Fading Abroad While Shining At Home: Bangladesh’s Shrimp Sector Looks to the Domestic Market as Exports Decline

Shrimp is one of the most important export items in Bangladesh, accounting for more than 70 percent of its agricultural exports.^[1] Its massive contribution to national exports has earned it the nickname, “White Gold.” The majority of this revenue winning item is exported to the European Union (EU) countries, including the Netherlands, Belgium, and Germany. Bangladesh remains one of the EU’s top six sources of shrimp supplies.

Penaeus monodon or Black Tiger (BT) shrimp (locally known as ‘Bagda’) and Macrobrachium Rosenbergii or Giant Freshwater Prawn (GFP) (locally known as ‘Galda’)  are the main shrimp species produced and exported. Most BT shrimps are harvested in an extensive system without the use of commercial feeds. These features, along with its taste, have made BT shrimps highly regarded in the world market, especially Europe. Other exported shrimp varieties from Bangladesh include Horina (Metapenaeus monoceros) and Chaka (Penaeus indicus).

Shrimp sector facing dwindling exports 

Commercial production of shrimp in Bangladesh started in the 1970s after the Liberation War. Exports began growing in the early 1990s and reached an all-time high of USD 534.07 million in CY 2007 before the global recession took place. Shrimp export growth rebounded once again after the global recession, to reach a record high of USD 545 million in CY 2013.^[2] 

Since 2014, however, worldwide exports of BT shrimps have started declining. Exports decreased by 34 percent to reach USD 352 million in 2019. At the same time, Bangladesh lost its market share from 4 percent to 2 percent.^[3] 

A cursory glance at Bangladesh’s shrimp production data would suggest that the decline of exports can be attributed simply to a reduction of BT production: annual production was 75,274 metric tonnes in FY 2014-15, which declined to 61,709 metric tonnes in FY 2017-18.^[4] But the story goes deeper than that. 

Bangladesh’s failure to adopt Vannamei farming 

The fall in Bangladesh’s shrimp export has mainly been attributed to the increased farming of Litopenaeus vannamei or whiteleg shrimp by competing countries. Vannamei is a hybrid shrimp variety that is low-priced but high-yielding. Countries like Ecuador, Argentina, Thailand, Vietnam, and India have been able to transform their culture systems to adapt to intensive farming methods to cultivate the Vannamei variety and drastically increase their shrimp exports.

But at present, the government of Bangladesh does not allow commercial farming of the Vanamei variety, only recently approving cultivation of Vannamei on a pilot basis, presumably to progress to commercial cultivation if the pilot is a success.

Vannamei exports stagnated Bangladesh’s export prices. 

Quite certainly, the advent of Vannamei has definitely put downward pressure on the price of Bangladeshi shrimp exports. Global market price of shrimp has dropped down as countries like Ecuador and Argentina export a huge quantity of the lower priced Vannamei. But competition from Vannamei is not the only factor contributing to a stagnation of Bangladeshi export prices. 

While the figure suggests a gradual increase in Bangladeshi shrimp export prices, we argue that the valid export price of Bangladeshi shrimp has further declined. This decline can be attributed to the following factors:

1. Increasing share of GFP in the export basket: Giant Freshwater Prawn (GFP) is a higher-end shrimp variety and can fetch a significantly higher price in the international market compared to BT shrimp. As a result of the increased production and higher price segment, GFP’s contribution to the total shrimp exports by volume has risen from 13.65 percent in FY 2013-14 to 18.93 percent in FY 2017-18.^[5] Despite the increased representation of GFP in Bangladesh’s export basket, overall export prices have not reflected a corresponding increase. 
2. Increasing share of value-added exports: In recent years, Bangladeshi shrimp processors have added capacity for producing higher value-added shrimp products, expanding from traditional Head On Shell On (HOSO), Individual Quick Frozen (IQF) and block frozen shrimps to more of the Easy-Peel and Peeled and Deveined (P&D) product varieties. Also, Bangladesh’s export mix has matured to include a multitude of Ready-to-Eat (RTE) and Ready-to-Cook (RTC)  products for the international market. Once again, the expected price increases due to this higher value addition have not manifested in Bangladesh’s average export price.

For the reasons above, it can be argued that the real export value of shrimp (price per KG of net exports), taking into account the species mix and level of value addition,  has declined in recent years.

Supply chain issues also hindering growth.

Alongside the rise of Vanamei and its accompanying downward pressures on international prices, various issues in the Bangladeshi shrimp supply chain have hindered the country’s exports. Such problems include a lack of traceability and transparency within the supply chain, a lack of internationally-recognized certifications by most producers and exporters, weight manipulation using various means and product mislabelling.^[1]

While not as widespread as they once were, there are still few instances of such malpractices arising from the multitude of intermediaries involved in each stage of the highly informal shrimp sector supply chain of Bangladesh. The malpractices highlighted have cast a negative image of Bangladesh’s shrimp industry among global consumers, particularly those in Europe and North America, contributing to a decline in orders. 

Domestic demand providing a ray of hope to the sector.

Despite the gloomy story on the export front, there has been somewhat of a revolution in the domestic market. The local market buoyed by rising incomes now accounts for a much larger share of its shrimp production. Industry experts estimate that as much as 40 percent of the national shrimp production are consumed in the domestic market. By this estimate, the size of the local shrimp market can be estimated between USD 180 to 200 million (BDT 15 billion to 17 billion) in volume. 

Part of this has been achieved by the rising production of Giant Freshwater Prawn (GFP). According to data from the Department of Fisheries (DoF), the output of Galda has increased from 30,868 metric tons in 2010 to 51,571 metric tons in 2018- an increase of 67 percent.^[4] The rise in GFP shrimp production can be partly attributed to the rising local demand for the variety. There is a high demand in the country’s most extensive urban consumer base in Dhaka city and popular tourist destinations such as Chattogram, Sylhet, and Cox’s Bazaar.^[6] Economic growth has led to increased consumer buying power and thus led to high demand. 

In addition to the demand for GFP shrimp, there is also a growing demand for processed food products like ready-to-cook and frozen food items in Bangladesh. Companies such as Kazi Farms Kitchen and EON Foods are adding shrimp based products such as Shrimp nobashi, Shrimp Spring rolls, and Crispy Shrimp in their product offerings. Demand for these value-added products has risen as people in the growing middle and higher-income classes are facing more busy lifestyles and seek convenient food alternatives. 

According to industry intelligence, the emerging local market can only be good news for the export-oriented shrimp processing segment, which is suffering from massive over-capacity at present due to lower than anticipated volume of exports. Domestic demand for processed shrimp products can help to unlock this unutilized capacity.

As exports decline, Bangladesh’s domestic market provides a huge opportunity for the shrimp sector to survive and flourish. There are still concerns as unpredictable weather events and the COVID-19 pandemic brings in uncertainty to the industry. However, the domestic shrimp market will continue to grow as urbanization, demand for convenient food products, and purchasing power of people rise. 

Farhan Uddin, Content Writer and Saif Nazrul, Senior Business Consultant at LightCastle Partners, have prepared the write-up. For further clarifications, contact here: [email protected]