As we have been preparing for the launch of Osmobot, we have been speaking with more and more shrimp farmers around the world. When we first began, most farmers we spoke with were from the main shrimp producing areas: Southeast Asia, and Latin America.
But increasingly, as of late, we have been speaking with farms based in the areas of the world that buy shrimp, primarily the US, Canada, Northern Europe, and even China.
In seeing the rise of these farms, we wanted to dig in and understand how they could compete with SE Asia and Latin America, and if so, what was their secret.
The Rise of Indoor North American and European Shrimp Farms
According to some of the farmers we have spoken with there are now some 300 indoor shrimp farms in the United States and more coming online in Canada and the UK.
Historically shrimp farming has been limited to the regions that have stable, high temperatures where shrimp can be raised year round. Given the seasonal fluctuations in temperature that are the norm in the northern hemisphere, aquaculture has been limited to cold-water species like trout and salmon.
Outside of a few outdoor exceptions in the southern US, all of the rise of shrimp farms that we have seen have been indoors, meaning they are high density and very capital intensive. Our question is given this, the higher prices of land, electricity, and labor, how are they able to compete with overseas farms?
They Cannot Compete with Latin America or SE Asia
The answer is that they can’t. No farm in the US or Europe that we know if is able to compete or even come close to competing with the farms in SE Asia and Latin America.
Land is too expensive and it is too difficult to secure the necessary permits. Labor is $15/hour instead of $3/hour and you don’t get 5x more productivity out of an laborer at those prices.
Finally, without all of the industrial support upstream of the farm, the prices of feed and PL’s are significantly higher in these regions that is in the major shrimp farming hubs.
So why then are we seeing a rise in new farms in the North America and Europe?
They Do Not Have To Compete with Latin America or SE Asia
We have yet to come across a farm in the traditional shrimp buying regions – North American and Europe – that is actively trying to compete in frozen food section of the grocery store.
No, instead we are seeing these North American and European farms profiting from the rise in demand for shrimp and the rise of demand for local, fresh food to serve high-end niches. This is never fully frozen at the grocery store, direct to restaurant, and in some cases, direct to consumer at farmers market. Farmers are able to sell their animals for prices closer to $15/kilo, whereas overseas farmers sell to the processors (or middlemen) for $5/kilo. The difference in sale prices makes up for the increased cost of production.
We actually saw a similar pattern when we were in the largest shrimp producing country in the world, China. China recently shifted from a net exporter to net importer of shrimp, which has hugely benefited the local farmers. Instead of competing on the global market, they have found their own niche in the Chinese market – selling the animals live directly grocery stores. In doing so, they can command 3x higher prices than what they would get if it was being sold to be frozen and exported.
Given these trends, we expect to see innovative farmers find even more niches over the coming years as we see farms continue to expand beyond their traditional regions.