India Finance News

Steep rise in China demand helps arrest decline in marine exports

The sharp increase in demand from China has been able to stem the rapid decline in marine exports in the country seen last financial year. However, several issues need to be resolved in order to see exports rising further. In FY18, seafood shipments were valued at an all-time high of $7.4 billion but fell the following year by eight per cent on lower shrimp prices. However, so far this fiscal so far, they have been stable at last year’s level.

Meanwhile, there has been a spike in exports to China, with the value of shipments rising a staggering 257 per cent to reach $811 million in FY19. And in the first eight months of the current financial year, it went up to $1,025 million.

The country’s marine exports are highly concentrated on shrimps, and the oversupply two years back impacted the prices badly. The growth so far this year has been flat, as prices haven’t recovered to previous levels.

Taking cognizance of the impact of oversupply on the price, farmers started spreading the harvest across seasons, and are now also making other efforts to improve realisations.

“The year before last, there was overproduction in India and this impacted prices of marine exports to the United States. They have not recovered to the extent we expected. I believe this year will be the same as last year,” said Tara Ranjan Patnaik, chairman of Falcon Group, which owns Falcon Marine Exports Ltd. But he asserted that demand is growing and that Indian products are well accepted across the globe.

The crucial factor for farmers is the incentive to export. The government should come out with clarity on Merchandise Exports from India Scheme (MEIS) for the marine exports. If the Scheme is not there or is substituted with another scheme, it would impact exporters as they are working on thin margins and passing on the benefits to the farmers.

“The fall in exports in value terms may have been arrested, and there are talks that the crisis could have bottomed out. We might see a spurt in demand for shrimp, considering there is a shortage of pork meat in the market, after the African Swine Flu. The price of pork meat has gone up and the low-priced shrimp might emerge as an alternative,” said Aditya Dash, managing director, Ram’s Assorted Cold Storage Ltd.

“There was some improvement in price this year compared to last year. This has been a tough year and in the next two to three years, it is going to be a phase of consolidation for the sector,” Dash said. The European Union-Vietnam Free Trade Agreement from January 2020 will make the country uncompetitive, and the US is one major market India can bank on. He said prices are unlikely to go up significantly in the near future unless there are some factors like the Tokyo Olympics, which may require more supply.

At $2 billion in FY19, the United States, in fact, is the largest seafood importer from India. It is followed by Vietnam and China, which is emerging a bigger market.

Patnaik of Falcon Group said, “Countries like Japan, China, Korea, and Taiwan have a huge demand and in the future, these markets would be better for Indian exporters. At present, the exports are more of raw materials, but there is an opportunity to tap value-added products. The government should look at supporting the industry with duty benefits.”

Dash said that China itself is a major seafood exporter as per official reports and it is a risky and arbitrary market.

A Drip Capital executive said, “Over-reliance on exporting one specific product is unlikely to be sustainable in the long run. While Vannamei Shrimp remains a major marine export item from India, global consumption patterns and palates are ever-changing. Quality concerns from buyer markets, particularly in the West, are going to remain a big challenge for Indian farmers who face increasing competition from other markets.”

Source: Business Standard

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