US hike in anti-dumping duty to hit Indian shrimp exports: Report.

MUMBAI: The US government's decision to hike anti-dumping duty on shrimp imports is expected to hit exporters hard, says a report by rating agency ICRA.

"Hike in anti-dumping duty (ADD) by USA for shrimp exports may lead to higher prices and making Indian shrimp uncompetitive," it said.

The US department of commerce (US DoC) in its 10th annual review has increased the weighted average ADD on shrimp imports from India to 4.98 per cent up from 2.96 per cent.

India has emerged as the largest exporter of shrimp to USA following the disease (Early Mortality Syndrome) hit on Thailand's shrimp production; Indian cultivation has over the past five years moved largely from low-volume high-value Penaeus monodon (black tiger) to high-volume Penaeus vannamei. Nearly 39 per cent of the value of shrimp exported from India lands in USA, making it the largest consumer of Indian shrimps, it added.

ICRA believes that the higher reliance on the USA as the destination market and the ability to squeeze the input supply chain would lead to the processors/exporters passing on increase in costs to farmers, as has been witnessed in the past.

Typically, processors enjoy a superior bargaining power with the farmers considering the limited shelf life of unprocessed shrimp, the bulk sourcing by domestic processors and given that some of the large processors finance the farmer's working capital requirements, in exchange for contracted supply.

Hence, ICRA believes that the impact of any hike in duty/tax will be passed on to the farmers, and not to the end customer, given the need to maintain international competitiveness.

Farmers bear the price risk and stand to benefit when there is fall or increase in duties, taxes and global prices given the intensely competitive and highly fragmented nature of the shrimp processing industry (223 entities exporting to the USA alone).

As per the report, during the period January 2013 to December 2014, when the global prices had increased steeply due to concerns of constrained global supply on isolated incidents of disease outbreak, the benefits were reaped by the farmers.

However, when processed shrimp prices started declining sharply from January 2015 due to higher stocks with wholesalers in the consuming countries, amid increase in global supply with the South East Asian countries gradually recovering from disease outbreak, farmer's profits were impacted while the processors remained insulated.

The industry majors remain skeptical about backward integration owing to the susceptibility of margins in the farming business to the volatility in processed shrimp prices, it added.

Source : timesofindia.indiatimes.com