LightCastle Partners recently prepared a whitepaper titled “Bangladesh Shrimp Sector: Transitioning Towards Sustainable Growth” that discussed the value chain analysis, recent export trends, bottlenecks for growth, the potential of Vannamei farming, and the future prospects of the Bangladesh shrimp sector. Subsequently, a webinar was organized on August 22, 2022, to share the key findings from the whitepaper with relevant stakeholders of the shrimp sector and to create a platform for discussion on the challenges, opportunities, and sustainability of this sector.
Sanjir Ali, Senior Business Consultant, and Project manager at LightCastle Partners, provided an overview of the Bangladesh shrimp sector and presented the findings from the whitepaper during the webinar. It was followed by a panel discussion that was moderated by Zahedul Amin, Director at LightCastle Partners. The distinguished panelists listed below participated in the discussion:
Mr. Alok Kumar Saha, Deputy Director, Department of Fisheries
Mr. M.A. Hasan Panna, Managing Director, Fahim Seafood Processing & Farming Ltd
Mr. Shyamal Das, Managing Director of M.U. Sea Foods Ltd
Mr. S. Humayun Kabir, Vice-President of Bangladesh Frozen Foods Exporters Association
Mr. Willem van der Pijil, Managing Director of The Global Shrimp Forum
Highlights from the keynote presentation
Traditional farming dominates the Bangladesh shrimp industry
More than 95% of shrimp and prawn in Bangladesh is produced in extensive polyculture ponds that were formerly used as rice ponds and are locally referred to as ‘Ghers’. In the last five years, farmers have suffered heavy losses due to the spread of diseases, lack of farming knowledge and best practices, and frequent natural calamities induced by climate change. Hence financial limitation is a major bottleneck for the small to medium-level farmers and this is further burdened by the lack of access to finance from formal financial institutions. The sector hence faces major challenges in adopting technology for improved productivity and profitability.
The local value chain suffers from over-reliance on the availability of wild broods
In the case of Monodon, less than 3% of Post Larvae (PL) is from imported broods, and the remaining PL is produced from wild broods. Similar circumstances apply to the production of Rosenbergii, where less than 3% of the PL comes from well-established hatcheries. The heavy reliance on the wild leads to inconsistent quality of output and doesn’t promote commercial hatcheries within the ecosystem. Furthermore, dependence on traditional farming methods also doesn’t promote commercial hatcheries which restrict the production and scaling of SPF broods and makes the dependency on the wild a viable option due to low requirements.
A fragmented value chain hinders shrimp exports to new global market segments
Most of Bangladesh’s shrimp farming efforts are directed at Monodon and Rosenbergii. Despite the fact that Monodon is a premium species of shrimp, most Bangladeshi products are exported to Europe for use in food services This is true despite the sizable nature of Black Tiger shrimp (Monodon) farms in Bangladesh, which can project an image of a premium product. A lengthy and uncoordinated supply chain exists between the farm and the processing plant, which causes issues with traceability. Additionally, due to the small scale of the farmers, certification (ASC/BAP) is extremely difficult, which restricts market access to retail marketplaces.
High potential of penetrating the global retail market through Vannamei exports
The production of Black Tiger shrimp is gradually decreasing in Bangladesh since the market has turned away from it in favor of Vannamei. In recent times, Vannamei production has been successfully tested in the nation by MU Seafoods with a productivity of 8900kg/ha in the first year and around 10,000kg/ha in this year. The viability of the commercial introduction of Vannamei depends on farmers in Bangladesh being able to successfully raise shrimp in large-scale intensive systems and possessing the required expertise to manage such production. Through semi-intensive cultivation, there is potential to commercialize Vannamei and join the global retail supply chain, which will guarantee a larger volume and strong margins for Bangladeshi exporters in the international mass market.
Reflections and recommendations from the panel discussion
Prospect of Bangladesh shrimp exports to the European Union in the context of a war-led recession
There is a limited impact of recession in the European Union (EU) market currently. However, since shrimp is considered a luxury product compared to other alternatives, customers might purchase fewer shrimp in the coming days. At the same time, there is also a contrasting force—a strong demand in the market that is driven by robust post-pandemic recovery. Although the EU market seems promising as it is still the leading destination for Bangladeshi Black Tiger (Monodon) shrimp exports, there is a growing concern for a decline in demand in the near future due to increasing unemployment rate, high inflation rate, and impending energy crisis in the EU.
Bangladesh has an advantage as the homegrown feeds are mostly used for shrimp farming as opposed to commercial feed. If Bangladesh was reliant heavily on commercial feed, the impact of the Russia-Ukraine war on the price hike of feed raw materials would have put Bangladesh in a difficult state.
There is a greater demand for Monodon in the northern part of the EU—countries such as the Netherlands, Belgium, Germany as well as in the UK. However, over the last couple of years, there has been an increasing demand for Vannamei. Currently, Vannamei cannot compete with Monodon due to its size. But this competitive advantage for Monodon may diminish soon as Ecuador has made significant progress in improving the genetics of Vannamei and thus, producing it in large sizes. But in the current market scenario, Monodon still has a strong demand due to its size range and its preference in certain market segments like in the Asian market of the northern part of the EU.
India is facing stiff competition from Ecuador and Vietnam in Vannamei exports. Hence, there has been a shift towards Monodon production in India as it requires low-intensity farming. Analysts predict that buyers will be increasingly more interested in importing Monodon from India in the next couple of years, which means Bangladesh will face serious competition in Monodon exports. In the current context, if Bangladesh shrimp industry players can act together to manage the supply chain better and enter the global retail shrimp market, it will be financially more rewarding.
Building a country’s image in the global market is important as Madagascar has set a great example in establishing its brand and in turn, getting premium prices through consolidating its position in a specific market segment like French retail stores. Developing a strong supply chain can help in building such an image and all the value chain actors can play an important role in this.
The potential of Vannamei exports to enter the global retail market
Vannamei exports will be useful to utilize the full capacity of processors in Bangladesh. However, the value chain actors will have to come up with strategies to compete with major players like India, Vietnam, and Ecuador who have the capacity for higher production and export volumes. Considering the competition, Bangladesh will need to optimize its production to offer competitive prices for Vannamei exports. Semi-intensive farming could be more effective and economically viable for Vannamei production. The government will have to take regulatory measures to restrict Vannamei production to farms that can meet biosecurity standards and have the technical capacity for handling the production of a new species.
It is essential to get certification for shrimp products from ASC or BAP to tap into the shrimp retail market which fetches higher prices in comparison to the HORECA industry where Bangladeshi shrimp is most consumed. In addition, emphasis should be given to following standard processing practices to meet the requirements for the retail markets including freshness and food safety.
Strategies to facilitate semi-intensive farming in Bangladesh
Although there has been much talk about the benefits of semi-intensive farming, there has been a lack of concerted efforts to expand it. It is difficult to invest in shrimp farming as access to finance is a huge challenge. There has to be a strong focus on incentivizing the farmers and investors by ensuring low-interest credit facilities and insurance coverage. Case studies from major shrimp exporting countries like India, Ecuador, and Vietnam should be analyzed to understand how they have supported and encouraged their farmers and investors. In Bangladesh, potential investors fear the high risk of losing their money as natural calamities can affect shrimp production. A strong mechanism is required to give them confidence that their investments in this industry will be safe and profitable.
Semi-intensive farming requires importing broods with 58% import duty since locally produced broods are often infected with WSSV. Ensuring duty-free imports of broods can help in the expansion of semi-intensive farming.
Intensive or semi-intensive farming can ensure traceability of shrimps which is impossible to achieve in traditional farming. Farmers and investors need to be supported with policies that will ensure lower input costs and encourage them to adopt semi-intensive farming.
Strategies to promote the brand of Bangladeshi shrimp in the global value chain
It is important to consider the improvement in the production of Monodon before delving into marketing strategies. As farms are not able to utilize their full capacity for production, it is difficult for them to sustain their businesses. Farm owners have to take the burden of fixed cost expenditures and bank loan payments. They struggle to keep their businesses afloat, which may push them towards unethical practices to keep the farms operational and continue exports by any means necessary.
There has to be a consensus at the national level to develop the Bangladesh shrimp industry as one of the prominent players in the global market. In the last twenty years, this industry has not progressed as much as its other international competitors. Shrimp exports from Bangladesh have been mostly limited to the global HORECA market which does not help establish the Bangladeshi brand. Source destination of the shrimps is not a concern for the customers when they place an order in hotels and restaurants. However, in retail markets, consumers care about the origin of the shrimp when they make their purchase decisions. But Bangladeshi shrimp exports are yet to penetrate the international retail market in large quantities.
Bangladesh used to have an upper hand in Monodon exports. There has been an emerging trend in the last three months where buyers of Bangladeshi Monodon shrimps have placed orders in India due to lower prices. This indicates that India has found ways to optimize its production and hence, it can offer competitive prices to attract international shrimp buyers. A set of measures for improved integration in the value chain, subsidized utility prices and insurance coverage for farms, and reduction in post-harvesting loss could have proven to be beneficial for India. It is certain that without strengthening the value chain and developing the capacity to export quality products, the marketing efforts will fall short. At this crucial juncture, there is a scope for massive reform in the industry as broader collaboration and innovations can contribute to taking shrimp exports to the next level. To this end, it is imperative to widely disseminate factual insights and findings from the industry analysis to all the relevant stakeholders as well as arrange comprehensive dialogues at the national level to devise a growth strategy.
Some of the key areas that need to be addressed include updating the national data on shrimp farming, supporting semi-intensive farmers for Vannamei production, providing quality broods and developing the capacity of traditional farmers, and focusing on the opportunity for freshwater shrimp production and exports to enter the global cruise-liner segment.
Way forward for Vannamei production upon successful piloting
During the first phase of piloting Vannamei production last year, 8900 kg/ha of Vannamei were harvested. The production is anticipated to rise to 10,000 kg/ha this year. The government has to put an end to the pilot program and allow the farms to start commercial farming of Vannamei to increase its production. Additionally, importing broods for Vannamei farming will not be profitable. Local producers need to be equipped with the technical expertise to produce broods in the country. There is a strong demand among semi-intensive farmers to start production of Vannamei once the government approves. To determine the future of Vannamei cultivation in Bangladesh, there is a need for enhanced consultation and interaction between the government and value chain actors.
Recommendations on strengthening the Bangladesh shrimp sector
It is evident that the Bangladesh shrimp industry is facing a crisis. As a first step towards identifying the challenges, data on total arable land for shrimp aquaculture and the volume of annual shrimp production should be verified and updated. In the past, six to seven years, barely 30–35 thousand metric tons of shrimp have been exported yearly, compared to the installed production capacity of 4 lakh metric tons of shrimp annually. A thorough examination of this industry is required to comprehend the obstacles to increased shrimp exports. There is an opportunity to boost shrimp export earnings by leveraging value-added shrimp products. However, Bangladesh is falling behind and is unable to take advantage of this opportunity as of now.
Moreover, Bangladesh has a big opportunity to enter the processed ready-to-eat market, but it requires low-cost inputs that Vannamei can offer. Due to the country’s LDC status till 2025, exporters can take advantage of tariff-free access to global markets. If prompt policies are developed and put into place to capitalize on this potential, it may result in more opportunities for employment and entrepreneurship in the nation as well as higher export earnings.
To encourage the expansion of the shrimp sector, the government can implement measures such as establishing a one-stop service center for shrimp producers and exporters, providing crop insurance for shrimp farmers, and facilitating easy access to low-interest financing facilities. In addition to Monodon and freshwater scampi farming, the government should focus on promoting the production of high-yield species like Vannamei.