1 CHAPTER I INTRODUCTION 1.1 Background 1.1.1 Indonesia’s Aquaculture Industry Indonesian GDP has been increasing during 2022 compared to 2021 for about 5.31%, where in total GDP Indonesia reached IDR 19,588.4 trillion, GDP per capita reaching IDR 71 million or USD 4,783.9. Agriculture which is part of aquaculture contributes around 12% from Indonesia's total Indonesia GDP or IDR 2,428.9 trillion. If we look at agriculture total GDP, aquaculture contributes around IDR 505.1 trillion or 21% from agriculture (3% from 2022 Indonesia total GDP). In overall, it shows that the industry is growing compared to 2021 for 2.25% where in 2021 growth only around 1.87%: Table 1. 1 Indonesian GDP and agriculture contribution in 2022 Source: bps.go.id 2 Based on the historical data, the number of companies that come into the aquaculture industry is increasing from the previous five years, as per now the number of companies that utilise ponds are about 200 companies, compared to previous year around 186 companies. As shown on the table below related to the growth of ponds and hatcheries in Indonesia (bps.go.id, 2023) Table 1. 2 Indonesia’s fish cultivation in 5 years Source: bps.go.id Shrimp is one of the commodities that is consumed and common in Indonesia, but the shrimp market is facing a slowdown due to many issues. Below are the details of macroeconomics issues of the global market that affect Indonesia. ● Global economic recession - Indonesia is one of the top players as an exporter of shrimps to the USA and Japan, with the recession demand of shrimp and consumers bargaining power becoming shifting to other sources of protein which are cheaper. ● Secondly, Ecuador is the top producer and exporter with cheaper prices to China, USA and starting to expand to the EU. Even with the current price, big players in Ecuador keep producing more where other countries are showing declining in production. ● Thirdly, Ecuador keeps providing importers with HOSO (Heads on Shell on), which in comparison with other shrimp is far cheaper from other countries' prices. Hence this causes demand shifting to Ecuador’s shrimp. With the situation above will impact to Indonesia as seen below: ● Demand for shrimp declined due to the crisis, consumers tend to find substitution to other protein sources that are cheaper. Jenis Budidaya 2017 2018 2019 2020 2021 Ponds 118 126 168 186 203 Hatcheries 82 73 70 64 56 Freshwater Fish 13 14 9 7 5 Seawater Fish 44 45 34 26 15 Total 257 258 279 283 279 3 ● Many importer countries look at Ecuador as the benchmark, hence exporters push the price lower. ● Oversupply due to lower demand makes shrimp farmers panic selling their shrimp in a smaller size (usually above size 50/pcs) with lower price. ● This also makes a lot of idle ponds due to them making the decision to stop the production to wait for the price to be recovered. With the recession and shrimp price competition with other countries, this put Indonesia in a hard position, Ecuador has significant growth and India holds their production due to the market situation, as shown below (undercurrentnews.com, 2023). Figure 1. 1 Shrimp global price (Indonesia, India and Ecuador) Source: www.undercurrentnews.com During Q2 2022 Indonesia’s vannamei shrimp price size 50-60 pcs/kg is at IDR 70,100, India’s price at IDR 62,000 and Ecuador at IDR 45,200. Suddenly during Q4 the recession and market situation impacting to Indonesia and India price significantly lower to IDR 60,100 and IDR 58,200 but Ecuador was getting stronger and kept at IDR 49,300. Figure 1. 2 Indonesia’s shrimp price in 2022 Source: https://app.jala.tech/ 4 1.1.2 Global Shrimp Price Market researchers predict that during 1H 2023 the price situation remains low and rebalancing of the price requires time. Sharp price corrections and persistently high costs challenged shrimp farmers in 1H 2022, weaker demand in US and EU and high supply from Ecuador led to low prices, which will only begin to improve when supply growth declines and demand responds to lower prices. Whether this inflection point will occur during 1H 2023 or later in the year will take more time to rebalance. Shrimp farmers in several regions in Asia and Latin America will be affected. Ecuador farmers, high USD and limitation on fuel subsidies have left many smaller shrimp farmers unprofitable. Nevertheless, Ecuador is still likely to generate supply growth in 1H 2023, as large players are in expansion mode and have fixed costs to cover. To gain more pictures related to the shrimp prices situation, we can see that the prices are well below pre-pandemic levels. (Urner Barry Rabobank Research, 2023). Figure 1. 3 White shrimp index: 5-year prices comparison Source: Food and Agriculture Organization of the United Nations, Global Aquaculture Alliance, Urner Barry, Rabobank Research 2023 5 1.1.3 Aquaculture Healthcare and Shrimp Disease Aquaculture healthcare is becoming an important part for the shrimp cultivation, as it is not just support but obligation for the farmers to be included in the pond and combined with the shrimp feed. Based on Ministry of Marine Affairs and Fisheries (KKP) stated that there are around 80 products registered in Indonesia, as the shrimp output detained around 20% from its maximum potential due to the diseases issue, for example like culture risk of EHP (Entercytozoon Hepatopenaei), WSSV (White Spot Syndrome Virus), and low biosecurity standards (kkp.go.id, 2019). EHP is the most common disease that happens in Southeast Asia and India, the disease causes slow growth and smaller size of shrimp during harvesting process. Many countries impacted by the disease with the historical result that they produced below the projection, the causes could be from pathogens, bacteria, and viruses. Besides, like ornamental fish, shrimp stress level should be maintained to prevent them from potential growth during the days of culture. (kkp.go.id, 2019). EHP commonly happens also in India that impacts the shrimp activities in the pond site. As seen below the table shows the characteristics of shrimps that are infected by EHP. Table 1. 3 EHP disease impacting shrimp activities Source: www.kkp.go.id No. Shrimp Impact Caused by EHP 1. Shrimp appetite to consume feed. This impact to FCR (Food Conversion Rate) and shrimp productivity (lower to consume) 2. Slow growth. Fungus that lands on shrimp impacting the capability of shrimp to digest the nutrition. 3. Increase of FCR. Due to lower of appetite, many feed wasted and poisoning the quality of ponds due to quantity of feeds that mixed with the water in pond site According to the test result from KKP in “Detection of EHP in Vannamei Shrimp” found out that the characteristic is similar (around 99% or almost same) between India and Indonesia. EHP 6 indicators can be caught using PCR method in some samples of shrimps from different ponds (kkp.go.id, 2019).