Indonesia, which was able to strengthen its global competitive position owing to outbreaks of diseases and production issues in Thailand and Vietnam in the early years of this decade, is currently the third-largest shrimp producer in the world, with a global market share of 12%. The country produces between 450,000 to 500,000 tons of shrimp.
Demands for Indonesian Shrimp is Rising at Home and Abroad
Indonesia exports 220,000 to 260,000 tons of shrimp: about 60% to the US, 19% to Japan, and 5% to the EU. Indonesia is the second-largest shrimp exporter to the US, just behind India. L. vannamei shrimp accounts for 70% to 80% of the export share, while Penaeus monodon, or P. monodon (black tiger shrimp), which is primarily exported to Japan, accounts for 20% to 30%. Relative to other Asian countries, domestic demand in Indonesia is high—around 40% of total production.
This high domestic demand gives Indonesia a competitive advantage as the domestic market is less affected by external factors, such as stricter import regulations or retailers’ demands for traceability and sustainability. Still, a strong domestic focus that makes them less dependent on global export markets may mean that companies will be less likely to shift toward traceability and sustainability.
Fisheries contribute about 2% to Indonesia’s GDP, and farmed shrimp has a production value of about $4 billion, which represents about 15% of the fisheries sector. Aquaculture in Indonesia, including processing and exports, employs around 8.7 million people, which is about 7% of the total workforce. Of this 8.7 million, there are approximately 1 million individuals are directly affected by shrimp farming.
Extreme Weather and Diseases Threaten Indonesia’s Shrimp Industry
Indonesia’s unique environment and location can impede shrimp farming. During the dry season, increased salt content in the water lengthens breeding periods for shrimp, and the rainy season can contribute to increased acidity in ponds, lower water temperatures, and flooding.
Extreme weather conditions can also affect hatcheries and farms. In 2018, for example, a tsunami that hit Banten province damaged 28 hatcheries and many shrimp farms in Lampung, and national production was reduced by up to 10% over a three to four-month period. The tsunami also disrupted operations across the value chain, and the feed industry suffered drops in demand of as much as 6,000 tons per month over the same period.
During the late 1980s and 1990s, Indonesia was heavily affected by various disease outbreaks, such as white spot disease, yellowhead disease, and monodon-type baculovirus. These outbreaks of diseases reduced shrimp production by about 50,000 tons—about one-third of the production volume during that time.
In 2012, Indonesia suffered less from the early mortality syndrome (EMS) disease outbreak than other Asian countries. This was partly because of the physical distance between islands, which makes it more difficult for viruses to spread, and partly because the government had taken action to prevent the spread of disease. During the EMS outbreak, for example, the country banned the import of foreign post-larvae shrimp (PL).
Nevertheless, the country is still threatened by outbreaks of diseases. In 2016, disease outbreaks reduced shrimp production by as much as 100,000 tons—about 20% of current overall production. However, this decline in production could partly be offset with intensification efforts and growth in other regions.
Indonesia’s Geography Presents Barriers to Profitability
Indonesia’s farms spread widely over its islands, face two challenges that make it difficult to be highly profitable: dependence on middlemen and energy generation that is unreliable due to unstable grid connections.
The lack of a stable energy supply poses difficulties for Indonesian shrimp farmers located on remote islands. In these regions, shrimp farmers rely on diesel generators at specific times to secure power for crucial equipment, such as aerators. Energy accounts for 15%—that is 9% for diesel energy and 6% for grid energy—of Indonesian farmers’ costs. After the feed, energy is the second-most expensive cost driver for Indonesia’s farmers. Their energy costs are significantly higher than in other Asian countries—double, for example, the energy costs of Vietnamese farmers.