gap,” he says, “meaning that Ecuador cannot rest.”
The aquafeed producer interviewed is currently working on new feed technologies that make feeding more efficient and less time consuming. Gabriel Luna also mentioned feed machines with microphones that respond to shrimps feeding, meaning they are fed exactly when they are hungry, minimising feed waste, while also optimising growth potential.
Finally, the Ecuadorian shrimp industry is shifting towards more sustainable practices, including research into the use of novel ingredients, such as farmed insects as feed ingredient substitutes for imported plant-based meals and fishmeal.
