Vietnam could face tra fish oversupply
Vietnam’s tra fish export sector was probably the most improved industry this year, but rampant production could lead to excess supplies and price drops, according to Viet Dragon Securities Company (VDSC).
Many farmers have rushed to breed tra fish after prices increased steadily from the beginning of 2017 due to fingerling and raw materials shortages.
The situation may lead to oversupply of raw materials when farms step into the harvest season. The selling price of raw fish for factories could be reduced, the company said.
Farms could suffer great losses and stop breeding tra for the next season, meaning they would lack raw materials for the next crop, VDSC warned.
However, according to the firm, if the US-China trade war continues, Vietnam could increase its market share in the US, replacing Chinese tilapia that currently accounts for 40% of all fish imports to the US.
Barriers to Vietnamese tra fish in the US market are likely to decrease. Vietnam has passed the US Department of Agriculture (USDA) field tests – the most important step in the assessment process established by the USADA’s Food Safety and Inspection Service (FSIS).
In addition, the preliminary anti-dumping tax on basa fish during the 14th administrative review period (POR 14) is significantly lower than that of POR 13. As a result, VDSC expects the tra fish export volume to the US market to increase sharply this year.
The EU-Vietnam Free Trade Agreement (EVFTA) may be approved early this year. If the EVFTA is approved, the import tariff for frozen tra fish fillets will be reduced from the current rate of 5.5% to zero within three years. The rate for processed tra fillets will be reduced from 7% to zero within seven years. VDSC said demand for tra fish in the EU is expected to rise.
With the popularity of processed products in the US and EU markets, Vietnam has the potential to increase its profits from high-value products. The gross margin for the products is 22-25%, higher than the margin of 12-16% for frozen fillets.
The world population will exceed 8.5 billion people by 2030. As the natural fish supply worldwide is dwindling, the market share of farmed fish is expected to increase from 47% in 2016 to 54% in 2030. According to VDSC, this change presents a chance for tra producers like Vinh Hoan to expand production.
Vietnam’s Mekong Delta region has favorable ecological conditions for large-scale tra farming. The natural conditions combined with advanced farming technology will produce white-meat tra products, a favorite choice of consumers. Other major tra producers such as India, Bangladesh, Thailand and Indonesia produce low-value yellow-meat tra fish.
Vietnam’s export value of the fish was estimated at US$2.3 billion for 2018, higher than the US$1.8 billion recorded in 2017, according to the Vietnam Association of Seafood Exporters and Producers (VASEP).