Vietnam to compete as a top global shrimp exporter
Vietnam is currently the 3rd largest shrimp exporter in the world with total output of about 900,000 tonnes in 2021. This is the result of a continuous and persistent development through several years, as Vietnam did not appear on the global market and started late in the race compared to other shrimp exporters. This is because Vietnamese farmers have only started breeding whiteleg shrimps since 2008 (a breed originated in South America that is much more popular than the Asian black tiger shrimp).
Is this 3rd position a temporary phenomenon due to luck, or does the Vietnamese shrimp industry have actual strength and is persistently accelerating in the race to the top?
To answer that question, we must understand that the competency of any shrimp producing countries are decided by two core factors. First is the shrimp farming capacity – an important foundation that determines long-term competitive advantage. Second is the diverse processing capacity, allowing access to difficult markets for higher profits.
Up until now, Vietnam has been known for its processing capabilities, outperforming major competitors such as Ecuador and India. Value added shrimp products of Ecuador only account for 4% of total shrimp imports into the US – meaning for every 100 Ecuadorian shrimp cases imported, only 4 are processed and have high value. This number is 14% for India, 30% for Indonesia and 65% for Vietnam. This is only an example of a major consumer market to show the strength of Vietnam’s processed shrimp. In another large and picky market such as Japan, Vietnam is leading with a 27% market share, much higher than the next player, India, with a 19% market share.
However, regarding farming capacity, Vietnam does not yet have a strong position compared to other competitors as it does with processing. The cost of raw harvested shrimp of Ecuador or India are always 15-20% lower compared to Vietnam. The main reason is due to the low harvest rate (total shrimp head harvested compared to total farmed), as the technology used by farmers was not invested properly and evenly. Fluctuating yields year after year, even seasonal complete losses, had led to total costs per tonne of shrimp being unable to decrease.
However, recent observations have given more reasons to believe that the cost of shrimp farming in Vietnam will significantly decline in the future. New technologies have been continuously applied to prevent diseases, increase yields and output per hectare. These technologies such as Biofloc farming, microbiology technologies, shrimp-rice farming combination and a complete farming process. The results of these technologies also exceed the level of intensive farming and harvested output per hectare compared to the models currently applied in Ecuador and India. In which, the CPF shrimp farming model of Thailand is the popular method chosen by the farmers due to financial support, breed and feeds.
It is rare to see an industry where the farmers are that actively seeking for new technologies. With each passing year, more and more farmers are seriously investing to shift from underdeveloped ponds to farming ponds applying high technologies, creating superior results compared to the industry average. Statistics show that the majority of farming households applying these technologies can earn a return of 20-50% each crop, and shrimp farmers can produce at least 2 crops per year. The average cost of shrimp farming can decline to 4-5 USD/kg, similar to the costs in Ecuador and India.
Besides the output of the farmers, the local leading companies in shrimp processing and exporting are also gradually expanding their value chain by investing to solve shrimp farming bottlenecks. In the past 5-6 years, major shrimp farming projects from a few hundreds to thousands of hectares have been invested in the Southwestern provinces. In which, there are companies that have found their own success formula, creating sustainable profits and continuously set plans to expand farming areas to meet the demands of difficult markets such as the US, EU and Japan.
One of the companies we follow is Fimex in Soc Trang. They have shown great farming results and have been improving efficiency every year. The farming area has been growing from 2013 till now, reaching 320 hectares. On average every hectare will yield 20 tonnes/crop, with an average cost around 4 USD/kg, 30% lower than raw shrimp purchased from farmers. And as Fimex continues its research into new technologies to improve yields and expand farming areas, they will be able to increase the ratio of shrimp farmed inhouse. Thus, the issue of reducing input costs is being gradually and effectively solved.
In conclusion, the current position of the Vietnamese shrimp industry is the result of continuous efforts with purposeful actions, as well as the participation of several players in the industry. Even though only 10% of current farming areas are applying new technologies, the trend is quickly spreading to reduce the costs of raw shrimp in Vietnam. With processing capabilities regarded as the top in the world, as well as positive changes in farming capabilities mentioned above, we can believe in a scenario of Vietnam rising to number 2 or even a top spot as a shrimp exporter in the world.