Brazilian Aquaculture

A Seafood Industry Giant in the Making

Rabobank I ndustry Note #362 - January 2013
Page 1/11 | Rabobank Industry Note #362 - January 2013
Rabobank I nternational
Food & Agribusiness
Research and Advisory
Guilherme Melo
guilherme.melo@rabobank.com
+55 11 5503 7138

Gorjan Nikolik
gorjan.nikolik@rabobank.com
+31 30 71 23825

www.rabotransact.com

Contents
Introduction 1
Domestic aquaculture
industry is in its infancy 2
The Brazilian seafood
industry remains
fragmented, with limited
presence of multinationals 5
Seafood consumption is one
of the fastest growing food
segments in Brazil 6
Unlocking the potential will
require significant changes
in legislation and
investment 8
Conclusion 10

Brazil has all the necessary ingredients to become the next seafood super power,
rivalling established producers such as Thailand, Norway and even China.
However, in spite of its intrinsic natural resources and large availability of grains,
the Brazilian seafood industry still has to overcome significant barriers to realise
its potential, including heavy bureaucracy to obtain licences to start an
aquaculture operation, lack of biosafety standards, low yields and a relatively
underdeveloped feed industry. Rabobanks view is that despite the challenges, the
Brazilian aquaculture sectorled by private and governmental investmentswill
enlarge its importance in the global aquaculture scenario.
Introduction
Global seafood is undergoing a vibrant period of growth based on increasing demand and a
constrained wild catch supply. It is estimated that in 2010, global capture fisheries and
aquaculture supplied the world with around 168 million tonnes of seafood, of which 143
million tonnes were destined for human consumption. This volume represented 24 percent
of all globally consumed animal protein, rising from a 15 percent share in 1992.
While global demand has increased steadily, global capture fisheries have remained
relatively flat at around 90 million tonnes since 2006 and are set to hover around current
levels over the coming years given the need to control fishing efforts in order to restore
overexploited stocks and achieve long-term sustainability (see Figure 1). This implies the
additional production required will need to be met by the aquaculture industry. However,
current leading producers such as China, India, Thailand, Vietnam and Norway have
relatively limited ability to expand due to constrained resources. Brazil, on the other hand,
has all the ingredients necessary to play a key role and fulfill the expected supply shortfall.
Figure 1: Static global capture fisheries and growing aquaculture
production
million tonnes

Source: FAO, 2012
Brazils intrinsic natural resources make it a potential aquaculture powerhouse. Its exclusive
economic zone (EEZ)sovereign territorial watersis one of the twelfth largest areas of
water in the world, measuring 3.5 million km2. It also has a coastline that stretches for
8,500 kilometres bordering the Atlantic Ocean. Brazils long coastline and fresh waters
stretch across a diverse range of tropical and subtropical climates that are ideal for
aquaculture similar to that of South east Asia and China, which currently account for over
80 percent of the global production. Brazil also possesses 12 percent of the planet's
available freshwater reserves, with over 5.5 million hectares of federal controlled land.
0
20
40
60
80
100
120
140
160
180
Capture production Aquaculture production

Page 2/11 | Rabobank Industry Note #362 - January 2013
Brazilian Aquaculture Moreover, Brazils current vast grain production along with its still large potential for further
growth (available arable land) provide the country another advantage in production of
species that consume a vegetarian diet as feed costs make up around 60 percent of the
total cost of fish production. A feed cost advantage was also a substantial factor behind the
growth of the poultry and pork industry in Brazil, which are now the second and fourth
largest in the world, respectively.
Box 1: The Brazilian feed industry key driver to cost
competitiveness

In the years to come, Rabobank believes that the
Brazilian feed sector has all the conditions (favourable
climate, good precipitation levels and available arable
land) to continue supporting animal protein production
growth, which will be driven by the growing demand
(domestic and international) for these types of products,
including seafood.
The Brazilian feed industry is the fourth largest in the
world and has posted an average annual growth of 5
percent over the past ten years, boosted by the growing
animal protein industry combined with a large supply of
grains, notably corn and soybeans. Brazil holds 28
percent of the worlds soybean production and 7 percent
for corn. Poultry and pork account for 79 percent of the
total feed output, but the aquaculture segment is the
one that has shown the fastest growth rate, albeit from a
fairly low basis (see Figure 2).

Figure 2: Feed consumption by species
million tonnes

Source: Sindiraes, 2012


Domestic aquaculture industry is in its infancy
Although Brazil has enormous potential to become a prominent aquaculture player, growth
is still crawling. In 2010, its total seafood production amounted to only 1.26 million tonnes,
of which, 70 percent came from maritime and continental capture with only 479 thousand
tonnes originating from aquaculture. Although aquaculture production remains low, it has
grown rapidly in recent years in the wake of the uncertainty about quality and quantity of
the final product obtained through wild capture. Between 2003 and 2010 the aquaculture
segment posted an annual growth of 8 percent (see Figure 3).

Figure 3: Aquaculture production in Brazil is growing rapidly
tonnes

Source: MPA, 2012
0
10
20
30
40
50
60
70
80
2010 2011 2012E
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
2003 2004 2005 2006 2007 2008 2009 2010
Maritime & continental extraction Aquaculture

Page 3/11 | Rabobank Industry Note #362 - January 2013
Brazilian Aquaculture Of the total aquaculture output in 2010, finfish species made up 81 percent, followed by
shrimp production with 16 percent, and the remaining part coming from by mollusks and
frogs. The majority of production (80 percent) is undertaken in fresh water, while the rest is
from coastal waters.
From a global standpoint, Brazils seafood production (wild and farmed) is falling behind
countries such as India, Vietnam, Indonesia and China, a nation that far exceeds the other
countries in production (see Figure 4).
Figure 4: Brazilian production is falling far behind other countries
Aquaculture (excluding aquatic
plants)
Total seafood (wild and farmed)
Countries Thousand
tonnes
Countries Thousand
tonnes
China 36,737 China 63,495
Indonesia 2,362 Indonesia 11,662
India 4,648 India 9,348
Vietnam 2,671.8 Japan 5,292
Phillipines 744.7 Phillipines 5,162
South Korea 475 Vietnam 5,127
Bangladesh 1,308 US 4,874
Thailand 1,286 Peru 4,355
Japan 718.5 Russia 4,196
Norway 1,008 Myanmar 3,914
Chile 701 Chile 3,761
Brazil 479 Brazil 1,260
Source: FAO, 2012
Tilapia, shrimp and tambaqui lead the way in Brazil
Although there are currently around 40 different species of fishes being commercially
farmed in Brazil, tilapia, shrimp and tambaqui are the most important ones by far. The
three species combined accounted for nearly 60 percent of the total output in 2010.
Shrimp: From exports to domestic oriented
Shrimp farming began in Brazil during the 1980s, but it was only after 1995, with the
introduction of Penaeus vannamei (a variety of shrimp), that the industry experienced a
period of rapid development. Between 1997 and 2003, production grew from 3.6 thousand
tonnes to 90 thousand tonnes at which point Brazil had become one of the leading shrimp
producing regions. Yields increased from 1,050/kg/year/ha to 6,084, which is 490 percent
growth in only six years. The currency devaluation in this period, which increased the
attractiveness of exports, also added fuel to the advancement of shrimp farming.
However, by 2003, the shrimp industry was hit hard by the outbreak of the Infectious
Myonecrosis Virus (IMNV). This, coupled with an antidumping action imposed by the
Southern Shrimp Alliance (SSA) in the US and the appreciation of the Brazilian real, resulted
in a sharp decline in total output to 63 thousand tonnes in 2005. Since then, production has
slightly recovered, stimulated by the rise in domestic demand.
Indeed, initially an export industry, Brazils shrimp farmers are currently dedicated to the
internal market only. Compared to most Central American and many Asian producer
regions, with the notable exception of China, Brazil has the unique advantage of having a
large domestic market. In our view, an industry growth rate of 10 percent per year or above
could be maintained for at least the medium term without the need to rely on export
markets.
Tilapia: The driver of Brazilian aquaculture growth
Tilapia farming has posted one of the fastest growth rates among the aquaculture sector in
Brazil and in the world. According to the Brazilian Ministry of Fisheries and Aquaculture,
while total aquaculture production has grown by a compounded rate of 8 percent per year,
the tilapia output has risen at an annual rate of 17 percent during the past four years. In
2010, Brazils tilapia production amounted to 155 thousand tonnes, placing the country as
the sixth largest tilapia producer in the world.
At present, it seems tilapia is the most attractive and likely species that Brazil could export.
Worldwide tilapia has been one of the most successful aquaculture industries. Its
consumption is growing in markets such as Asia, South America and Egypt as well as in
western markets such as the United States (US), which is the leading importer of tilapia. In

Page 4/11 | Rabobank Industry Note #362 - January 2013
Brazilian Aquaculture the US, tilapia imports have grown at more than 20 percent per year for the last decade and
tilapia has become the fourth most popular species only behind shrimp, tuna and salmon.
Key exporters of frozen tilapia to the US are China (90 percent) and Indonesia (5 percent),
while the suppliers of fresh tilapia to the US are Ecuador (37 percent), Honduras (39
percent) and Costa Rica (9 percent) (see Figure 5).
Figure 5: Breakdown of the US tilapia imports in 2011 by origin

Source: USDA, 2012
Brazil has the potential to be competitive on the fresh market as most of the competing
producers in this market have higher feed costs and limited ability to commit large new
areas of fresh water to tilapia farming.
On the frozen side, China is the dominant exporter of tilapia fillets due to a combination of
low production and processing costs. At the moment, Chinas position is unchallenged, but
in 2011 the first signs of weakness appeared in the Chinese tilapia industry as weather
problems affected Chinas ability to rapidly expand production and exports. Although
exports recovered strongly in 2012, the Chinese tilapia industry was not profitable. Rising
feed and labour costs as well as rising domestic demand are hampering Chinas ability to
continue to be the worlds key tilapia exporter. This may also create opportunities for Brazil
for to become an important frozen fillet supplier.
Tambaqui: Can it become Brazils trademark seafood species?
The expansion of the tambaqui species (Colossoma macropomum) has caught Brazils
attention. Tambaqui is an indigenous fish that has become increasingly popular among
consumers given its low fat content and its considerably attractive flavour. Indeed, besides
being largely available in Brazilian supermarkets, it has been exported to European
countries such as Portugal and France. In 2010, Brazil produced 54 thousand tonnes of
tambaqui, an increase of 17 percent over the year before.
Other species
Apart from these species, there are others that may have their position strengthened in the
years to come. This is the case for pirarucu (Arapaima gigas), which is originally from the
Amazon area and whose carcass yield can be more than 50 percent. Another example is the
beijupir (Rachycentron canadum), which has already been cultivated in the state of
Pernambuco and is highly valued in the international market.

Looking forward, based on our relatively conservative assumptions, in which the rate of
growth over the next ten years would be equal to half the rate realised during the past five
years, Brazils aquaculture industry could reach a production level of 1 million tonnes by
2022 (see Figure 6).
37%
39%
8%
11%
4%
Fresh
Ecuador Honduras Costa Rica
Colombia Others
90%
5%
1%
4%
Frozen
China Indonesia Thailand Others

Page 5/11 | Rabobank Industry Note #362 - January 2013
Brazilian Aquaculture Figure 6: Strong growth likely in Brazilian aquaculture production
million tonnes

Source: Food & Agriculture Organization of the United Nations, Rabobank
estimates, 2012
The Brazilian seafood industry remains fragmented, with limited
presence of multinationals
The Brazilian seafood industry can be divided into two different types of players: primary
producers and processing companies, with the former acting either independently or
vertically integrated. However, regardless of the type of player, the aquaculture market is
very fragmented and is composed of small to mid-sized players (see Figure 7).
Although the availability of information on the processing side is quite scarce, some sense of
the size of the companies involved can be got by reviewing the data compiled by the
Brazilian Development Bank BNDES based on Relatrio de Informaes Sociais (RAIS). It
indicates that there are 661 seafood processing companies in Brazil, of which only 7 can be
considered large scale enterprises (i.e. companies with more than 500 employees).
The leading processors are Gomes da Costa, which is owned by the Spanish Calvo Group,
and Camil. These two players are mostly focused on canned seafood (sardine and tuna) and
combined, account for approximately 85 percent of the canned market in Brazil. While the
former is a traditional player, Camil stepped into the market in 2011 when it acquired
Femepe and Coqueiro from PepsiCo. By that time, they were the second and third largest
canned companies in Brazil, respectively.
Of the vertically integrated companies, the leading players are Leardini, Netuno and
Nutrimar/Aquacrustra. The first two companies have their roots in the processing link of the
chain, but they are also setting their sights on aquaculture production. Leardini, for
instance, purchased Cavalo Marinho, a mussel and oyster farm. Netuno, which is owned by
Japan based Nissui, has also given notice that it intends to enlarge its tilapia production,
aiming to enter the Brazilian and US markets.
On the other hand, Grupo Nutrimar, was created mainly to target the production of
Aquacrustra, which is owned by the same family as Nutrimar and is focused on shrimp
production. The company also imports seafood for distribution in Brazil.
Figure 7: Net revenues per company in 2011
Company Net revenues
(million USD)
Products Brands
Gomes da Costa 317.00 Tuna and sardines Gomes da Costa
Camil* 178.54 Sardines, tuna and other species Coqueiro, Alcyon,
Pescador, Navegantes
Leardini 119.50 Shrimp, abadejo, linguado Leardini
Netuno 110.00 Tilapia, lobster, shrimp Netuno
Nutrimar/Aquacrusta 110.00 Shrimp, kani kama, squid, lobster Nutrimar
Costa Sul 73.77 Fresh fish, shrimp, kani kama, squid,
octopus
Costa Sul
Monteiro Pescados 44.85 Lobster, shrimp, fresh fish, octopus Monteiro
Pioneira da Costa 38.16 Marine and freshwater fish Pioneira da costa
Ecomar 15.36 Fish Ecomar
Geneseas 10.26 Fresh fish Geneseas
* Corresponds only to the seafood business
Source: Anurio do Agronegcio, 2011, Company information
-
200
400
600
800
1,000
1,200
Shrimp Tilapia Other freshwater fish Other species

Page 6/11 | Rabobank Industry Note #362 - January 2013
Brazilian Aquaculture The on farm segment of the industry is quite fragmented. Data collected from the
Agricultural Census (IBGE) carried out in 2006 suggest that there were around 156
thousand aquaculture farms in Brazil, of which, 22 percent were concentrated on tilapia
production. The remainder of their aquaculture production is spread among the various
species.
Seafood consumption is one of the fastest growing food segments
in Brazil
With its 193 million peoplethe fifth largest population in the worldBrazil is a traditional
consumer of animal protein, accounting for 14 percent and 12 percent of the total
worldwide beef and poultry consumption, respectively. However, when it comes to seafood,
the picture is quite different, with domestic demand in 2010 amounting to a mere 1.8
million tonnes out of a global consumption of above 145 million tonnes, or 1.2 percent of
global consumption. Per capita consumption is still significantly low (9.4 kg in 2010)
compared to the world average, which hovers around 18 kilogrammes.
Nonetheless, seafood consumption is one of the fastest growing food segments in Brazil,
posting a compounded rate of growth of 9 percent over the past six years, outperforming
the other animal proteins (see Figure 8). Demand has been largely driven by higher income
levels and the strengthening of the Brazilian real, which has made imports more attractive.
Additionally, the search for healthier food options has opened Brazilian consumers eyes
towards new cuisines, such as sushi.
Another factor contributing to increased seafood consumption in Brazil has been the
increased availability and variety of alternatives at the retail level. Additionally, increased
availability gives access to consumers that do not usually go to restaurants. According to
Euromonitor, between 2009 and 2011 the volume of seafood sold through the retail channel
grew by 33 percent, jumping from 1.2 million tonnes to 1.6 million tonnes.

Sardines are a cheap fish, which is mainly marketed in a canned form that is largely
directed towards low-income consumers. It is estimated that Brazilian consumption of
sardines reached 110 thousand tonnes in 2011.
Dried cod (bacalhau in Portuguese) is another type of seafood that has become increasingly
valued by Brazilian consumers and is traditionally consumed during the Easter and
Christmas periods. Although there are no official figures on the total consumption of this
product in Brazil, data from the Brazilian Trade Bureau shows that imports have increased
by 40 percent since 2005, reaching 43.4 thousand tonnes in 2011. According to industry
sources, this rise in cod consumption may be attributed to two factors: consumers
purchasing power growth and the appreciation of the Brazilian real, which facilitated
imports.
Salmon demand has also helped to boost seafood consumption in Brazil. Its popularity is
being driven by the increasing number of Japanese restaurants popping up across the
country as salmon is one of the most common sushi and sashimi items. We expect retailers
Figure 8: Seafood is the fastest growing type of animal protein
consumption in Brazil, CAGR 2006-2011


Source: MPA, Rabobank estimates, USDA, 2012
9%
5%
3%
2%
0% 2% 4% 6% 8% 10%
Seafood
Poultry
Pork
Beef

Page 7/11 | Rabobank Industry Note #362 - January 2013
Brazilian Aquaculture will unlock the true potential of the Brazilian market by progressively offering and promoting
more whole and fillet salmon.
Salmon consumption in Brazil had an unexpected boost in 2008 and 2009 due to the
infectious salmon anaemia (ISA) outbreak in Chile. The Chilean industry had to prematurely
harvest nearly its entire Atlantic salmon biomass. These fish, although safe to eat, were too
small to be sold as fillets in the US and Europe so were instead sold in large volumes as
whole fish on the Brazilian market far below cost of production. This served to promote the
fish to millions of new consumers. Currently, spurred by low salmon prices, Brazilian
demand is set to reach a new record. Chilean salmon exports to Brazil for the first six
months of 2012 have increased by 91 percent to a total of 31 thousand tonnes. Due to the
high level of protein consumption but still very low salmon consumption per capita, Brazil is
seen as a key driver of global salmon demand over the next five years.
Tilapia has also been more appreciated by the domestic market, spurred by its appealing
flavour and nutritional value combined with changes in the way it has been marketed to
consumers. This includes a shift from selling the whole fish to selling the fillet. Demand has
been fuelled by the increase in other meat prices, which have given tilapia a comparatively
more attractive value. Assuming that all production stays in the internal market, the
consumption of tilapia would still only amount to a mere 155 thousand tonnes or 0.8
kilogrammes per capita.
Imports are bridging the gap
Rapidly growing domestic demand together with the limited seafood production and the
recent appreciation of the Brazilian real have paved the way for an acceleration in Brazils
seafood imports in recent years. Between 2008 and 2011, the volume of imports grew at a
compounded annual rate of 14 percent, reaching 323.8 thousand tonnes in 2011, and
accounting for 18 percent of the seafood consumption in Brazil (see Figure 9).
Figure 9: Brazil's seafood imports, 2008-2011
tonnes

Source: SECEX, 2012
The primary seafood products imported by Brazil are salmon (from Chile) and cod (from
Portugal and Norway). These two species together accounted for 25 percent of the total
volume imported in 2011, with cod purchases amounting to 43 thousand tonnes, and
salmon, 40 thousand tonnes. We expect salmon to record a large growth in imports in 2012
based on the half-year figures.
Moreover, imports of processed fish (fillet) from China are gaining momentum, with the
country becoming the largest seafood exporter to Brazil (in volume) in 2011, outpacing
Norway, Chile and Argentina, whose main export to Brazil is hake fillet (filet de merluza).
Chinese sales to Brazil rose from 7 thousand tonnes in 2009 to 79 thousand tonnes in 2011,
up ten times in two years (see Figure 10).
China dominates the global supply of frozen fillets, and as demand in Europe and the US
stagnated due to the economic recession, Chinese processors looked towards Brazil as a
new growth market. In a similar fashion, the Vietnamese pangasius industry has identified
Brazil as a future destination for their fillets, which are increasingly difficult to sell in Europe.
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
2008 2009 2010 2011

Page 8/11 | Rabobank Industry Note #362 - January 2013
Brazilian Aquaculture Figure 10: Brazilian seafood imports
Countries 2009 2010 2011
Chile 44,532 41,019 47,015
Norway 29,753 34,841 33,072
Argentina 60,331 60,872 49,580
China 7,624 33,050 79,703
Portugal 7,857 11,779 17,250
Morocco 31,380 32,055 12,488
Others 48,696 50,385 84,711
Total 230,173 264,001 323,819
Source: Secex, 2012
In spite of the recent increase in total imports, the Brazilian market is still relatively closed.
Imports of shrimp, for instance, have been prohibited since 1999 due to sanitary risks.
Unlocking the potential will require significant changes in
legislation and investment
The current underdeveloped stage of the Brazilian aquaculture industry can be attributed to
several factors, which together have diminished the industrys appeal to investors.
Bottlenecks to be overcome
On the regulatory side, one of the weaknesses is the legal framework concerning the use of
water for aquaculture. There is considerable bureaucracy to overcome to obtain all of the
permits/licenses to start an aquaculture operation. This is in part explained by the large
number of institutions involved in regulating the activity on either federal or state waters. In
addition, a common complaint from the industry is the lack of biosafety standards for
production of the majority of the species. An example of potential damage that can be
rooted in this absence of biosafety rules is the disruption of aquaculture production in an
entire region caused by inappropriate husbandry and greater density of fish in a determined
farm that ended up contaminating nearby farms.
Low yields and size heterogeneity also prevent the flourishing of the sector in Brazil. As
pointed out by BNDES in its recent report on the Brazilian aquaculture, the husbandry
methods commonly used in Brazil are still quite primitive. This issue could be partially
solved if the relationship between the links of the chain were more coordinated among
themselves as they are in the case of pork and poultry production (integrated system).
Under such an arrangement, processors (known as integrators) would supply growers with
all the necessary inputs and therefore have control of the genetics and feed used.
Additionally, integrators generally provide technical assistance to farmers in order to
enhance the animal husbandry so that they can capitalise on the high quality inputs.
Another hurdle to the development of the aquaculture sector is the underdeveloped feed
industry for the sector, despite the large availability of grains. As there are many species
being grown with a wide range of eating habits and living environmentsusually on small-
scale farmsit is not economically feasible for companies to produce specific rations
suitable for each situation on a large scale. The result of this situation is a combination of
poor quality feed and high prices.
Given the key role played by feed for the success of the industry, the aquaculture industry
itself will probably have to lead the research focused on enhancing feed quality (e.g. higher
conversion rate and digestibility), which may take place through partnerships with
universities/research institutes and feed companies.
It is worth highlighting that in the case of tilapia, the technological package is more
developed given its higher scale of production. Therefore, all aspects involved in animal
husbandry related to tilapia are well ahead that for species native to Brazil.
Infrastructure is also another important obstacle for the sector. As pointed out by BNDES,
many areas that have been granted to aquaculture farms are very far from roads, ports,
feed blenders, consumption areas, and so on, which poses additional challenges to the
operation and, consequently, economic feasibility of such projects.
Last but not least, the lack of public information about the sector has likely prevented
investors from better assessing the potential of such a market.


Page 9/11 | Rabobank Industry Note #362 - January 2013
Brazilian Aquaculture
Enticing opportunities
Despite the challenges to be overcome, Rabobank believes the outlook for the seafood
sector in Brazil is quite bright. The country possesses the key factors for becoming an
aquaculture powerhouse.
On the domestic side, the speed of demand growth for seafood should maintain momentum,
driven by rising income levels coupled with changes in consumers preference towards food
quality and healthier products. Additionally, as per capita consumption is still falling much
behind the World Health Organisations standards (12 kilogrammes/year/capita), it is very
likely that the Brazilian government will continue rolling out incentives to encourage
consumption. In fact, the government has already been relatively active in this market
through the acquisition of seafood to be distributed in public schools.
Just to demonstrate the magnitude of the potential demand in the future, if we assume that
consumption will grow at a CAGR of 7 percent for the next four yearssimilar to the levels
seen in past yearswe would see the total consumption jump to 2.6 million tonnes in 2015,
which is not far from the actual domestic pork consumption (see Figure 11).
Figure 21: Seafood consumption is anticipated to remain strong
in Brazil
thousand tonnes

Source: MPA, Rabobank estimates, 2012
This fast-growing domestic consumption is also likely to promote an increase in Brazilian
seafood imports as some of the preferred species cannot be grown in Brazil, notably salmon
and cod, which require cooler temperatures. Under this scenario, exporters from Norway,
Portugal and Chile could also benefit from anticipated demand expansion.
We also envisage export opportunities driven by the growing international demand for
seafood, which is expected to grow by 27 million tonnes by 2030, according to Food and
Agriculture Organization of the United Nations. Additional boosts to Brazilian exports will
come from the declining rate of global aquaculture production growth on the back of water
constraints and rising feed costs. Within the aquaculture sector in Brazil, tilapia and shrimp
segmentswhose value chains are far ahead the othersare the ones who could profit
most from this scenario.
For example, the world tilapia trade is dominated by China, the main exporter, and the US,
the largest importer. Brazil, curiously, is the major supplier of grains to China, who uses
part of such grains to feed fish domestically before shipping them to the US. In addition,
large Brazilian meat companies already have big US operations (e.g. JBS and Marfrig), a
factor that could facilitate possible trade. The same potential applies to shrimp, where
developed countriesrepresented by the US, EU and Japanare responsible for 85 percent
of total imports, with China, Thailand, Vietnam, Ecuador and India responsible for 36
percent of global exports.
In white fish, the question is whether Brazil can create an industry which will replicate the
success of pangasius. Pangasisus is almost exclusively produced in the Mekong Delta in
Vietnam, and within a period of less than ten years, expanded from a small backyard
industry producing less than 100 thousand tonnes into a professional industry exporting to
every large market globally and producing above 1 million tonnes. However, due to a
worsening image with Western consumers and rising feed costs, production from the
Vietnamese industry has stagnated for the last three years. This may open opportunities for
-
500
1,000
1,500
2,000
2,500
3,000

Page 10/11 | Rabobank Industry Note #362 - January 2013
Brazilian Aquaculture native species such as tambaqui and pirarucuwith features such as fast growth rate, white
colour, mild flavour and a vegetarian diet (and thus low feed cost)to play a role in the
global fresh water white fish market and compete with pangasius.
All of these factors combined point to the expectation that the leaders in the global seafood
industry will increasingly consider Brazil as the next frontier of seafood, notably
aquaculture, following the early movers such as Calvo (canned tuna and sardines), Nissui
(tilapia and shrimp farming) Pescanova (tilapia faming) and Nutreco (aquatic feed).
This may also entice Brazilian meat giants to venture into the aquaculture space. Brazil's
top four meat producerswith combined revenues of USD 62 billion in 2011 have
developed logistics, feed production, unrivalled expertise in animal protein production and a
global footprint that could be extended to the aquaculture sector. For Brazilian meat
companies, aquaculture can be seen as a source of diversification and an opportunity to
generate growth levels far higher than in the meat industry.
Conclusion
Brazil has all the ingredients necessary to become a seafood superpower, rivalling producers
such as India, Norway and even China. However, in spite of its intrinsic natural resources
and large availability of grains, the Brazilian seafood industry still has to overcome some
barriers to fulfil its potential. Among them, we can highlight the heavy bureaucracy needed
to obtain permits to exploit water, lack of biosafety standards for production,
underdeveloped feed industry focused on fish and the absence of public information on the
sector.
Despite having to overcome such challenges, the outlook for the seafood sector in Brazil is
quite appealing. On the demand side, domestic consumption should continue growing
relatively fast on the back of the expected rise in income levels coupled with changes in
consumers preference towards food quality and healthier products. This fast-growing
domestic consumption is also likely to promote an increase in Brazilian seafood imports as
some of the preferred species cannot be grown in Brazil, notably salmon and cod.
In parallel, we also envisage opportunities on the export side for companies placed in Brazil.
This will be motivated by the growing international demand for seafood, which is expected
to grow by 27 million tonnes until 2030, according to FAOassuming consumers will
maintain the present level of per capita consumptionalong with the low cost of production
that these companies may reach here in Brazil.
All in all, Rabobanks view is that in spite of all the challenges the Brazilian aquaculture
sector will have to cope with over the coming years, the countryled by private and
government investmentswill enlarge its importance in the global aquaculture scenario.













This document is issued by Coperatieve Centrale Raiffeisen-Boerenleenbank B.A.
incorporated in the Netherlands, trading as Rabobank International (RI). The information
and opinions contained in this document have been compiled or arrived at from sources
believed to be reliable, but no representation or warranty, express or implied, is made as to
their accuracy, completeness or correctness. This document is for information purposes only
and is not, and should not be construed as, an offer or a commitment by RI or any of its
affiliates to enter into a transaction, nor is it professional advice. This information is general
in nature only and does not take into account an individuals personal circumstances. All
opinions expressed in this document are subject to change without notice. Neither RI, nor
other legal entities in the group to which it belongs, accept any liability whatsoever for any
loss howsoever arising from any use of this document or its contents or otherwise arising in
connection therewith. This document may not be reproduced, distributed or published, in whole
or in part, for any purpose, except with the prior written consent of RI. All copyrights, including
those within the meaning of the Dutch Copyright Act, are reserved. Dutch law shall apply. By
accepting this document you agree to be bound by the foregoing restrictions. Rabobank
International Utrecht Branch, Croeselaan 18, 3521 CB, Utrecht, The Netherlands +31 30 216
0000

This report has been published in line with Rabobanks long-term commitment to international
food and agribusiness. It is one of a series of publications undertaken by the global department
of Food & Agribusiness Research and Advisory.
2013 - All Rights Reserved.


Page 11/11 | Rabobank Industry Note #362 - January 2013
Brazilian Aquaculture

Rabobank International
Rabobank Food & Agribusiness Research and Advisory Global Animal Protein Sector Team
USDavid C. Nelson
david.nelson@rabobank.com

USDon Close
don.close@rabobank.com

USWilliam Sawyer
william.sawyer@rabobank.com

AustraliaSarah Sivyer
sarah.sivyer@rabobank.com

ArgentinaPaula Savanti
paula.savanti@rabobank.com



BrazilGuilherme Melo
guilherme.melo@rabobank.com

EUGorjan Nikolik
gorjan.nikolik@rabobank.com

EU & RussiaNan-Dirk Mulder
nan-dirk.mulder@rabobank.com

EU & RussiaAlbert Vernooij
albert.vernooij@rabobank.com

MexicoPablo Sherwell
pablo.sherwell@rabobank.com





NE AsiaChenjun Pan
chenjun.pan@rabobank.com

NE AsiaDaron Hoffman
daron.hoffman@rabobank.com

SE Asia & IndiaPawan Kumar
pawan.kumar@rabobank.com

New ZealandMatthew Costello
matthew.costello@rabobank.com

www.rabobank.com