China’s aquaculture sector to take inflationary hit from drought

Aquaculture operators in China's Sichuan province have been badly impacted by power cuts that have come as the result of a worsening drought.

Regional businesses have faced power cuts and malfunctioning back-up generators as a result of the failure of hydropower-generated electricity sources due to low water levels caused by a catastrophic heatwave and drought that has hit China over the past two months.

Faced with power cuts and malfunctioning back-up generators, an aquaculture operation in the region was unable to circulate water and subsequently lost 10,000 tons of fish in the past week, according to local media reports. Sichuan is a major producer of carp and other species sold through China’s domestic market.  

“While it is difficult to assess the scope, losses due to heat and drought are happening at poultry and aquaculture operations in central China and the Sichuan region,” Shanghai-based agriculture research consultancy Sitonia said in a recent economic research note. “These losses are likely to be inflationary for poultry, eggs, and aquaculture, and are likely to weigh on feed demand in the third and fourth quarters of the year.”

China is the world's largest aquaculture producer by a significant margin, but its output totals will be impacted by the heatwave and drought, according to Sitonia Head of Research Darin Friedrichs.

 “It is likely to have an impact across a range of commodities and that will be inflationary,” Friedrichs told SeafoodSource. “China’s CPI [consumer price index] in July was relatively mild compared to inflation in the U.S., but it was the highest in a year, and driven in part by higher fruit and vegetable prices. There is some impact on corn, and we’ll likely see imports rise by 5 to 10 million tons. There will be a bigger impact on rice, but the government has large stockpiles, so if prices rise too much they’ll intervene and sell stocks.”

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