Impact of US Tariffs on India's Shrimp Sector
The Indian shrimp industry is currently facing significant challenges due to newly imposed US tariffs, causing widespread concern among traders and farmers.
Key Impacts and Concerns
- Estimated Financial Loss: There is an anticipated loss of approximately $1 billion as US customers may withdraw from long-term contracts.
- Farm-gate Price Drop: The price of shrimp, particularly the 50-count Vannamei variety, is expected to decrease by nearly ₹70 per kg, from a previous rate of ₹350 per kg.
- Processor Halt: Shrimp processors have paused purchase plans, adversely affecting growers, especially since 70% of Indian shrimp production takes place in summer.
Implications for Farmers
Farmers are experiencing panic due to the potential 26% tariff, which could significantly reduce their earnings.
- Financial Impact: If the full tariff is transferred to farmers, prices may drop by 20%, leading to losses of ₹60-70 per kg for Vannamei shrimps.
- Investment at Risk: Farmers typically invest around ₹1 lakh per hectare of shrimp ponds, many of which are located in Andhra Pradesh.
US Tariff Details and Broader Market Effects
The US has levied a 26% tariff on Indian imports, increasing effective duties to nearly 39%, potentially up to 45% with existing duties.
- Market Dominance: The US is the largest market for Indian shrimp, with FY24 exports nearing $1.9 billion, primarily featuring 'Vannamei' and 'Black Tiger' varieties.
- Contractual Uncertainty: Contracts typically lasting from three months to a year are now on hold, affecting shipments worth ₹3,000 crore.
Market Challenges
It is difficult to diversify into other markets due to competitive agreements and tariffs.
- Competitive Tariffs: Ecuador, a major competitor in the US market, has only a 10% tariff, widening the tariff gap with India.
- Inventory and Transit Concerns: There is uncertainty regarding ₹2,000 crore worth of shrimp in transit and another ₹2,000 crore worth packed for shipment, which may incur additional tariffs.
Strategic Insights
- Effective Duties: The new tariff regime raises concerns as effective duties on Indian seafood could approach 39-45%.
- Market Positioning: Although India is better placed than some competitors, changes in production from countries like Ecuador could shift market dynamics.