Aquaculture decline rocks soybean demand

Soybeans can’t catch a break.

First there was the global outbreak of African swine fever, a disease that wiped out over one-quarter of the world’s hog herd, decimating the top market for soybean meal.

And now COVID-19 is having a similar impact on the aquaculture industry, which is another major consumer of the feed ingredient.

“The closure of many restaurants, food services and other major users of seafood are severely impacting (aquaculture) producers,” said Jim Sutter, chief executive officer of the U.S. Soybean Export Council (USSEC).

The one-two punch of AFS and COVID-19 has knocked the soybean industry back on its heels, which is not good news for the entire oilseed complex.

Aquaculture is the fastest growing animal protein business in the world and soybean meal is the top protein source in aquaculture feed rations.

The U.S. supplies about one-third of the soybeans used in the aquaculture sector.

By 2030, 62 percent of all seafood used for human consumption will be a product of aquaculture.

USSEC recently hosted a webinar on how COVID-19 is impacting that rapidly growing sector of the food business.

George Chamberlain, president of the Global Aquaculture Alliance, said the food service sector, which includes hotels, restaurants and catering businesses, has seen a 70 percent reduction in sales.

“This had been the major source of seafood consumption, especially in the United States,” he said.

He doesn’t anticipate people around the world will return to dining out in the foreseeable future.

“We don’t expect life to return to normal anytime soon because that would require herd immunity,” said Chamberlain.

His best guess is that social distancing will continue for another 18 to 24 months until a vaccine is available and that means reduced seafood consumption and decreased soymeal demand from the aquaculture sector.

Gorjan Nikolik, senior global specialist for seafood with RaboResearch Food & Agribusiness, shares that grim outlook.

He cited the results of a survey of 44,718 U.S. citizens conducted by CivicScience showing that 41 percent of respondents don’t anticipate going to a restaurant in the next one to five months and 20 percent will stay away at least another six or more months.

“That’s concerning,” said Nikolik.

“That means that we’re going to have a severely depressed demand curve for the rest of this year.”

He noted that the impact of COVID-19 varies widely depending on the type of aquaculture product.

The salmon industry was enjoying a long-term, high-price scenario that started in 2016 when Chile had a major disease outbreak that reduced global supply of the product.

“It was a good way to enter a difficult time,” said Nikolik.

The salmon sector has experienced a reduction in prices but production volumes have not been extensively impacted.

Retail demand for the product in the European Union has helped offset losses in foodservice demand because there has been a 50 percent reduction in salmon prices in that market.

The shrimp scenario is different because the product was in oversupply heading into COVID-19.

“It doesn’t look good when you are gearing up for big supply and suddenly the demand just disappears,” he said.

The slump in Chinese demand occurred during lunar new year, which is the high point for shrimp consumption in that country.

Product had to be rerouted to the U.S. and the EU but demand in those two markets also quickly evaporated.

Shrimp farmers have gone from a break-even scenario to incurring considerable losses. Prices are about half of what they had been for farmers in places like Ecuador and Indonesia.

“The shrimp industry clearly is hurting quite heavily,” he said.

Chamberlain said the one positive to come out of COVID-19 is the shift in Chinese consumption patterns. Instead of buying live fish at wet markets Chinese consumers have taken to purchasing whole, gilled and gutted or sectioned fish at grocery stores or frozen fish from e-commerce retailers.

Steps have also been taken to improve food safety standards at seafood processing plants, which have been subject to the same types of COVID-19 closures as North American meat packing plants.

But the industry will continue to face short-term challenges.

“Consumer budgets are expected to be tight with all the unemployment, so seafood items may suffer,” he said.

Rising air freight rates due to reduced air travel is also expected to take a toll on exports of high-value products like lobster, salmon, sea bass and tilapia.

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