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15 May 2020


Average shrimp prices for 2H20 expected to experience a low rate of recovery, supported by price stabilization program and reduced excess supply (Current Issue No.3109)

Oversupply is the key factor in the falling price of shrimp since early 2020, as output has far exceeded demand. Related government agencies have prepared for the approval of assistance measures for related parties within the production chain through the 2020 Shrimp Price Stabilization Program. KResearch views that the program could help to push shrimp prices upward during midyear, when production is expected to hit the market in large volume. Nevertheless, because control of the quantity of shrimp output in this program is relatively limited compared to overall production, the remaining shrimp output could then be sold at a lower market price.

For the remainder of 2020, excess shrimp supplies are still expected albeit at a much reduced level, as a result of a production slowdown and a gradual rise in demand for shrimp at both the domestic and international level. While consumer sentiment is unlikely to soon be as optimistic as it was before the onset of the COVID-19 pandemic, it is expected to improve over 1H20 (provided that no new waves of infection occur). Alongside plans to reduce the quantity of the upcoming shrimp harvests, and taking into account this year's drought and weather fluctuations which are expected to have adverse impacts on shrimp output during late 2020, the production volume of shrimp is expected to contract during 2H20, compared to its level during 1H20. As this state of shrimp oversupply begins to subside, ex-farm shrimp prices are forecast to recover from their lows, albeit maintaining a level that is comparatively lower than that of the previous year. KResearch preliminarily projects that the ex-farm prices for Pacific white shrimp of every size is likely to fall to a range of THB 130 to 140 per kilogram in 2020 - compared to the average price of THB 141.71 per kilogram in 2019, or a contraction of 1 to 8 percent (YoY).

While state relief measures may help to alleviate the impact of low shrimp prices - which are, to an extent, still putting pressure on shrimp farmers - shrimp processing businesses may benefit from this issue as the cost of raw materials becomes cheaper. Nonetheless, business operators may still have to face the challenges presented by the unfavorable market conditions, making it necessary for them to readjust business strategies – including the development of new processed shrimp products that could address the demands of consumers, both foreign and domestic – in terms of price, quality and convenience or ease of consumption – amid the business market or business-to-business (B2B) slowdown, while a substantial amount of time is still needed for businesses to fully recover.