Shrimp market affected by dumping decision

As American retailers head into the prime holiday buying season, they have one question to ask suppliers: what impact does Tuesday’s shrimp dumping decision hae on supply?

China and Vietnam, both non-market economies, are perceived to have bore the brunt of the U.S. Departmnet of Commerc’s preliminary determination that they are dumping product in the market and should pay tariffs for doing so.

Well over 60 percent of the Chinese shrimp supply is now facing tariffs of 49 percent to 113 percent.

The duties apply to canned and frozen warmwater shrimp.

U.S. retailers have been depending on lots of Chinese cooked shrimp to fuel sales over the past two years- and haven’t been disappointed. But with between 50 and 100 million pounds of supply now in jeopardy, retailers could soon have to place their bets on other sources.

Chinese shrimp imkports to the US market skyrocketed in 2003 to 178.6 million pounds – a 64 percent increase over the volume in 2002. For the first four months of 2003, Chinese shrimp imports were up 57 percent in volume over the same period last year.

The Commerce Department will make a separate decision on July 28 on whether to impose tariffs on shrimp from Thailand, Ecuador, Brazil, and India. China and Vietnam were singled out because they are not free market-based economies.

Anticipating harsh treatment for the largest non-market economy in the world, and a shortfall in supply, the shrimp market strengthened considerably since last month. Prices have jumped 20 percent since early June. The cost of the bell weather 41-50 count white shrimp has increased from just over $2 a pound a month ago to more than $2.50 per pound.

Mid-to-late summer is when the big retailers pull the trigger on shrimp sales for the winter holiday. Even the big foodservice chains start sniffing around for sales on shrimp for fourth quarter needs.

From an importer’s standpoint, less supply is a positive outcome of the dumping decision. For consumers, it will most likely result in a price hike. But while few expect any big leaps in market prices now that the (preliminary) verdict has been handed down on the nation’s second largest shrimp supplier, continued strength and even an up tick is widely presumed.

In China, the four main exporters, which account for 43 percent of Chinese shrimp exports to the US market, received duties of 0 percent to 98 percent.

Assistant Secretary of Commerce for Import Administration, James Jochum, said in a conference call Tuesday that the wide disparity in dumpin duties is because two of the companies had lower costs of production because they were vertically integrated – one reeived a 0 percent (or de minimus) tariff rate and the other a 7.67 percent tariff rate. The latter, Shantou Red Garden Foodstuff Co.,Ltd., supplies Vernon, CA-based Red Chamber CO, arguably one of the largest shrimp suppliers in the United States.

The other two received duties in excess of 90 percent. One of those was Hong Kong’s Yelin Enterprise Co., which reportedly shrimps product to another of Amercia’s largest shrimp importers, Ocean Duke, located in Torrance, CA.

The next tier of 21 companies represented 36 percent of Chinese exports and were assessed a 49 percent dumping duty. The last tier of Chinese firms represent 22 percent of the US export shrimp volumeand were assessed a duty of 112 percent.

The Commerce Department also said that the dutie swill be 90 days retroactive for certain Chinese exporters.

Chinese and Vietnamese exporters will soon find it difficult to pay those duties from a cash flow standpointand still have the products’ prices fit in the marketplace. How many will beable to make itwork? And, as Chinese farmers wrap up harvest this month, where can they expect that product to go? That all remains to be seen.