|Global Market Analysis|
FISH AND FISHERY PRODUCTS
On balance, 2009 has been a challenging year for fisheries following the global economic downturn that induced a general sector-wide demand-led contraction. Although the worst seems to have passed, with trade slowly beginning to expand in several key markets, activity remains far below the levels registered in the run up to the recession. As a result, 2009 import values and volumes are forecast to end up lower than those of last year: global import demand could contract by 8.5 percent in 2009, 10 percent in developed countries and a more modest decline of 4 percent in developing countries; and as for import values, a near 10 percent fall is predicted in Japan, and declines of almost 7 and 13 percent, projected respectively, in the United States and in the EU.
Fish, however, is still expected to remain a widely traded commodity in the year with an estimated 37 percent of all production destined for the world market (live-weight equivalent). While the process of recovery in some markets will be lengthy, the outlook for 2010 remains generally positive as does the longer-term trend for fish trade, with rising shares of production in both developed and developing countries entering international markets.
The trend in falling fish prices which began in late 2008 appears to have finally abated. Moderate price increases for most species have been registered for several months in succession. This development reflects a resurgence in demand against lower supply potential in the recession-hit farmed fish sector. Indeed, the FAO Price Index reached 126.4 in September 2008 and fell drastically hitting bottom in March 2009 at 110.3. It has since recovered to 115 in September 2009 (base year 2005 = 100).
Table 18. World fish market at a glance
Of all fish products traded, shrimp is the most important, with a global export value share of about 15 percent. Shrimp is mainly produced in developing countries and well over half of all production finds its way onto the global market
A tentative recovery is underway in the shrimp sector following a difficult trading environment towards the end of 2008 and early 2009, a period during which shrimp aquaculture producers cut back on production. International shrimp quotations which had bottomed-out in mid-2009 are slowly starting to move upwards. In the key import market of Japan, the economic crisis prompted a shift towards greater shrimp consumption at the expense of higher valued fish products. Shrimp imports into the country in the first half of 2009 were slightly higher than in the same period last year. In the United States, demand remains steadfast. Over the first six months of 2009, shrimp deliveries were almost unchanged compared with the same period last year. By contrast, the European Union market remains depressed, but higher price movements in recent weeks could signal an upturn in demand.
The outlook for the global shrimp market is bright. A stronger yen that has supported greater Japanese shrimp inflows during September and October is likely to continue in the near term. Economic recovery in key import markets, especially the United States, is expected to pave the way for larger international shipments, and as a result, prices are expected to firm up.
Tuna represents about 8 percent of total world fish exports in value terms, a share that has been in steady decline over the past decade. Among the fishery sectors, only tuna is characterized by a high degree of industry concentration with few companies in control of global production and the trade. The world tuna market can be divided into two products: the market for sashimi tuna and the market for canned tuna.
Demand in Japan for sashimi tuna was unseasonably strong in mid-2009, as fewer Japanese ventured overseas in tourism. As a result, prices of sashimi tuna climbed up. This is in contrast to the market for canned tuna. Demand weakened considerably in the middle of the year and prices are expected to weaken in the coming months.
The year 2010 is expected to be a difficult one for the global tuna industry, with several new regulations coming into force. Overhanging the sector, especially Japanese consumers, is the prospect of listing Atlantic and Mediterranean bluefin on the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) Appendix 1. A proposal by Monaco to place these species on the list is scheduled for discussion at the next CITES meeting in March 2010. If the proposal is successful, the price of bluefin is anticipated to soar. Historically, Japan has been the main market for bluefin, absorbing up to 80 percent of global captures.
Tuna canning enterprises also expect that a decision to list bluefin tuna on CITES' Appendix 1 would have repercussions on tinned consumption. The average consumer typically is not aware of the different tuna species and international action to preserve one species will, by many, be regarded as applicable to all.
Groundfish species are widely traded, representing about 11 percent of the global fish market, with the main exporting countries concentrated in the northern hemisphere.
In recent years, the wild groundfish sector has had to compete for market share with cultured products, such as pangasius and tilapia. Groundfish supplies were abundant during 2009 with prices trending downward. This tendency is likely to prevail in 2010, as the Russian groundfish catch is expected to rise. It is noteworthy that the impact of low cod prices has also hit profitability prospects in the aquaculture industry.
Alaska pollack is the main capture groundfish species in the world. In 2010, total Alaska pollack catches are expected to rise by 400 000 tonnes to 3 million tonnes, of which 1.7 million tonnes could be sourced from the Russian Federation's waters The expected increase in supply has already had a negative impact on prices, with quotations falling from USD 1 700/tonne in January 2009 to USD 1 350/tonne at present. Further declines are expected, especially as Alaska pollack fisheries and the stocks in the Sea of Okhotsk are reportedly abundant.
Regarding policy developments, Norway and the Russian Federation have reached a fishing quota agreement for the Barents Sea for 2010, with an overall 82 000 tonnes increase in the cod quota to 607 000 tonnes. Norway's share will amount to 271 000 tonnes, up 16 percent from 2009. The haddock quota will rise from 194 000 tonnes to 243 000 tonnes in total, of which Norway's quota will constitute 116 000 tonnes. The rise in the quotas is attributed to healthy stock levels, especially in Norway, where cod exports are set to increase on the back of higher international demand, in turn reflecting economic recovery and competitive consumer prices.
In the first half of 2009, imports of groundfish by the United States, grew by 14 percent over the same period last year. The underlying reason for the rise in imports to 75 000 tonnes mainly concerns higher purchases of blocks and slabs rather than increased fillet imports. European Union imports of groundfish also increased in 2009, taking advantage of attractive prices. In 2010, competition for market share between captured and cultured species is likely to intensify.
The international cephalopod market is segmented by import destination: the Japanese and the European Union market. Demand for cephalopods in Japan, especially octopus, has been firm following the slump in international Japanese tourism, whereas in the European Union the downturn in tourist numbers to southern Member States resulted in falling demand for cephalopod species. Seasonal demand and the global economic recovery underway could see prices pick up in the new year.
The United States continues to be the dominant destination for world tilapia trade, ahead of the European Union where demand remains subdued. European Union importers in search of cheap whitefish alternatives began importing pangasius several years ago, and being satisfied with the product in terms of price competitiveness and the steadiness of supply, have not been compelled to enter the tilapia market. However, this could change if large-scale commercialized tilapia aquaculture gets underway in Africa. Tilapia prices, as widely foreseen, moved down in the course of 2009, as output in China returned to normal after a very cold winter in the country last year which disrupted production and strengthened prices considerably. Further price slides are forecast in 2010 reflecting an extended recovery in exportable supplies.
Rapid growth in the world market for farmed pangasius (a type of catfish endemic to the freshwaters of the Mekong basin) has been registered in recent years. Pangasius is the cheapest of all fish fillets that can be found on the market and its demand is somewhat robust in times of economic crisis. Spain for instance, where the recession was severely felt, reported rising numbers of pangasius imports.
Given the geography of the species in terms of origin, Viet Nam is practically the sole producer with an output of 1.5 million tonnes expected in 2009. The country exported 334 000 tonnes of catfish in the first eight months of 2009, worth an estimated USD 737 million, and propelling the sector as a major foreign currency earner among seafood exports. Early in 2009, exports however, experienced a sudden set-back, partly because of economic problems which affected demand in some of the principal markets, but mainly because the Russian Federation imposed a temporary ban on imports. However, this ban was lifted in May 2009, and since then the pace of exports of pangasius to the Russian Federation has been rapid, such that Vietnam could almost match it export figures of 2008.
As for the outlook, a repeat of last year's cycle could materialize: solid supply prospects bringing down prices resulting in lower production. Demand though is gathering momentum in Western Europe and low prices will also assist in the further penetration of markets in Eastern Europe.
These predominantly aquaculture species are important for trade in the Mediterranean area, with Italy as the main importing country. Production in 2009 is expected to be lower than in 2008 at 270 000 tonnes. As a result of the economic crisis, liquidity constraints and low prices over the year forced many producers in Greece, Spain and Turkey with weak cash balances to harvest early, thereby increasing supply numbers but also reducing production yields and profit margins. Production cutbacks are still foreseen in most producing countries which could see prices fall levelling off and even rising next year.
The prospect of higher concentration in the industry is uncertain as to date only a few of the small and most exposed fish companies have folded or have been absorbed by larger firms.
Small pelagics are a major food commodity, especially in developing countries, where it constitutes an affordable source of protein.
Generally prices of small pelagics are lower than those of groundfish or other competing species. In terms of trade importance, small pelagics account for around 7 percent of total fishery product trade. Herring is the major species entering the global market. Export margins on herring increased during 2009, especially in Norway, when prices trended upwards. Exports of Norwegian frozen whole herring increased in volume by 52 percent from 322 800 tonnes in 2006 to almost a half a million tonnes in 2008. A similar performance to last year's is anticipated in 2009 with robust demand predicted in the principle markets of the Nigeria, the Russian Federation and Ukraine.
Aquaculture dominates both global salmon production and trade. About two-thirds of world production originates from the sector, and most salmon entering the international market are sourced from farms. Salmon trade has registered exceptional growth in recent years, the share of salmon exports in total fish exports rose from 8 percent in the 1990s to 11 percent at present.
The sector has withstood much of the economic down-turn by diversifying its markets geographically and for its products, and maintaining a strong presence in both food-service and in retail. The market, however, for farmed Atlantic salmon has been disrupted in 2009 by lower supplies in Chile as a result of the Infections Salmon Anaemia (ISA) disease. Other major suppliers, especially Norway, have been unable to gear up production fast enough to compensate for the Chilean shortfall, resulting in higher prices this year. In recent months, however, the market has become more unsettled as rapid growth in Norway has pushed many salmon producers there to the maximum limits set by their production licences. As a result market supplies have increased and prices have begun falling. Compared with 2008, Norwegian farmed salmon exports for the first ten months of 2009 increased by 14.5 percent in volume and 32 percent in value (Norwegian Kroner - NOK).
The United States, in particular, increased its salmon imports from Norway given the lack of supplies from Chile. A large part of these new sales to the country are fresh salmon fillets which increased from 1 700 tonnes in 2008 to 14 200 tonnes in 2009 (Jan-Oct). Inventories continue to play a role in meeting international demand, as frozen salmon from last year's harvest is being processed by Chilean companies for value-added product exports. Next year's supply from Chile of Atlantic salmon is also expected to be drastically down, and could slump to low as 60 000 tonnes.
However, the longer-term outlook for salmon markets is fairly positive. Demand should be solid in most import destinations, while in Chile, new regulations for salmon farming, the recapitalization of the domestic industry and the development of an ISA vaccine should lead to the resurgence of a stronger and more sustainable salmon sector in the country. But Chile's full recovery will only likely be felt in world markets until 2011 and 2012 at the earliest.
Demand for fishmeal is a prominent driver of the entire fish sector, with about 25 percent of world capture fisheries typically entering fishmeal production. Fishmeal is particularly important for the aquaculture industry: more than half of all fishmeal output is destined to feed cultured species. Barring Chile, which is the only country to anticipate an increase in fishmeal production, combined fishmeal output by the five major exporters is forecast to decline in 2009, in continuation of the trend which started several years ago. Prices began move upwards over the past few months, and further increases are likely in the wake of rising demand in China. This country is again likely to attract more than 50 percent of total fishmeal exports. Weather anomalies will also assist in the price strengthening. With 2009 declared as an El Niño year, albeit a mild one, the catch of Peruvian anchovies, the main raw material for fishmeal production, is anticipated to be very low. Hence, expectations of lower output, combined with steadfast demand in China, all point towards higher prices that are likely to be sustained into 2010.
Fish oil output, a by-product of fishmeal production, declined in the first half of 2009. Some 365 000 tonnes were produced by the main fish oil exporting countries, representing 20 000 tonnes less than in the same period last year. The greatest decline was reported by Chile, while all other major fish oil producers reported relatively stable output. Fish oil prices usually mirror the trend in fuel prices, and rose in the second quarter of the year. On the back of rising petroleum prices, further hikes in fish oil quotations are forecast in the coming months.
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