Increased supplies of cod provide a good opportunity to promote fish consumption

Supplies of cod will increase dramatically during the coming year, which means that prices will drop and that groundfish producers will face a challenging period. However, the picture is mixed. While quotas in the Barents Sea have been increased, quotas in the United States north east have been slashed by up to 77%, and New England fishermen are once again facing serious problems.

In the UK, some fishermen are asking whether the successful management of resource sustainability in the groundfish sector is threatening the economic sustainability of the fishery. The abundance of cod has put such strong pressure on prices that many fishermen are unable to turn a profit on their operations. Consequently, the large quotas may paradoxically force some fishermen out of business.

The lower cod prices are having a negative effect on fishing companies’ bottom line already. Aker Seafood announced that their catch value per operating day had decreased by 10% during the fourth quarter of 2012. However, the company was not overly concerned about the situation, as the large increase in cod quota and the lower prices represented an opportunity to enter new markets.

There has been considerable debate over the possibility of Russia obtaining MSC certification for their pollock fishery. It is expected that the initial reaction to such certification might be some turbulence in the market and a downward pressure on prices. This, in turn, may force Russian producers to turn to markets other than the EU and the USA, including Russia, China, and perhaps Africa.

However, in the long term, less pollock may be channelled into the European and US markets, which in turn could lead to prices increasing again after some time. Initially, though, the situation is likely to be rather turbulent.

In times of economic depression, consumers may change their purchasing and consumption behaviour. Prices will play an important part in this. From the point of view of the fisheries sector, the fishing industry may be in a good position in relation to the meat business. Over the last five years, prices of meat as well as fish have increased significantly, according to the FAO food prices index. But since 2011, fish prices have declined, while meat prices have remained high. Thus, fish is competing with meat on price, and apparently winning.

Supplies

The supply picture in the groundfish industry is very mixed. While Norway and Russia have increased their quotas dramatically as a result of very successful fisheries management over the past decades, the cod fishery in the north east USA and Canada is facing disaster. The cod quota in the Gulf of Maine was cut by 77%, while the quota for Georges Bank was cut by 61%. Consequently, North American fishermen are extremely upset, and prices in the area are expected to skyrocket. Catches of other species, such as haddock and pollock, are also expected to be reduced because too much cod is mingled in the catches, and this by-catch will not be allowed.

In Europe, on the contrary, supplies will be more than plentiful in 2013. Norway and Russia increased the cod quota to 1 million tonnes, and prices are falling already. In Russia, the fishermen are worried that the domestic cod market will collapse completely. The Russian quota was increased to 430 000 tonnes, while domestic consumption is estimated to be around 200 000 tonnes per year.

In 2012, Russian pollock landings increased by 2.8% to 1.675 million tonnes. Catches varied from area to area, though. In the western Bering Sea catches rose by almost 16%, while in the Kamchatka – Kuril area and in the northern part of the Sea of Okhotsk catches fell by 6.2% and 7.2%, respectively.

Russian pollock quotas for 2013 were reduced by 5%, to 1.7 million tonnes. This year’s quota is still the third largest since 2004.

The US Pollock A season opened in January with a quota of 1.258 million tonnes, slightly higher than last year. The season was off to a good start in terms of weather.

In spite of great expectations, the Lofoten "skrei season" (cod fishing season) had varied conditions at the beginning of the year. Landings have been good in some places, but prices are low, and because of the cold weather, producers of stockfish (air-dried groundfish) and clipfish (salted and dried) have been holding back so far. Expectations are pessimistic with regard to both demand and prices, and consequently producers are being cautious. As a result, much of the fish landed during the early season is being sold fresh or whole frozen.

In early March, haddock arrived off the Norwegian coast for the spawning season, but the haddock fishery had a slow start, according to reports. The main reason for this is that prices are low, and when cod prices are low, the fishermen get even less for haddock. Few processors are buying fresh haddock at the moment, while haddock frozen on board is much more acceptable, so prices for frozen haddock are still relatively good.

Hake

The hake fisheries in southern Africa (mainly Namibia and South Africa) are on an upward trend. Although there has been some confusion about the TAC in South Africa, it is now set at 156 000 tonnes for this year. To place this in an historical perspective, the Namibian TAC for 2012 was 170 000 tonnes – up from 60 000 tonnes in 1990 but down from 180 000 tonnes in 2005.

South African hake companies are optimistic about the immediate future. One of the leading suppliers, Oceanfresh, saw sales soar by 179% in the third quarter of 2012. The main reason for this is that the company managed to establish good retail relationships in Africa as well as in international markets.

Namibian companies are also turning to new markets in Africa and Asia. Whereas Namibian hake went mainly to Spain in the past, more products are now being shipped to African markets and to several markets in Europe. In 2004, 73% of Namibia’s hake exports went to Spain. In 2011, Spain’s share was reduced to 40%, while African markets took about 20%.

Hake prices have been on a slowly downward sliding trend in Europe for some time, and this is expected to continue this year. With good landings in southern Africa, coupled with good demand in the southern African region, Europe may have to depend on supplies from South America and from domestic landings.

Farmed cod

In spite of a great deal of talk and expectation, cod farming has not been the great success that was hoped a few years back. In fact, it has proven very difficult to achieve profitability in cod farming. The reason is quite simple: supplies of wild-caught cod of high quality are now so great that farmed cod cannot compete. The prices needed to create profits are just not high enough.

As a consequence, a number of cod farming companies have closed down. Now one of the largest producers of farmed cod in Norway, Codfarmers, estimates that they have spent up to NOK 1.5 billion on trying to create a cod farming industry. One of the problems they have identified is that the cod grows too slowly in the northernmost farming locations. Consequently, they are closing down operations in the north, but continuing in the southern part of Norway. At the same time, they are also showing some optimism in their expectations for the future. The high supplies of wild cod will decline eventually, they say, as this is a cyclical phenomenon. While they may be right, it should be recognised that the objective of fisheries management is to create a stable, sustainable fishery. Cod may just be the wrong species for aquaculture in that case.

Demand

In 2013 there is likely to be less pangasius on the market, which should increase demand for other whitefish species, such as cod. From Viet Nam it is reported that production will drop below 1 million tonnes in 2013. According to the latest forecasts, Vietnamese pangasius production will probably only reach 800 000 tonnes. This may help push pangasius prices back up a bit. In 2012, imports of pangasius to the major markets fell. Less pangasius on the market may benefit producers of other whitefish such as cod, haddock and hake.

Surimi

Surimi production in 2013 is expected to be more or less the same as in 2012. In 2012, the US production was 167 000 tonnes, up 13% compared with 2011. In 2013, production is expected to reach about 170 000 tonnes. Surimi prices in Europe are still flat, as they have been over the past year. However, it can be expected that now they will go down slightly.

International trade

European imports of groundfish declined slightly in 2012 compared with 2011. UK imports of frozen cod fell from 81 600 tonnes in 2011 to 79 000 tonnes in 2012. The relative position of the various suppliers was maintained more or less at the status quo, except that Russia increased shipments by some 31% and Norway shipped 15% less frozen cod to the UK.

German imports of frozen cod fillets fell by almost 20%, to just 21 000 tonnes. Most of the decline were due to lower exports from China (-30.7%).

German imports of frozen Alaska pollock fillets was very slightly higher than last year’s figure, but France saw a decline in frozen pollock imports by just over 15%. The main supplier to both markets was China. However, on the French market China lost ground (-22%), while China gained some ground in Germany (+3.9%). Russia lost market share in Germany, but made a slight gain in France.

US imports of groundfish were fairly stable in 2012 compared with 2011. A very slight decline in import volume was registered. Total imports fell from 148 900 tonnes in 2011 to 147 500 tonnes in 2012 (-0.9%). The major changes registered were lower imports of fillets from China, while Iceland increased its market share with regard to fillets. A number of new suppliers of fillets came into the marketplace, and imports from these unspecified countries increased from 2 200 tonnes to 11 200 tonnes.

Prices

As mentioned, cod prices have dropped all over Europe, and Scottish fishermen are now worried about their future because of this situation. Some are asking whether the successful management of resource sustainability in the groundfish sector is now threatening the economic sustainability of the cod fishery. Although Scottish fishermen are blaming Norway and Iceland for this, it is a situation common to all of Europe. It is simply a matter of the law of demand and supply.

In Europe groundfish prices can be expected to decline further throughout the year. This trend will be global, although observers in the US north east are predicting that groundfish prices will increase substantially because of the reduction in their local quotas.

Haddock prices are generally expected to increase to a level above cod prices because of the likely large increases in cod landings. Haddock landings, in contrast, are not expected to increase. Suppliers in Europe are expecting that haddock prices will more than match cod prices soon.

Prices for clipfish (salted and dried whitefish) and wet-salted fish have dropped significantly during the first two months of 2013. Norwegian export prices (FOB Norway) for cod clipfish fell from NOK 51.96 per kg during the first two months of 2012 to NOK 40.30 during the same period in 2013, and they are still falling. In February, the price dropped to NOK 36.36 per kg. For wet-salted fish there was a similar decline in prices: wet-salted cod fell from NOK 31.62 per kg in 2012 to NOK 24.81 in 2013. The main reasons for this price reduction are much better supplies and weaker purchasing power in the traditional markets (Portugal, Spain and Brazil). Prices for these traditional products are expected to decline further.

Outlook

It will be a hard year for the groundfish industry. Cod prices are falling, and it must be expected that prices for competing products will also decline. Supplies will be more than abundant (unless some fishermen decide to leave the industry), and this abundance could even affect other species such as salmon, halibut, seabass, seabream and tilapia.

With the generally low whitefish prices at present, and relatively high meat prices at the same time, perhaps it is an opportune moment to promote fish as an alternative to meat. Fish can now compete both on the health issue and on price.