Supply overcorrection sees pangasius prices drop by a third in 2019

30/03/2020

After strong price gains in 2018, the Vietnamese pangasius sector responded with heavy investment and rapid expansion across the main farming regions. In 2019, however, full inventories and trade challenges in the United States of America and the European Union (Member Organization) meant that core markets were left oversupplied.

Production

Spiking farm-gate prices for pangasius in 2018 and good availability of cheap fingerlings were powerful catalysts driving aquaculture development along the Mekong Delta in South Viet Nam in 2019. This expansion continued despite excess inventories reported in the United States of America and in the European Union markets. A number of new hatcheries and farming sites have sprung up in the farming regions, including a 600 hectare project in An Giang province with a remarkable capacity of 120 000 tonnes.

Towards the end of 2019, however, the price situation had worsened significantly and producers found it increasingly difficult to shift volumes at a profit. In response, many farmers delayed harvests and average harvest weights increased sharply as a result. Viet Nam, both the largest producer and exporter of pangasius, continues to drive global output growth. In 2019, total Vietnamese production is estimated to have reached approximately 1.4 million tonnes, an increase of some 3.5 percent over 2018. Supply growth from other Asian countries such as India, Indonesia and Bangladesh, the next three largest producers, has been somewhat sluggish in recent years although the pace of development is picking up.

Trade and markets

Viet Nam is expected to take in USD 2.3 billion in pangasius export revenues in 2019. This would represent only a marginal increase over 2018 despite the hike in harvest volumes, reflecting the steep drop in prices over the course of the year. Overall the market situation remains challenging, particularly in the European Union where Viet Nam is still subject to a yellow card issued due to failures to address Illegal, Unregulated and Unreported (IUU) fishing. A statement by the European Union inspectors at the end of 2019 points to evidence of improvement but the yellow card warning will remain at least until the situation is reassessed in mid-2020.

In the United States of America, the Vietnamese fishing industry received a boost in 2019 after the United States of America Department of Agriculture (USDA) officially recognized Viet Nam’s Pangasius Food Safety Control systems as compliant with American standards after three years of negotiations, as well as reducing anti-dumping duties. Elsewhere, China continues to increase its share of the global pangasius market on the back of strong consumer demand for the species, with imports from Viet Nam supplemented by growing domestic production. In the first nine months of 2019, China registered a 26 percent increase in the value of its pangasius imports to USD 277 million.

Prices

By the end of 2019, export prices (FOB Ho Chi Minh) for fillets were USD 2.20 per kg, marking a steep downward trend from the peak of USD 3.40 per kg reached in 2018. In the United States of America, the average import price over the first nine months of the year dropped by 11 percent to USD 4.00 per kg.

Outlook

Global pangasius production is expected to increase by some 3.8 percent in 2020 to around 2.7 million tonnes. Vietnamese production, usually representative of total international supply, is forecast to rise marginally. Although challenges in the United States of America and the European Union markets will persist in the medium term, the long-term outlook is more optimistic. When considered in conjunction with the rapid growth of the Chinese market and the upward demand trajectory in emerging markets, the conditions are right for a recovery from the current price lull.

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