The effect of the global COVID-19 pandemic on world seafood markets has accelerated a downward price trend that began in early 2019. However, the severity of the impact for Vietnamese producers has been mitigated somewhat by a resilient US market and effective management of the virus within Viet Nam itself.

Production

Containment measures in Viet Nam, which is by far the largest supplier of pangasius to the world market, were implemented rapidly and effectively. As a result, the total number of COVID-19 cases in the country has been low relative to other regions. Reports from the large pangasius farming sector in the Mekong Delta suggest that the direct operational impact of the pandemic in terms of business shutdowns and labour issues has been minor. However, the market impact of COVID-19, particularly in the United States of America and China, is translating into significantly more conservative approaches to stocking and harvesting targets and companies are incurring financial losses all along the supply chain. To limit their risk in the shorter term, Vietnamese farmers have also reportedly reduced feeding to slow growth rates until market conditions improve.

Total supply this year is expected to drop compared with an estimated 1.4 million tonnes produced in 2019, which was around a 3.5 increase compared with the previous year. A price spike in 2018 led to heavy investment and expansion in the main farming regions over the last 2 years or so, but this additional capacity is not being fully utilized. According to Viet Nam’s Ministry of Agriculture and Rural Development (MARD), production in the first 5 months of 2020 was down 6.3 percent compared with the same period last year, to an estimated 462 000 tonnes.

In addition to market decline resulting from COVID-19, production has also been affected by mortalities associated with increased water salinity and exceptionally hot weather. With demand subdued, however, current volumes are more than sufficient to meet buyer requirements. In fact the tighter supply is protecting margins by halting the downward price trend that has been ongoing since 2018.

Outside of Viet Nam, farmers in other producing countries such as China, India, Indonesia and Bangladesh have been affected to varying degrees by the pandemic. Export markets are of significantly less importance to these producers compared with Viet Nam but logistical difficulties, labour shortages and weaker domestic market conditions are all direct consequences of COVID-19.

Trade and markets

As demand for pangasius in East and Southeast Asian emerging markets has increased, so has the diversity of markets available to the export-oriented Vietnamese industry. The alternatives now available to exporters beyond the key US market, such as China and the Association of Southeast Asian Nations (ASEAN), has prevented the drop in revenue from being as severe as it could otherwise have been. That said, the pandemic has nevertheless had a substantial effect on sales, particularly during the height of the outbreak in China earlier in the year.

According to the Vietnam Association of Seafood Exporters and Producers (VASEP), total Vietnamese exports of pangasius reached USD 334 million in the first quarter of the year, representing a decrease of 29.3 percent from the same period of last year. Exports to China and Hong Kong SAR totalled USD 63.2 million in the same period, down 36.4 percent. The full impact in the European Union was not felt until later when lockdown measures began to be enforced across the continent. For the first  5 months of 2020 the total decline in the value of Vietnamese exports to the European Union was 47.3 percent compared with the same period last year.

In the US market, reports suggest that demand has not been as badly affected as anticipated and sales have not seen as significant a decline as in the European Union and China. According to VASEP, over the first 5 months of the year, revenue from exports of pangasius to the United States of America was down by 19.8 percent year-on-year. This is due to a number of factors, one being the cheaper commodity whitefish market segment that pangasius occupies, which increases its relative appeal when households reduce spending. There has also been an easing of labelling requirements in the United States of America which allows distributors to redirect large blocks intended for foodservice to retail. Meanwhile, the US Department of Commerce has lowered anti-dumping duties on Vietnamese pangasius, representing a boost to future trade despite the present situation.

Prices

With global demand heavily weakened, traded prices for frozen pangasius fillet (FOB Ho Chi Minh) have been languishing around USD 2.00 per kg. This is a culmination of a steep decline that began from a peak of USD 3.40 per kg in September 2018. Farm-gate prices were reported by the Viet Nam Ministry of Agriculture and Rural Development (MARD) to be around VND 18 000-18 200 (USD 0.77-0.78) per kg for 700g fish as of the end of April, well below the cost price of VND 20 000-22 000 (USD 0.86-0.95) per kg.

Outlook

As we enter the second half of the year, the pangasius sector is expected to see some relief from what has been a challenging period. As supply tightens, the important Chinese market continues its recovery. This should help lift prices from what are currently unprofitable levels and restore a degree of stability to the Vietnamese sector. However, much uncertainty still remains as the pandemic is far from under control in many other large markets including the United States of America and Brazil. In the longer term, some repositioning will be necessary, with renewed emphasis on retail, but the versatility of pangasius and the geographic diversity of export markets represent important advantages.