BAC LAU, Vietnam – Viet Uc Seafood Corporation, Vietnam's biggest shrimp hatchery, is rapidly expanding into farming to meet global demand for better quality products.

The Ho Chi Minh City-based company has built 40 modern indoor farms on a plot of land in Bac Lieu in the Mekong Delta and plans to get to 400 in the near-term future, Vu Duc Tri, business controlling director, told Undercurrent News. Each farm holds 14 sheltered ponds that can harvest up to 2.5 metric tons of shrimp at one time and can be individually programmed to meet requirements for different customers, he said.

Viet Uc’s vertical integration strategy by building farms comes as the industry’s biggest customers are demanding traceable production systems and a sustainable farming model, Duc Tri said. Many of Vietnam’s farmers fail to meet these basic requirements when it comes to pond management, he said.

“Farmers have to put a lot of chemicals and a lot of harmful stuff in the pond for the shrimp to survive,” Duc Tri said. “That works this year and next year. But in five-to-10 years, the market is not there because people do not want to buy that stuff anymore.”

Retailers in developed countries are becoming more elusive customers for the shrimp industry as harvests need to be traceable and demonstrate best practices under the stewardship of certification schemes. Other major buyers such as major retailers in Japan are also starting to require certified shrimp, making it harder for farmers in Southeast Asia to find a market for their shrimp.

Shrimp aquaculture from the Southeast Asia region will reach 2 million metric tons in 2020, compared with about 1.5m metric tons back in 2012, according to panelists at the most recent Global Outlook on Aquaculture Leadership, or GOAL, conference organized by the Global Aquaculture Alliance. Vietnam is the largest shrimp farmer in the region, with output expected to reach about 750,000t a year by 2020, according to the GOAL panelists.

Viet Uc, which was set up by Australian-Vietnamese entrepreneur Van Thanh Luong, already owns the world’s largest shrimp hatchery, producing 15 billion larvae annually. Uc means Australia in Vietnamese. The company works with Australia’s public research arm, CSIRO, in ensuring its high-quality broodstock.

The company’s farming push has the objective of achieving a premium product that does not compete with non-certified commodity shrimp from China and Vietnam, Duc Tri said.

Producers that are able to achieve a sustainable and traceable supply, with the ability to match the volumes needed by large-scale customers, can get a 20% price premium over the broader commodity market, he said.

Vietnam’s shrimp industry is solely constrained by the quality of the farmed product leaving its shores, Duc Tri said. The Asian nation has negotiated free trade agreements with several nations, so access to customers is no longer an issue, he said. Some farmers in the Mekong Delta, where Viet Uc is located, also suffer logistical challenges because there is poor infrastructure in the area of southern Vietnam, he said.

Viet Uc’s covered, temperature-controlled farms take a lot of the variability out of shrimp farming, Duc Tri said. Auto feeding, biosecurity enabled by covered ponds and the ability to regulate temperature swings caused by weather changes are key in achieving stable supply, he said.

The company's farming ambition is a long-term project and for now, the product will only be sold in the Vietnamese market. Viet Uc is looking beyond the current slump in prices and predicts that the shrimp industry will outperform other protein categories such as beef, chicken and pork in the Asian market, Duc Tri said.

“In China, the market is still there,” he said. “The market was not affected, it’s good. There is actually not enough quality in the market.