A few weeks ago, the Associated Press published an interesting article on the shrimp supply chain, and it starts with a very grim conclusion:
“As big Western supermarkets make windfall profits, their aggressive pursuit of ever-lower wholesale prices is causing misery for people at the bottom end of the supply chain.”
The global shrimp supply chain is a complex network of various stages, from farming and harvesting to processing and distribution. A significant portion of production is concentrated in countries like Vietnam, Indonesia, and India. These countries supply nearly half of the shrimp consumed in top markets such as the U.S. and Europe.
The investigation by NGOs and the Associated Press, highlights how the relentless drive to secure the lowest possible prices by large Western supermarkets has had a devastating impact on shrimp farmers and laborers, leading to widespread exploitation:
“‘The supermarket procurement practices changed, and the working conditions were affected — directly and rapidly,’ said Katrina Nakamura of Sustainability Incubator, who wrote the regional report and whose Hawaii-based nonprofit led the research on the industry in Vietnam.”
A key takeaway from the article is the 20-60% drop in earnings for shrimp farmers and processors compared to pre-pandemic levels. Producers have resorted to cost-cutting measures to meet the aggressive pricing demands of Western supermarkets, primarily by reducing labor costs. This has led to severe consequences for workers, including extended working hours, wage insecurity, and sometimes earning less than the minimum wage. The situation is bleak in parts of India and Indonesia, where hazardous working conditions and even child labor have been documented.
While the issues suffered by those who participate in this supply chain are quite specific, many of them are not unique to the shrimp market and even highlight the fact that when consumers who are usually oblivious to the process needed to lower costs, press for lower prices, someone in the supply chain suffers.
Let’s delve deeper.
The Shrimp Supply Chain
Let’s start by looking at the shrimp supply chain:
Tier 1: End Buyer (Retailer) – At the top of the chain, the end buyer, typically a retailer, is responsible for purchasing shrimp products from exporters or brokers.
Tier 2: Brokers/Exporters – Brokers or exporters facilitate the movement of shrimp products from the production stages to the end buyers. They serve as intermediaries between the shrimp processing plants and the retailers.
Tier 3: Shrimp Processing Plant, Shrimp Farm, and Shrimp Hatchery – These are the primary production centers, and each stage supplies the next in the product flow:
Shrimp hatcheries provide young shrimp to shrimp farms, which in turn, raise the shrimp and send them to the shrimp processing plant for processing and packaging.
Tier 4: Feed Mill Factory – The feed mill factory produces feed for the shrimp farms, ensuring the supply of food for shrimp production. The feed is often produced using by-products from fishmeal factories.
Tier 5: Fishmeal Broker and Fishmeal Factory – The fishmeal factory processes fish by-products to create fishmeal, which is sold through a fishmeal broker and used in the shrimp industry as feed. The by-products from various stages of the shrimp and fish processing cycle flow into the fishmeal factories.
Tier 6: Fish Market, Fish Processing Plant, and Transshipment – Fish markets and fish processing plants handle the fish products that may also enter the shrimp feed supply chain. Additionally, transshipment links commercial vessels and brokers. Transshipment here indicates the movement of seafood between vessels or ports without full traceability.
Tier 7: Local Fishing Vessels and Commercial Vessels – These vessels source the fish that enter the fishmeal production process and the wider seafood supply chain. This tier is the foundation of seafood production.
The diagram also shows the labor supply flow, with labor brokers involved at various stages. These brokers play a key role in the shrimp industry, facilitating the movement of workers, often in ways that may not be fully transparent or regulated. As we try to understand the interplay between prices and labor conditions, it’s important to understand these two flows.
Labor Flow:
Receiving Labor Brokers and Sending Labor Brokers are active at each production stage (shrimp farms, processing plants, hatcheries, and feed mills), indicating a complex network of labor sourcing, which often may involve cross-border labor movements.
In-country Labor Brokers are associated with the commercial vessels, suggesting that both local and migrant labor is used extensively within this system.
Product Flow:
The product flow is indicated by the black arrows, illustrating the movement of shrimp and seafood products from the lower tiers (shrimp farms, hatcheries, and fishing vessels) upwards through brokers and processing plants to the end buyer (retailer).
This diagram highlights the tiered structure of the shrimp supply chain. It emphasizes the role of brokers in both product movement and labor sourcing and indicates how transshipment and fishmeal by-products influence this supply chain.
When looking at a supply chain like this, your first thought may be that the end buyers are so far removed from the Local Fishing and Commercial Vessels where most of these violations occur, that it’s almost impossible to hold the retailers accountable. But I would argue that one of the roles of the long supply chain is to reduce costs, and another is to mask violations, allowing firms to plead ignorance.
Exploring Transshipments and Market Dynamics in the Shrimp Supply Chain
One activity that facilitates illegal actions is transshipment. As mentioned above, transshipments involve transferring shrimp and other seafood from fishing vessels to larger cargo ships in international waters.
While transshipments can provide economic relief for producers facing cost pressures, they also create a highly opaque supply chain that conceals the origin of seafood products. This lack of transparency facilitates the circumvention of labor laws and environmental regulations, exacerbating critical issues such as forced labor and overfishing.
During a transshipment, reefers, or larger refrigerated ships, collect catch from multiple fishing vessels along their journey, allowing them to mix illegal or unreported catch with legitimate haul, and offload it at poorly monitored ports —effectively laundering it as legally caught. This practice is closely linked with Illegal, Unreported, and Unregulated (IUU) fishing. Moreover, transshipments allow fishing vessels to remain at sea for months or even years, making it easier to evade monitoring, enforcement, and accountability.
In their paper “Are Bans Effective under Limited Monitoring? Evidence from High Seas Management,” Hamsa Bastani and Joann de Zegher inferred the number of transshipments, and it’s evident from the following graph that they’ve steadily increased over the years.
While the AP article doesn’t mention them explicitly, it’s obvious that transshipments play a crucial role in shrimp supply chains, especially when considering the price trends highlighted in the graph below.
The global price of shrimp has exhibited significant fluctuations in the last decade, peaking at over $10 per kilogram in 2014 before dropping to a low of around $7 by 2016. Post 2016, the prices show a varied trajectory, rising intermittently, but never quite reaching their earlier highs. In 2024, the price has once again started to climb but remains below $9 per kilogram.
As prices decline, producers and processors face increased pressure to minimize their costs. So this downward trend is clearly intertwined with the practice of transshipments as it’s a widely adopted cost-minimizing measure in the shrimp industry and other seafood sectors.
The impact of this practice has not gone unnoticed by regulators, and several countries and regions have implemented transshipment bans or restrictions to improve transparency and combat illegal fishing practices. For example, New Zealand has banned transshipments in its Exclusive Economic Zone (EEZ). Similarly, Palau has prohibited transshipments in its waters as part of broader marine conservation efforts. The European Union also imposes strict transshipment regulations for vessels operating under its flags or in its waters to ensure compliance with labor and environmental standards. Additionally, Indonesia has implemented transshipment bans to curb IUU fishing and improve monitoring of its vast fishing industry. International bodies like the Regional Fisheries Management Organizations (RFMOs) often reinforce these bans, which regulate transshipments in international waters to protect fish stocks and improve supply chain transparency.
The paper by Hamsa Bastani and Joann de Zegher seeks to examine the impact of transshipment bans in the seafood industry. The motivation for this study stems from growing concerns regarding Illegal, Unreported, and Unregulated fishing as well as the associated human rights abuse often hidden by transshipments. The authors take particular interest in understanding whether a zero-tolerance ban on transshipments can effectively reduce these harmful practices, given the inherent challenges of monitoring activities on the high seas.
The paper addresses three core questions:
1. Do targeted agents comply with bans on transshipments, particularly under conditions of limited monitoring?
2. Are there strategic behaviors or unintended consequences that undermine the effectiveness of such bans?
3. What is the economic cost of enforcing these bans, especially concerning raw material prices?
The study utilizes novel satellite-based datasets that track transshipments and fishing activities. These datasets, available through organizations like Global Fishing Watch, allowed the authors to monitor transshipment activities over time and across different regions of the high seas. They combine these datasets with economic data on fish landing prices, providing a comprehensive view of the impact of transshipment bans on both behavior and prices.
Bastani and de Zegher employ an empirical approach, utilizing a difference-in-differences model to analyze the effect of transshipment bans. Their analysis focuses on changes in the number of transshipments before and after the imposition of bans by Regional Fisheries Management Organizations (RFMOs). They also study geographical evasion strategies by vessels and the possibility that ships “go dark” by turning off their Automatic Identification System (AIS) transponders to avoid detection during transshipment activities.
The authors further investigate the economic costs of the bans by analyzing the effect on fish landing prices, particularly how the bans influenced raw material prices in the affected regions.
The findings are quite interesting:
Visible Compliance: The transshipment bans reduced the yearly growth in transshipment rates by 58%. This demonstrates substantial visible compliance with the bans, even under limited monitoring.
Strategic Behavior: The study found minimal evidence of strategic evasion. Vessels did not shift their transshipment activities to areas without bans, nor did they engage in masking behavior (i.e., turning off AIS signals).
Economic Impact: The bans led to a 3% increase in raw material prices. While this increase was not large enough to disrupt global supply chains, it indicates that bans on transshipments have economic consequences, primarily increasing operational costs for fishing vessels that now need to make more frequent trips back to shore to unload their catch.
Traceability, Sustainability, and Labor Exploitation
The downward price pressure has many other implications.
Traceability —the ability to track products through the supply chain— is a significant omission in the shrimp industry, enabling unethical practices such as IUU fishing and labor exploitation. Transshipments further obscure product origins, making it difficult for retailers and consumers to verify whether shrimp is ethically sourced. Although technological solutions like blockchain (I know, I know) could improve traceability, several barriers remain. These include the high costs of adopting such technologies for smaller producers, the complexity of the supply chain involving many small farms, and weak regulatory enforcement in shrimp-producing countries like India, Vietnam, and Indonesia. These challenges compound the existing ethical and environmental concerns within the industry.
Sustainability is a major challenge in shrimp farming, particularly in relation to environmental degradation and resource overuse. Key issues include mangrove deforestation, where vital coastal forests are cleared for shrimp farms, leading to biodiversity loss and increased vulnerability to environmental disasters. Pollution from intensive shrimp farming, including the use of antibiotics and chemicals, contaminates local water systems and harms ecosystems. Additionally, overfishing for fishmeal to feed farmed shrimp exacerbates the depletion of global fish stocks. While certification programs like the Aquaculture Stewardship Council (ASC) and Best Aquaculture Practices (BAP) aim to promote environmentally responsible shrimp farming, their reach is limited, and inconsistent enforcement raises questions about their effectiveness. Sustainable alternatives, such as recirculating aquaculture systems (RAS) and feed derived from plant-based or insect proteins, offer promising solutions by reducing environmental impact and the reliance on wild-caught fish for feed. However, these alternatives are still emerging and are not yet widely adopted across the industry.
Labor exploitation in the shrimp supply chain extends beyond the issues already discussed, with additional concerns such as debt bondage and human trafficking, particularly prevalent in Southeast Asia. Often, workers from impoverished backgrounds are lured into the industry with false promises and then trapped by recruitment fees and travel costs, leaving them in a cycle of debt. Human trafficking also plays a role, especially in countries like Thailand, where migrant workers face exploitative conditions in jobs like shrimp peeling and processing. Gender inequality is another issue, as women make up a significant portion of the shrimp processing workforce but often deal with lower wages, fewer opportunities for advancement, and vulnerability to discrimination and harassment. Child labor also persists, especially in countries like India, where children, particularly girls, are employed in hazardous shrimp peeling jobs. Addressing these issues requires stronger enforcement of labor laws, supply chain accountability from retailers, and empowering workers through unions or cooperatives.
Tackling these deep-rooted problems, alongside improving traceability, sustainability, and transparency in the supply chain, will require coordinated efforts from governments, corporations, and consumers if the goal is to create a more equitable and sustainable shrimp industry.
If you read my newsletter regularly, you may notice that these issues are similar to those discussed when analyzing the Cocoa supply chain that resulted in severe shortages. Short-term thinking and pressure to reduce costs result in long-term issues that are hard to rectify.
Final Thoughts
The findings from both the Associated Press investigation and academic studies like those of Bastani and de Zegher suggest that the issues plaguing the shrimp supply chain are systemic.
Labor exploitation, lack of transparency, and environmental degradation are not isolated incidents but are instead byproducts of a global system that prioritizes profit and low prices above all else.
To address these issues, several steps could be taken.
Firstly, supermarkets and retailers must ensure that the additional revenue generated from increased shrimp prices makes its way down the supply chain to improve working conditions. This could be monitored through better oversight mechanisms, including independent audits and increased transparency. I’ve discussed the effort small retailers and roasters are making in the coffee supply chain. The technology to do it exists. It’s a matter of priorities.
Secondly, governments in shrimp-producing countries must strengthen labor laws and enforce penalties for violations. International bodies like the European Union have already begun taking steps in this direction by adopting directives requiring companies to address human rights and environmental impacts across their supply chains.
Finally, consumers play a critical role in shaping the future of the shrimp supply chain. By choosing products that are certified by ethical and sustainable labels, such as the Aquaculture Stewardship Council or the Best Aquaculture Practices, consumers can pressure companies to adhere to higher labor and environmental standards.
I know many of my articles emphasize our responsibility as consumers, but we can’t claim to care if we don’t act. Supply chains become aligned with the expectations and priorities of the consumers they serve. If our choices are based on securing the lowest possible cost, supply chains will be built to prioritize exactly that. And the implications to this are clear.
So we can keep demanding bargain prices, ignoring the wreckage left in the wake and feigning surprise when the same issues resurface year after year, or we can wield our power as consumers and make a difference.
I love the idea of using the blockchain for the supply chain, but before companies move towards implementing it what do the short term solutions look like?
It looks like the lower cost is also due to the intense competition between country producers.
https://www.seafoodsource.com/news/premium/supply-trade/vietnams-shrimp-industry-fears-being-left-behind-by-ecuador-india