Vietnam shrimp feed forecast – healthy but more modest ......• The commercial feed market has grown at 11% since 2015, mostly driven by protein production volumes but also increasing

May 2019

Vietnam shrimp feed forecast – healthy but more modest growth to 2023

www.pluralstrategy.com/sectors/agribusiness

2© Plural Strategy Group 2019 | Agribusiness

Agenda

OverviewShrimp

- Production- Aquafeed demand

3

Vietnam’s aquaculture production has significantly increased since 2015

Vietnam aquaculture production, MT (‘000s) (LWE)

Source: MARD, Plural Strategy

1,117 1,128 1,161 1,125 1,119 1,141 1,188 1,2521,420

329 352 328 433 481 440507

552

594125 140154

169

186

156 160 176170 177 182

192199

207

10086

2,407

2010 2013

90

20152011

94

2012 2014 2016 2017 2018

Other

1,729

Tilapia

Shrimp

Pangasius

2,172

1,688 1,759 1,8281,902 1,903

2,041CAGR

+2%

CAGR+8%

CAGR 2015-2018

8%

10%

10%

4%

© Plural Strategy Group 2019 | Agribusiness

4

Commercial shrimp feed is expected to grow at 6% to 2023 – slowing production but increased professionalization and demand for better quality feedShrimp commercial feed outlook, MT (‘000s)

Source: Plural Strategy

2017

399

2015 20182016 20222019

621

2020

546

2021 2023

460507

553589

674

728

CAGR+11%

CAGR+6%

• Vietnam’s shrimp production is expected to grow at c. 6% CAGR to 2022, driven by increased productivity in the form of rising yields, global demand and renewed trade agreements

• Due to ongoing professionalisation, the percentage of shrimp farmers using commercial feed should gradually increase, although there is also a trend towards large shrimp producers to integrate and produce feed in-house

Forecast


5

Agenda

OverviewShrimp



6

Vietnam’s production reached historic highs in 2018 but more modest protein demand is expected to 2023• Vietnam’s shrimp production has recovered well from a period of disease at the start of the decade, growing at 8% CAGR since 2010 and

10% since 2015, driven by increasing export demand and growing domestic consumption• Overall shrimp demand in Vietnam’s key export markets has flattened in 2018 with some oversupply in key markets such as the US, EU

and Japan, although demand in Korea continues to grow• Vietnam has remained competitive globally, further improving its position with renewed trade agreements the EU and Korea, and

benefitting from tougher EU regulations on India’s antibiotics usage and disease in Thailand• However, Vietnam faces a more intense global competitive landscape with rapidly growing markets such as India and Ecuador and

recovering markets such as Thailand and China – each with plenty more capacity to exploit• Increased supply-side capacity and soft demand has led to weakening prices through 2018 and Q1 2019 and will likely weigh on

production growth in 2019 and 2020

Plural expects commercial shrimp feed growth to slow to c. 6% per year to 2023• The commercial feed market has grown at 11% since 2015, mostly driven by protein production volumes but also increasing use of third-

party feed as the market professionalizes• Plural expects 6% growth to 2023 slowed by more modest protein production volume but buoyed by a shift to more industrialized farming.

Although certain large fish producers are vertically integrating into farming and feed, Plural expects commercial feed suppliers to take a larger share of the market in place of trash / home-grown alternatives

A more intense global competitive landscape and sustained lower prices will drive professionalization including increasing demand for higher quality nutrition• Vietnam has achieved rapid growth in recent years by expanding shrimp farm land rather than improving productivity. The large majority of

production comes from small, family run shrimp farmers• Vietnam’s shrimp farmers will face tougher conditions in the next few years in the absence of disease. A more intense competitive

landscape and growing markets such as India will likely keep global prices subdued and will put pressure on Vietnam’s position• This will drive farm consolidation, differentiated and higher quality product, and the need for more productive, professional farming

methods. This trend will provide value add investment opportunities across the value chain, particularly technology and nutrition

Summary – focus on shrimp

Vietnam’s shrimp feed sector will achieve continued healthy growth to 2023, albeit at a more modest pace. Excess global supply capacity, in the absence of disease, will mean lower protein prices which will drive increasing farm professionalization and demand for higher quality nutrition.


7

Agenda

OverviewShrimp



8

Source: Multiple country sources, Plural Strategy

Global shrimp production by producing country, MT (‘000s)

The global shrimp market has grown 10% since 2015 with new leaders emerging; Vietnam has maintained its share

750 600 500 600 700 650 600 500 650

650550 525 250 250 325 380

400

329352

328433 481 440 507 552

594180

225 300 400 390 400675

700

250 280300 310

400

420500

200 200250

200

250

550510 600 570

600 610580

600

6003,327

2011

100

2012

100

2,962

200

2010

150

China

220

2013

2,628

2016

150

2014

150

2015

150

2017 2018

Other

Indonesia

Ecuador

India

Vietnam

Thailand

2,7292,512

2,6332,881 2,800

3,694

CAGR 2010-2018

1

12

12

21

8

-6

-2

4

CAGR 2015-2018

-1

19

17

22

10

17

0

10


9

Vietnam’s shrimp production grew 10% between 2015-2018, the bulk of demand is driven by exports, although exports declined in 2018Vietnam total shrimp production and proportion officially exported, MT (‘000s) (LWE)

Source: MARD, VASEP, FAO, Plural Strategy

440

2011

350

2010

Domestic

47

82

282

352

46

2016

248305

2012 2013

50

431

2014

80

Exported367

2015

111

328

396

116

433

435

552

2017

193

401

2018

329

507481

594

73

Change % 2017-18

8

-8

66

CAGR % 2015-18

10

3

38

Disease significantly reduces export demand / supply

Disease + drop in prices + increasing competition from India and Indonesia


10

Vietnam’s relies on four key export markets. Export value rebounded strongly since 2015 driven by demand from EU, China and Korea, although slowed in 2018Vietnam shrimp exports by destination, $m

CAGR 2015-2018

343 413 312 409683 549 600

863 838581 607 618

709

743584 600

704 639224 256381

414

350 436

683 638

551559 455

831

1,064

657709

659638225

318

251285

382386

360435

427

559

731

561521

564415

2010

2,396 US

2011 2012

2,107

China

Other

Korea

2,239

2013 2014 2015 2016

3,114

2017

3,953

Japan

158

EU

3,151

144

128 171

2,952

3,855

2018

3,554

15

3

22

-1

15

-10

Source: VASEP, Plural Strategy


11

EU and US shrimp import volume, MT (‘000s)

Shrimp demand in developed markets is at historic highs; significant dips have been a result of supply shortages, caused by periods of disease

Disease significantly reduces demand / supply

Further disease issues and short-term oversupply from 2014 jump

1,2031,294

1,468 1,5021,582

1,720 1,745 1,697 1,7001,764 1,785

1,638 1,5951,686 1,686 1,734

1,8291,897

20082003 20182001 20042002 2005 2006 2007 2009 2010 2011 2012 20162013 2014 20172015

CAGR+6%

CAGR+1% CAGR

-5%

CAGR+4%


12

2019 production is up 6% in first three months of 2019 vs the previous year. Export value is down 7%Month-by-month shrimp production and exports, 2017-2019

Source: MARD, VESEP, Plural model

JunFebJan Mar Apr JulMay Aug Sept DecOct Nov

2017 2018 2019

Production (MT ‘000s) Exports ($m)

Jan Apr JulMarFeb May Jun Aug Sept Oct Nov Dec*2017 Jan-June data unavailable


13

Source: NOAA, EUMOFA, Plural Strategy

EU shrimp imports

European shrimp imports, a key market for Vietnam, are significantly down in the first two months of 2019. Prices have been dropping since 2017

Europe imports - volume % change over previous year

34

17

47 46

29

-5-10

-5

-15 -17-8

1014 13

6 6 8

-1

-5

-2

4

-6 -4

-22AugJan Sep OctMarFeb JulApr

0

MayJun NovDec Jan

-13

Feb

74

99

Europe import prices - Euros

2018 2019 2018 2019

2

3

4

5

6

7

8

9

20072001 2013200920052003 2011 2015 2017 2019

Ø 6


14

Agenda

OverviewShrimp



Commercial feed demand has grown at 11% CAGR 2015-2018

15

Vietnam feed demand by type, MT (‘000s)


294 314 293387 430 399

460507 546

105113

105

139154

135

156163

17534

3740

2011

707

2010

22

760

2012 2013 2014

554

2015 2016 20182017

29564

422

Commercial

450420

616

29

649Trash

Integrated

2223

32

CAGR % 2015-18

10

9

11


16

Commercial shrimp feed is expected to grow at 6% to 2023 – slowing production but increased professionalisation and demand for better quality feedShrimp commercial feed outlook, MT(‘000s)


20222015 2016 2017 202120192018 2020

553

2023

399

460507

728

546589

621674

CAGR+11%

CAGR+6%

• Vietnam’s shrimp production is expected to grow at c. 6% CAGR to 2023, driven by global protein demand, renewed trade agreements and some productivity improvements

• Weaker protein prices will force farms to consolidate and professionalise farming methods – this should drive higher demand for commercial feed

Forecast


Plural Strategy Group Ltd

London

62-65 Chandos PlaceLondon WC2N 4HG, UKE [email protected] +44 203 958 7250

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New York

2 Park Avenue, 20th FloorNew York, NY 10016E [email protected] +1 917 472 1461

Contact Information

Matthew [email protected]

T +1 917 472 1461M +1 917 361 4357

Bart [email protected]

T +44 20 7958 7250

Documents

Vietnam shrimp feed forecast – healthy but more modest ......• The commercial feed market has grown at 11% since 2015, mostly driven by protein production volumes but also increasing