GLOBEFISH - Information and Analysis on World Fish Trade

Tuna - July 2009

01/07/2009

Prices moving up Starting in mid May 2009 tuna prices in all major catching areas began to rise because of fears that upcoming tuna fishing bans in these areas will squeeze global supply for the canning industry. Canned tuna prices have been low in recent months, but are likely to follow raw material prices up-ward very soon. Sustainability is a major concern for the global tuna industry, which is trying to make its voice heard. Closing of canneries as a result of globalization and out-sourcing is impacting negatively economies based on tuna, especially in areas where there are very limited job opportunities. The future for the tuna industry is rather bleak, with higher costs while demand is somewhat limited.

Sustainability of tuna resources of major concern

The International Seafood Sustainability Foundation (ISSF)- is a partnership between the tuna industry and World Wildlife Fund (WWF). They are committed to using sound management based on good science compiled by regional fisheries management organizations (RFMOs) to rate the 19 stocks which support commercial tuna fishing used by the canning industry. ISSF has red listed Eastern Pacific bigeye tuna and lobbied during the Inter American Tropical Tuna Commission (IATTC) meeting in San Diego in June 2009 to take action to conserve these stocks. IATTC failed to adopt the conservation measures proposed by its scientific staff, but it did adopt measures that would provide some conservation benefits, in terms of reduction of fishing pressure by about 20%, rather than the 30% recommended. This is, in fact, a positive outcome, as in the previous two years no decision on catch reduction measures had been taken.

The film “End of the line” highlighted overfishing worldwide, including the overexploitation of bluefin tuna in the Mediterranean. Some companies have reacted to this message already. One major sandwich producer in the USA decided to stop using tuna in its sandwiches, even though no bluefin tuna had ever been used for this type of product. Marks & Spencer (M&S), one of the biggest fish retailers in the UK, is to stop selling certain types of tuna following the message of ”End of the Line”. M&S said it would become the first UK food retailer to source only pole & line or line-caught tuna for its fresh foods from sandwiches to fresh steaks and also for canned tuna by the end of the year. On the other hand, an important sushi restaurant in London decided to keep bluefin tuna on the menu, but to include a footnote saying that it is an overexploited species.

Prices of frozen skipjack, which came down to USD 930/tonne for tuna packers in Thailand in May 2009, have turned around again. June 2009 deals were concluded at USD 1 250/tonne, CFR Bangkok. Marketers linked this sudden price rise to the poor catch situation, strong summer demand and upcoming fishing closures/restrictions. Canners in Latin America are short of raw materials and looking for supplies from the Western Pacific to meet their production needs. The annual fishing closure period in the Eastern Pacific (IATTC) fishing ground was extended by 10 days to 59 days this year, and prices in Ecuador are forecast to increase from the present USD 1 100/tonne to over USD 1 500/tonne.

Japanese sashimi market bleak

As a reaction to the economic crisis, demand for high value sashimi tuna was very slow in Japan. It improved temporarily during mid June 2009, when half yearly bonuses were paid-out, and the sashimi tuna market became active for a short while. But this improvement was not sustained and had no lasting impact on the overall situation. To cope with rising unemployment and falling disposable incomes, Japanese consumers are spending less on dining out this year. Household expenditure on eating out fell by 4.6% in the opening months of 2009 over the previous year.

Sushi sales in general also recorded a drop of 18.3%, with demand for tuna falling by 7%. The decline in sales for take-away sushi was high at 26.4%. However, imports of air flown tuna increased by 7.5% during the first quarter of the year. Supplies of bigeye and bluefin tuna were up during the period. Market analysts link it to the strong yen and rising tuna trade outside the auction markets, particularly by supermarkets. Reportedly more meals are eaten at home, which supports the retail trade. 

Imports of frozen tuna into Japan also increased with higher supplies of skipjack (mostly for katsuobushi production) and albacore. Notably, demand for bushi or dried/shaved tuna products in Japan increased by 4.2% as a result of consumer preference for the cheaper alternative to high end sashimi tuna. The use of dried tuna shaves is extensive in Japanese cuisines.

Overall imports of fresh and frozen tuna (excluding loins and fillets) into Japan totaled 69 000 tonnes during the first quarter of 2009 compared with 66 900 tonnes imported during the same period last year. Following the trend observed in the fresh tuna market, more fish was traded outside the auction hall at the Tsukiji market. Auction prices of purse seine-caught yellowfin realised half the price of longline and pole and line caught fish. Supermarkets were the main customers for these fish.

US market very quiet

The opening months of the year saw little activity in the tuna importing business in the USA. Fresh tuna consumption was affected by the economic crisis, with fewer people having sashimi meals. Canned tuna demand, too, seems to be sluggish. As a substantial share of canned tuna is used for tuna sandwiches in fast food outlets, continued increasing unemployment leads to fewer people buying sandwiches for lunch while at work

As a result, all tuna imports declined in the first three months of the year: -13% for tuna pouches, -15% for fresh tuna, -9% for frozen tuna loins and -10% for canned tuna. The latter is the most important tuna product imported into the USA, accounting for over 60% of total US tuna imports. In the January – March 2009, total canned tuna imports were 39 300 tonnes, far below imports during previous years. Thailand continues to be the main exporter of this product. This country managed to increase its exports, despite the overall bleak situation, and accounts for about half of  the US canned tuna import market. The Philippines and Indonesia, other top exporters, reported lower shipments of canned tuna to the US market.

Difficult situation for Samoa and Galicia

Tuna canning is an important activity in those parts of the world where species of tuna used in canning are landed. The closure of factories has a devastating impact on the economic structure of the country or region. Two examples are American Samoa and Spain. Globalization, which leads to re-location of canneries, is impacting heavily the socio-economic structure in these areas.

Chicken of the Sea decided to close their factory in American Samoa and the implications of this decision for the people and the economy of this island cannot be understated. Over 2 000 people employed by Chicken of the Sea will lose their jobs, effectively reducing by a quarter the active workforce in American Samoa. The apparent culprit for Chicken of the Sea’s cannery closure was a 2007 mandate from the US Congress for American Samoa to match the mainland US minimum wage; a mandate that has boosted wages from an average of USD 4.00/hour, to a minimum of USD 7.25/hour over the course of two years. In addition, there are many other factors that impact negatively the competitiveness of canning in the American Samoa, such as US tariff reductions at the World Trade Organization (WTO) and through Free Trade Agreements (FTAs), competition from low-cost producers in Thailand and Ecuador, highly variable fuel costs, and the global economic recession.

Chicken of the Sea plans to return some of its tuna canning activities to the USA, and is spending USD 20 million to open canning operations in Lyons, Georgia. This new plant will employ 200 people and will take advantage of the relative decrease in utility costs, shipping costs and input material costs. American Samoa’s second cannery, owned and operated by StarKist says that it currently has no plan to close its Pago Pago cannery.

Spain’s canned seafood industry, concentrated mainly in Galicia region, needs to be restructured to remain competitive, according to ANFACO (The National Fish and Seafood Canners Association).
The restructuring may include a reduction in the industry’s production capacity that will lead to early retirement, low incentive bonus and personnel layoffs. According to the association, the industry is under constant threat from increasing imports of canned seafood particularly from Southeast Asian canners and strong competition from supermarket brands. There are 67 canneries in the region employing around 10 000 workers.

Many of the canners have stopped producing their own brands and instead produce canned seafood for supermarket brands. Spanish tuna canners are also the largest importers of pre-cooked tuna loins in Europe. From the total 85 000 tonnes of pre-cooked loins imported into the EU last year as raw material for canned tuna, more than 45 000 tonnes went to Spain. 

Although current demand from the Spanish market is described as being soft, skipjack 1.8 kg up is now being traded at EUR 900/tonne, up from EUR 800/tonne, while whole round yellowfin 10 kg up is offered at EUR 1 500/tonne.

Substantial price increases likely

The general mood in the canned tuna market is that in all major catching areas around the world prices will continue to show a consistent upward trend for at least the coming 4 months. Predictions tend to vary widely – but some traders project skipjack to be at around USD  1 750/tonne and even higher by September this year. This can be explained by lower supply, but also by increasing fuel prices and a weaker dollar.

With the reduced number of fishing boats, supplies of high quality red meat tuna from the Atlantic and Pacific oceans to the Japanese sashimi market will be lower in future. In this conservative market, affected by the economic recession, demand for sashimi tuna will also be slow in the coming months. Therefore, with some minor ups and downs in prices, the market is expected to maintain a balance during the rest of the year.  

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