Cod prices rising in spite of record supplies.

Cod prices are on the rise in major markets with a number of factors contributing, including a lower TAC, the Russian ban on imports from western countries, and the Russian Federation withholding cod for its own domestic consumption. The industry is expected to find ways to adapt to this new trade situation in the near term.

Cod

Markets for traditional groundfish products such as klipfish (salted and dried cod and cod-like species), stockfish (air-dried cod fish) and salted fish have been relatively good this year. There was only a slight drop in shipments of klipfish from Norway during the first eight months of the year. The total volume exported declined from 58 747 tonnes to 57 884 tonnes (-1.5%). However, prices were good, and the export value rose from NOK 1 830 million to NOK 1 965 million (+7.4%).

Norwegian stockfish exports have been relatively modest so far this year. Though the volume during the first eight months of the year increased by 31.5% to 3 849 tonnes, stockfish prices have fallen dramatically, from NOK 94.16 per kg in 2013 to just NOK 76.57 per kg in 2014. The main markets for Norwegian stockfish are Italy and Nigeria.

Norwegian exports of fresh and frozen whole cod increased significantly during the first eight months of the year. Exports of fresh whole cod during the period increased from 38 752 tonnes in 2013 to 51 911 tonnes in 2014 (+34%). As the price of fresh cod also went up, the value of exports increased by almost 47%, from NOK 665 million in 2013 to NOK 976 million in 2014. In terms of average export price, the price went from NOK 17.16 per kg in 2013 to NOK 18.80 per kg in 2014 (+9.6%). Notably, in recent months, the price of fresh cod has increased even more, and in August, the average export price of Norwegian fresh whole cod was NOK 25.22 per kg (fob Norway).

Prices for frozen whole cod have also increased, partly as a result of the very good demand for raw material for salted and dried fish in Europe. Norwegian exports of frozen whole cod increased from 49 941 tonnes during the first eight months of 2013 to 58 050 tonnes during the same period in 2014 (+16.2%). The value of exports went up from NOK 748 million in 2013 to NOK 948 million in 2014 (+26.8%).

With poor landings of Pacific cod at the moment and rising demand globally, overall prices have climbed. The Russian ban on imports from western countries is another factor that is pushing prices up.

US imports of cod and cod-like groundfish are edging upwards again. During the first half of 2014, imports of fillets were up by 2.4%, while imports of blocks and slabs were up by 3.1%. China has remained the main supplier to the USA for years now, and is maintaining that position well this year. Indeed, China accounted for 69.1% of US cod fillet imports and 86.4% of imports of blocks/slabs. Other important suppliers like Iceland, the Russian Federation, Canada and Norway held their market positions.

On the European market, there was stagnation or decline in imports of cod products. Germany registered practically no increase in imports of frozen cod fillets during the first half of the year (+ 0.7%), while the UK saw a decline in imports of frozen cod from 50 200 tonnes in 2013 to 48 400 tonnes in 2014 (-3.6%). The main suppliers to Germany were China (39% of total) and Poland (28% of total). On the UK market, China, Iceland, the Russian Federation, and Norway were the main suppliers. There was little change in their relative positions.

Cod prices, which have been on a declining trend in some markets, demonstrated a lift during the past few months on European markets. Recent Norwegian export prices indicate a general price increase across the board, both on what is for Norway consumer markets like the EU, and reprocessing markets like China and Poland. Prices for fresh fillets have also been on the rise, while prices for frozen fillets have declined recently. On the US market, cod prices have stayed level, as have prices for Alaska pollock.

Alaska pollock

NOAA recently released the results of a survey of the pollock resources in the Bering Sea, which showed that there is nearly a 60% increase in the pollock biomass in the region (Source: NOAA). However, this does not mean that the TAC for pollock in the Bering Sea will automatically be increased, because there is a 2 million tonne limit on groundfish species harvested in this area. The survey does indicate however that the outlook for the long-term is optimistic, and later surveys confirm this trend.

So far this year, the pollock fishery in the Bering Sea is going well, and by mid-August, 72% of the quota had been landed. Surimi production in the region during the B season was by mid-August almost 70 000 tonnes. Combined with production from the A season, the total surimi production in the Bering Sea amounted to 138 000 tonnes. If production from the Gulf of Alaska is added, total production came to 145 000 tonnes.

Because of the large size of the fish caught, it is expected that a larger portion of the catch will go to PBO block production this year. Processors indicate that as much as 50% of the catch could end up as PBO blocks. This is a major change from the normal split of 70% surimi/30% blocks that has been the norm for the past four years.

There seems to be a stagnation or small decline in the trade of frozen Alaska pollock fillets on the EU markets. German imports during the first half of the year were practically level (+1.9%) while French imports declined by 11.7%. On both markets, the main supplier, China, had a reduction in shipments (-8% in Germany and -19% in France), while the USA registered a massive (+40%) increase in shipments to Germany as well as a good (+17.5%) increase to the French market. The Russian Federation suffered a 19% set-back on the German market and 29% decline on the French market.

Hake

After ten years of MSC certification, the hake fishery in South Africa is considered a success, not only in terms of being a sustainable fishery, but also in terms of profitability. South Africa’s hake exports have expanded during this ten-year period, and according to FIS, this is attributable to obtaining MSC certification. Apparently, the market has reacted very positively to the certification, and this has resulted in increased exports to markets such as the UK, Germany, Switzerland, Sweden and Australia, where consumers are more concerned with sustainably caught seafood.

Argentinian hake exports to Eastern Europe, especially Ukraine, have been seriously reduced in recent months. Indeed, shipments from Argentina to Ukraine were reduced by 37% during the first six months of the year, and shipments to other countries in the region are also down compared to last year, although Argentina is still exporting to these countries in spite of the recent economic and political problems. However, prices on these markets have also dived. Hake prices to Ukraine have dropped from USD 2 923 per tonne during the first half of 2013 to USD 2 252 during the same period in 2014.

European imports of frozen hake declined during the first six months of 2014. On the German market, imports fell by 6%, and on the Italian market by 15%. These two important EU markets are supplied by different countries. On the German market the most important suppliers are Peru and Namibia, while on the Italian market the main suppliers are Spain, South Africa, Argentina and Namibia. The Spanish market is supplied mainly by Argentina and Namibia.

Surimi

Total frozen surimi supplies to the Japanese market are expected to remain at around 290 000 tonnes this year. Japanese domestic production by Hokkaido processors is expected to fall to about 44 000 tonnes, but this decline will most probably be offset by increased imports from the USA.

Frozen surimi prices are expected to go up as a result of production development and in spite of increased production in other Asian countries. Last year, there was a 20% decline in imports from Asian countries to Japan due to the sharp decline in the value of the Japanese yen. However, this year imports from Asia are rising again, despite of the weak yen.

During the first five months of 2014, US pollock surimi exports registered a slight (+1%) increase compared with the same period in 2013. During this period, the USA exported 67 376 tonnes of pollock surimi. Domestic production amounted to 75 461 tonnes, but a higher domestic demand channelled more product into the US market instead of to export markets. Japan is the largest export market and during the first five months of 2014, Japan imported 29 516 tonnes of US pollock surimi, an increase of 28% compared with the same period last year. The second largest importer, the Republic of Korea, on the other hand, showed a 10% decline in imports from the USA. Alaska’s pollock surimi production is expected to pass 180 000 tonnes for the first time in nearly a decade this year, and Japan’s imports of Alaskan pollock surimi is expected to reach 100 000 tonnes.

In Senegal, the surimi business is developing in an impressive way. The investment fund Hermes-Sojitz is investing in a high-tech surimi plant in Senegal, which will become the first such high-tech plant in Africa.Production will be based on low-value grey fish species, while traditional production methods use only white fish species. The target markets are in Asia, and investors expect that they will be able to produce frozen surimi at prices lower than their competitors.

Outlook

While cod supplies are strong, prices have stayed high and are climbing, mainly as a result of the situation created by the Russian ban on imports from western countries. This situation will require some changes in trade patterns, but the industry will surely find ways to adapt. Demand seems to be fairly stable at the moment, so one should not expect dramatic changes in the next few months.