Tighter supply ahead for seabass and seabream as Turkey eases off production.

A recent Federation of European Aquaculture Producers (FEAP) report has highlighted the lower juvenile production last year in Turkey, a trend which is expected to continue in 2014. Together with similar scale backs in a number of other producing countries, the net result is expected to be an overall drop in production, particularly for bream, over at least the next two years. Considering that a significant price rise has accompanied flat production growth this year, which suggests that demand is growing, this could well be a positive turn towards more consistent profitability for the industry as a whole.

Greece and Turkey

So far this year, the relatively higher prices are only bringing some relief to a Greek industry still in turmoil. Selonda is undergoing major restructuring that sees banks take 82% ownership, while industry leader Nireus sinks deeper into the red. Lower biomass this year has meant that the struggling companies have not been able to take full advantage of higher prices, and a large proportion of sales are still being made below cost price. On the positive side, however, major European markets are slowly recovering - a positive development for Greek producers whose dependence on export markets will be an advantage if Greece lags behind overall EU economic performance.

Due to lower supply this year, Greece posted lower volumes of bass and bream to all major markets except for France in the case of bream, which continues to go against the trend in its continued preference for Greek fish. The Greek export price for both bass and bream was up in the first six months of the year, by some 13%, and 7% just for bass.  

In Turkey, as far as prices in July, August and September 2014 are concerned, bass and bream producers witnessed the most stable period in the last few years thanks to the tourism season and favorable climate for export (i.e. high demand and weak Turkish lira). The mean price of fresh/whole bass which was about USD 6.0 in January and remained about USD 6.32 in August 2014. Increasing demand for 400-600 g bream from Europe had a positive impact on price of this species and mean price of fresh/whole bream, which was USD 5.48 in January went up to 6.55 in August 2014.

Turkey is also being proactive on the marketing side, looking increasingly to value added fillets and ready-to-cook products to diversify their product range and open up access to new markets. Northern Europe in particular is a target in this respect. Turkey continues to work its way into traditionally Greek markets at the same time, and its share of supply to Italy, UK, Spain, Germany and the Netherlands was up in the first six months of 2014. Exports of bass were also up substantially to the USA, while the United Arab Emirates and Lebanon are notable growth markets. Export prices have been increasing for Turkish fish, up by 10% for bass and 18% for bream from January to August 2014. 

The Russian Federation

After the introduction of the food embargo from western countries, which came into force in August 2014, the segment of bass and bream in the Russian fish market was influenced by changes in the geography of exporting countries and logistics, while the assortment of product composition remained the same. Deliveries of bass and bream from Italy, France and Greece were replaced by Turkey and North African countries. The major trend was the further strengthening of Turkey as the main suppliers of bass and bream on the Russian market.  The Russian ban is an opportunity for Turkey, not least because bass and bream are the second largest category after salmon on Russian shelves, and the Russian Federation is now facing a shortage of the latter option.

According to the data from Russian Federal State Customs, by the beginning of October 2014, the Russian Federation imported 3 131 tonnes of bream and 2 963 tonnes of bass. Turkey had a share of 93% in the bream volumes and a share of 92% in the bass volumes. The Russian Federation is now Turkey’s top market for bream and moving rapidly up the ranks for bass as well. Russian growth continues to outpace all other major markets, absorbing larger volumes at rising prices – a sign of an upward trend in underlying demand. In addition to Turkey, deliveries of bass and bream from Northern African countries are increasing, especially from Tunisia and Morocco.    

Italy

Import demand for bass and bream on the Italian market shows slight improvement so far this year, although it is likely that the drop in domestic production is a significant contributing factor. The composition of external suppliers is shifting, with Croatian suppliers increasing their share of the market, while imports of cheaper Turkish-origin fish continue to grow each year. The seasonal summer spike in prices was more pronounced than usual this year, suggesting a more active market, but economic slowdown going into the second half of the year could stifle demand once again.

Spain

Spain’s economic outlook is generally more positive than its Mediterranean EU neighbours, at least in relative terms, with the bass and bream market showing some signs of life in the Spanish market. By August 2014, wholesale volumes and prices, domestic production and import volumes were all up, although in the case of bass this was offset by a substantial weakening of import prices.

France

There has not been much improvement in wholesale prices in France this year, and import demand for both species appears to be weak. Higher prices for Greek product is a contributing factor but increased promotion of domestically sourced fish and a sluggish economy are also no doubt playing a role.

Germany and UK

The German market is developing well, with the growth of the Turkish share of bream supplies standing out. Turkish fish started out much cheaper than its Greek competition on the German market, but it is now catching up fast on the back of strong demand. Meanwhile, the UK is displaying distinct sensitivity to the higher prices and volumes have dropped appreciably for both species.

USA

The US market is another where Turkish suppliers are quickly increasing their share of the market at the expense of Greece. Turkey quadrupled its share of the US market in 2013, and on the current trajectory a similar result should be achieved in 2014. If it continues, this trend will see Turkey become the dominant supplier to the rapidly expanding US market by next year.

Outlook

In the short-term, prices on the major European markets will begin their annual downward slide as we move into autumn and winter, with the uptrend beginning again in December.  Looking slightly further ahead, while Greece can now work to consolidate and push operating costs down, it is Turkey that has undoubtedly maneuvered itself into the best position. Turkish producers are clearly mindful of feed costs and the general rule that ramping up production too quickly has negative impacts. They have also recognized that the current financial limits on Greek expansion means that Turkey can reasonably expect tightening supply on their side to result in boosted prices and thereby widening margins. An additional factor is higher fish mortalities in 2014, said to be slightly above 2013 (around 5% more), adding to expectations for balanced supply and price stability in 2015. On the market side, Turkish exporters have also sought to maximize their growth potential. The Russian Federation, together with emerging markets in the Middle East, are now essentially wholly Turkish markets and are moving upwards rapidly, while Turkish exporters have also secured a firm foothold in the US and major EU markets (with the exception of France). If prices strengthen in line with expectations following supply contractions, then the future of Turkey’s bass and bream sector may well be bright.