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GLOBEFISH - Information and Analysis on World Fish Trade

Uncertainty suppressing trade in 2019 but lull is likely to be short-lived

17/09/2019

Production trends for capture fisheries and aquaculture continue to diverge in 2019. The expected 3.4 percent decline in wild catches is set to further reduce the sector’s share of total production as farmed harvests continue to increase at a steady pace of around 4 percent per year. Supplies of cod, mackerel and octopus have been particularly tight, while a reduced anchoveta quota in Peru will translate into reduced landings for this important fishery. Relatively more plentiful catches are reported in the Western and Central Pacific skipjack tuna fishery, a key source of raw material for tuna canneries. Meanwhile, aquaculture production has been increasing for virtually all major species in recent years, although demand is outpacing supply for many bivalve products and harvest reductions are on the horizon for shrimp, seabass and seabream.

Indicators measuring the health of the global economy point to slowing trade growth in 2019 and buyer hesitancy amidst a general atmosphere of political uncertainty. The effects of these broader trends are evident in seafood trade estimates for 2019, with flat or minimal expansion in the total export value expected for the year as a whole, contrasting with strong increases in the last two years.

The tariffs introduced on a range of commodities by both China and the United States of America have inevitably had a visible impact on seafood trade flows between these two major trading partners, while the reluctance of firms to take on too much risk when the situation can change so quickly is another less direct but more widespread consequence of the trade war. In the United Kingdom, the possibility of a no-deal Brexit occurring on 31 October is being taken increasingly seriously and businesses have been urged to plan accordingly. The large Scottish salmon industry has expressed their concern that the government’s preparations have been insufficient considering the extent of the potential disruption to transportation networks and export procedures.

The most recent FAO Fish Price Index (FPI) reflects the ongoing divergence of prices for capture species and aquaculture species. While the capture fisheries sub-index continues to be supported at near record levels, the aquaculture sub-index has fallen back to levels last seen in early 2016. This contrast points to the pronounced differences in supply availability but also to the relative lack of integration between markets for the most important farmed and wild species.

Although there is a limited degree of substitutability between farmed and some wild species in the whitefish segment, high status species like cod are generally very well protected from price competition from farmed alternatives. For other key wild species, such as cephalopods, aquaculture offers no competition whatsoever. 

Export revenues for many of the world’s top seafood suppliers are set to take a hit in 2019, but others will benefit from additional opportunities. China is likely to see a drop in exports due to the challenges and costs it now faces accessing the US market, but this will benefit other suppliers such as Viet Nam, who can offer US buyers comparable products without the tariff burden.

Furthermore, the continuing strength of the global salmon market will support further revenue growth for Chile and Norway, with the latter also seeing gains for a range of wild species, particularly cod. On the market side, developing countries will again increase their share of global import value relative to developed economies, to an estimated 33 percent. China will see a substantial increase in seafood imports, driven by higher volumes of whitefish and shrimp. The EU28 and the United States of America are likely to see marginal declines while Japan is set for a small increase.

While the overall performance of the international seafood sector can be expected to weaken in 2019, many of the current impediments to growth are temporary and the most favoured view is that global economic conditions will improve in 2020. Although the outcomes of the United Kingdom’s planned exit from the EU28 and the US-led trade negotiations are still far from clear, the end of uncertainty will also be a significant stabilizing factor in and of itself. Considerably more pessimistic scenarios have also been put forward, however, and these possibilities include a general shift towards protectionist trade policies that would be severely damaging to international seafood markets.

Another concern is the potential damage to sustainability efforts inflicted by trade tensions, which may see increasing volumes of fish directed away from markets whose stringent regulatory and consumer-driven sustainability requirements have in recent years been the catalyst for improvements in fishery management practices in many supplier nations.

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