In April, we organized a mid-term review workshop in HCMC for the BMUB-funded project Markets & Mangroves that IUCN and SNV are implementing in the integrated mangrove shrimp (or "shrimp polyculture") landscape that covers most of Ngoc Hien District in Ca Mau Province. The project supports mangrove conservation by training farmers to produce shrimp that meet the Naturland organic standard, which requires at least 50% mangrove cover in line with national legislation.
In exchange, the farmers receive a price premium and a purchase guarantee from Minh Phu Seafood Corp., our business partner and one of the world's largest shrimp exporters.
The average mangrove cover in Nhung Mien Forest Management Unit, where the project intervenes, is 40%. We help farmers with mangrove cover close to but less than 40% replant mangroves so that they can join the certified organic shrimp program provided they commit to reaching 50% mangrove cover in five years.
In 2014, we helped 200 farmers plant 40 hectares of mangroves to reach 40% cover. This enabled 740 famers to get certified in 2014. By helping farmers plant another 50 hectares in 2015, we expect another 400 or so farmers to get certified in 2015.
Issues that emerged during the workshop were the potential productivity gains from better shrimp post larvae (PL) selection and nursing; new EU rules that make the Naturland standard even tougher; and whether or not the price premium that Minh Phu pays farmers is sustainable.
The project has funded research by the Research Institute for Aquaculture 2 substation in Ca Mau on shrimp stocking density, i.e., the total number of PL per square meter introduced into the pond over the course of one year. Eighteen farms were selected to measure the effect of six different stocking densities on shrimp production and survival rates.
On average, these farms apply stocking densities of 23 PL/m2 and produce 156 kg/hectare of shrimp. Average PL survival is less than 2%very low. Since Naturland bans stocking densities above 20 PL/m2, increasing the survival rate is key to raising yields. The initial results indicate an optimal stocking density of 8-10 PL/m2 and that the use of higher quality (and more expensive) PL would result in higher survival rates and increased production. The main output of this research will be a technical manual to assist smallholder shrimp farmers obtain higher yields while complying with the Naturland standard.
Given the importance of high quality PL, we have identified eight hatcheries with the best reputation. They are willing to sell PL at VND50. This is more than the standard price (VND30) but less than Minh Phu's (VND85). The challenge is to persuade farmers that paying more for better quality PL is more profitable, which can best be done through demonstration ponds.
In 2014, the EU issued a new regulation on organic aquaculture. Effective January 1, 2015, the regulation bans eyestalk ablation in female parent shrimp. At the base of the shrimp’s eyestalks are glands that secrete hormones that inhibit maturation of the ovaries. Cutting one eyestalk (eyestalk ablation) reduces the inhibition sufficiently to induce the female to mature and release her eggs. Shrimp can be matured without eyestalk ablation but the process is much slower, or may never happen. Previously, countries could follow national standards, which in Vietnam de facto allow eyestalk ablation. It is unclear if/how hatcheries can comply with this new regulation.
Minh Phu has struggled to sell all the organic shrimp that they buy from farmers at a 10% price premium. But at a 5% premium, they can sell all the organic shrimp on offer. At first glance, this is counter-intuitive: why would consumers not buy a higher quality product if it was only 10% more expensive? But the 10% premium applies to the whole shrimp not the processed product. It also applies to all sizes of shrimp, which in Nhung Mien range from 10 to 25 pieces/kg. Unlike intensively farmed shrimp, organic shrimp sizes are naturally diverse and it may be difficult to sell all sizes because supermarkets, restaurants, and other buyers are size-specific.
If you take these factors into account, the 10% farm-gate premium could translate into a 30% markup. Studies in Germany indicate that shoppers are relatively price insensitive until prices reach €3.90 for a 0.2 kg pack of shrimp, at which point they cut back consumption. There is therefore a price ceiling that, if breached, leads to a sharp falloff in demand.
After discussions between Minh Phu, the provincial government, and farmers following the mid-term review workshop, a solution has been found: Minh Phu will pay farmers a VND12,900/kg premium. Since shrimp prices in Nhung Mien average VND230,000/kg, this is close to the 5% that the company believes is sustainable. To reach all the certified farms, the project will train 51 more collectors, bringing the total number of collectors to 86 collectors based in four collecting stations.
While the price premium is important, getting certified has other advantages: it provides training and technical assistance on a range of PL nursing, pond preparation, and water management issues, it gives farmers access to the growing global market for safe, good tasting food, and it contributes to a cleaner and healthier farm environment.