Crisis changes the face of Vietnam’s Pangasius aquaculture significantly

Feeding Pangasius in Vietnam

Large Pangasius Farm in Vietnam

Slumped European demand, stagnant selling prices and rising competitors lead to challenges for the Vietnam Pangasius producers in the last years. In consequence, the sector restructures from family-own small scale to vertical integrated large-scale firms; new markets and diverse certification programs like BAP aim to ensure consumer expectations regarding product quality.

The recent years were not easy for the Pangasius sector in Vietnam. After a skyrocketing growth of the catfish production between 2000 and 2008, a recession has led to a couple of serious challenges for the sector. However, let’s go back to the beginning of the fascinating story of rise and crisis of one of globe aquaculture’s top pupil. Pangasius aquaculture in Vietnam (mainly Pangasius hypophtalmus) dates back to the 1940’s, when wild captured fry and fingerlings were on-grown for domestic supply by household-scale farmers.

The economic reforms after the reunification of Vietnam in 1975 have started a process of openness of trade and transition from a centrally-planned economy to a more liberalized market. These reforms stimulate the professionalization of the aquaculture sector, too. Major improvements in rearing methods in the 1990s made the production independent from wild caught fingerling for stocking and shifted the culture from (houseboat) net cages to farm pond aquaculture.

Pangasius’ relatively low production costs and its white mild tasty meat as well as its good handling for processing boost the demand worldwide, in particular in the European market and US. From 1997 to 2007 the production increased from 22,500 t to around 1.2 million t. The boom has been stopped harshly by a combination of hampering business factors in 2008:

• the global financial crisis applied direct pressure to the Vietnam Bank sector, which led to a more restrictive credit policy with interest rates from 8% up to 30% for short-term liabilities;
• the increased production and price competition with other white fish segments lowered the export price;
• Indonesia, Thailand, Bangladesh and Myanmar have stepped up as new competitors on the Pangasius market;
• occurring environmental concerns of European consumers have led to a decreasing demand which further lowered selling prices;
• stricter regulations on food quality, safety and hygiene at EU and US markets have made an import of seafood more costly;
• simultaneously the prices for fish feed as main cost driver have increased around 20% from 2012 in Vietnam, mainly caused by higher prices for fishmeal and -oil.

Many Vietnam small-scale farmers, who require borrowed capital to pre-finance feed and juveniles, have been forced to give up business in consequence of these difficult frame conditions.

Today, the sector has changed its face. Instead of the former household and small-scaled farm structure, highly vertical integrated firms with several enterprises (feed production, fish farming, processing, exporting) predominate the Pangasius production. These firms are able to pre-finance their farming expenses and/or balance temporary profit loss by other enterprises’ income.

More and more production systems are certified via trade quality labels like Aquaculture Stewardship Council (ASC), Best Aquaculture Practices (BAP) or the more general global Good Agricultural Practice (GLOBALG.A.P.) to meet market demands in EU and US. Further, Vietnam traders start to encourage the exports towards new promising markets like ASEAN states, UK and China. In fact, the new performance of the sector shows first hesitant payoffs: Notwithstanding an ongoing decline in the main markets US and EU, the Vietnam Association of Seafood and Producers (VASEP) reported a marginal profit of 0.4% in export values for 2015. 

Sources:

Dujin A. P. van, Beukers R. and Pijl W. van der (2012): The Vietnamese seafood sector. A value chain analysis, Research Report 2012
Online available here

FAO (2016): Globefish. Problems for Vietnamese Pangasius producers. Market  Report FAO 
Online available here

FIZ (2015) Pangasius. Fisch-Informationszentrum.
Online available here 

Phuong N. T. et al. (2007): Economics of aquaculture feeding practices: Viet Nam. In M.R. Hasan (ed.). Economics of aquaculture feeding practices in selected Asian countries. FAO Fisheries Technical Paper. No. 505. Rome, FAO. 2007. pp. 183–205.