The report analyses the market situation during the first quarter 2017.

ICES has recommended a 20 percent cut in the Barents Sea cod quota for next year. If accepted, cod prices will increase further. Prices are already high due to a growing demand for cod. But prices for Alaska pollock are low and are not expected to turn around. The surimi market is expected to be stable over the coming year, with consumption-adjusted production and stable prices.

The International Council for the Exploration of the Sea (ICES) shocked the industry when they recently recommended a 20 percent cut in the 2018 Barents Sea cod quota, to 712 000 tonnes, as well as a 13 percent cut in the haddock quota, to 202 305 tonnes. While the industry expected some cuts, the recommendation was harsher than expected.

The reason given for this substantial reduction was a natural decline in the Atlantic cod stock. According to the Norwegian Institute of Marine Research (IMR), the year classes 2004 and 2005 were particularly strong, but the subsequent year classes have been weaker, which has caused the scientists to recommend lower total allowable catch (TAC).

On the other hand, ICES recommended a 15 percent increase in the saithe quota, to 172 500 tonnes, and a 5.56 percent increase in the Icelandic cod quota, to 257 600 tonnes. But this barely compensates for the significant cut in the Barents Sea cod quota.

Now it remains to be seen what will emerge from the fisheries negotiations between the Russian Federation and Norway to be held in October. In recent years, the final quotas have been higher than the ICES recommendation; ICES recommended 805 000 tonnes for both 2016 and 2017, but the final quotas were set at 894 000 tonnes and 890 000 tonnes, respectively. Thus, it is expected that for 2018, the final quota will be higher than the 712 000 tonnes recommended by ICES.

Russian Federation's Pacific Fishery Research Institute has recommended a 110 000 tonne cut in next year's Russian Alaska pollock quota, bringing it down to 1.78 million tonnes. For Pacific cod, the institute recommended an increase of 11 000 tonnes, to 377 000 tonnes (Fish News).

After the collapse of the northern cod fishery in Newfoundland and Labrador 25 years ago, the cod has been slow in returning. Canada's Minister of Fisheries has now decided to re-open the Northwest Atlantic cod fishery, but only to inshore and seasonal harvesters. This has caused major criticism from the industry associations. The offshore sector claims that it needs to be involved in order to create enough jobs for the industry, even though offshore harvesters hold only 14 percent of the total quota. The fishers are consequently demanding a substantial increase in the quota, but scientists are calling for patience, arguing that the present biomass of the northern cod in Canada is about 300 000 tonnes, which is only one-third of what is needed before a large-scale commercial fishery can be resumed. The authorities are therefore adopting a cautionary approach in order to rebuild the stock to sustainable levels (FIS.com/Undercurrent News).

Landings and processing

This year, the Lofoten cod fishery beat all records. The first-hand value of the fishery was close to NOK1 billion (US$120 million). In terms of volume, a total of 59 400 tonnes of skrei (spring cod caught in the Lofoten and Vesterålen regions in northern Norway) were landed as at the end of March, which was short by about 16 000 tonnes of the total quota for the year (Fiskeribladet).

The Russian Pollock A season closed in April with good results. The overall Russian Alaska pollock landings during this season increased by 5.3 percent, to 946 100 tonnes, of which 874 600 tonnes (92.4 percent of the total) were caught in the Sea of Okhotsk.

As of mid-March, Alaskan landings of pollock amounted to some 504 000 tonnes, which constituted 37.5 percent of the 1.345 million tonne quota.

Trade

Norwegian groundfish exports increased by value during the first half of 2017, but decreased by volume. Exports of cod dropped from 72 400 tonnes during the first quarter of 2016 to 70 100 tonnes during the same period in 2017. But the value of this export increased by 1.2 percent, to NOK2.75 billion (US$323.5 million). This development is due to an increasing demand for cod products and the fact that Norway now exports a higher percentage of its cod products as fresh. In addition, salmon prices have remained very high, thus some consumers are switching to whitefish products. 

The European cod market is strong. Supplies are a little lower than last year and demand has grown, resulting in increasing prices.

Brexit appears to have had some – although not yet major - effect on cod prices. The pound stirling has weakened, and the Norwegian krone strengthened against the pound, which has resulted in higher prices for cod fillets imported into the United Kingdom. Prices as high as GBP5.00 per kg have been reported. The high prices are having a negative effect on import volumes. Norway exports mainly whole frozen cod to the United Kingdom, which was down by 7.5 percent during the first quarter of 2017.

Undercurrent News reported that the Russian Federation is planning to increase exports of Alaska pollock products to the EU in the coming years. EU countries are the largest consumers of Alaska pollock. In 2016, the Russian Federation’s harvest of Alaska pollock grew by 7.2 percent to 1.74 million tonnes, constituting as much as 37 percent of the total Russian landings. Now, the Russian Federation is planning to channel at least part of this increase into the European market. Various forms of product will be available such as Alaska pollock fillets, mince and other processed products.

China’s imports of groundfish have been relatively stable over the past few years, with only a slight increase registered. During the first three months of 2017, the country imported 45 800 tonnes of round frozen cod and 248 000 tonnes of whole frozen Alaska pollock, much of which was processed and re-exported as frozen fillets. Exports of frozen Alaska pollock fillets in the first quarter of 2017 amounted to 48 600 tonnes, compared to 51 800 tonnes during the same period in 2016. Exports of frozen cod fillets amounted to 26 600 tonnes in the first quarter of 2017, while during the same period in 2016, exports stood at 29 300 tonnes. Thus, Chinese exports of frozen fillets seem to decrease slightly in 2017.

During the first three months of 2015, German imports of frozen Alaska pollock fillets fell to 35 000 tonnes compared to 41 200 tonnes in 2014; in 2016, they fell further, to 33 800 tonnes. However, this declining trend reversed during the first three months of 2017, where imports increased again, to 35 900 tonnes, i.e. by 6.2 percent compared to the same period in 2016. Most of this increase was due to increased imports from the Russian Federation.

German cod imports have been stable over the past three years. During the first quarter of 2017, Germany imported 9 600 tonnes of frozen cod fillets, compared to 9 400 tonnes in the same period in 2016.

US imports of cod (all products) fell during the first quarter of 2017 compared to previous years. During this period in 2017, imports amounted to 15 100 tonnes. This was 16.6 percent lower than during the same period in 2017, and in fact even lower than in 2013, when the United States of America imported 15 600 tonnes.

Surimi

Global supplies of surimi are expected to remain stable in 2017, according to the Surimi Forum, which was recently held in Oregon, United States of America. Last year, it was estimated that production would increase in 2016, but this did not occur, and it is unlikely to occur in 2017. Part of the reason behind this is a shortage of raw material. Although Russian Alaska pollock stocks are believed to be very healthy, the industry has asked for a TAC decrease in 2018 because they fear market oversupply.  Supplies of tropical surimi will probably decrease in 2017. Chinese and Thai production is down, although production in India and Indonesia are slightly increasing.

French surimi consumption, the largest in Europe, is declining. France accounts for some 40 percent of European consumption of surimi, with about 57 000 tonnes annually. Spain is the second largest consumer (47 000 tonnes per year), followed by Italy (13 000 tonnes). Consumption is growing in Spain, Italy, the United Kingdom, Scandinavia and Benelux (Surimi Forum).

Japan’s surimi production is in decline. Japanese Alaska pollock landings have declined steadily since 2011 and amounted to only 121 000 tonnes in 2016, down from 230 800 tonnes in 2011; and landings of Atka mackerel, which has also been used as a raw material for surimi in Japan, are also declining. Japanese Atka mackerel landings dropped from 150 200 tonnes in 2008 to just 17 000 tonnes in 2016. Consequently, Atka mackerel as a raw material for surimi is disappearing.

Because of the declining raw material supplies for domestic production of surimi in Japan, imports are expected to increase in 2017 and 2018. This year, it is expected that the country will need to import about 300 000 tonnes of surimi from abroad (Surimi Forum).

Prices

Prices for Atlantic cod are currently high. Supplies from Norway have been a little lower than last year, which has obviously had an effect on prices.

While cod prices are high, Alaska pollock prices are under pressure. Fillet prices are at the lowest level since 2005, according to Russian and US sellers. Price developments for pin bone out fillets have been on a continuous decline since 2009. Prices for headed and gutted Alaska pollock are also low (Undercurrent News).

According to Tradex Foods, poor landings of Pacific cod have put pressure on prices. Due to the adverse weather in the spring, the Alaska fishers harvest pollock rather than cod. Prices for larger sizes of Pacific cod in shatterpack have increased from  US$  4.10 per lb to about US$4.25 per lb.

In spite of lower supplies of haddock from the Russian Federation, haddock prices have recently slightly weakened. This may be a delayed reaction to the high haddock prices of last year, according to some observers in the industry.