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GLOBEFISH - Information and Analysis on World Fish Trade

European Seabass and Gilthead seabream - April 2010

15/04/2010

Higher prices to producers cause renewed optimism in seabass/seabream sector now emerging from crisis of 2009 Record prices for bream have brought new optimism to the sector. Supply is tight at present with prices rising week by week. Until the new generation fish comes to market in June/July the market will remain tight with bream in short supply. Bass is less impacted with prices somewhat lower than for bream at the moment.

Although demand is weak in many of the industry’s main markets, the prevalent mood in the sector is one of cautious optimism. The main reason is the industry’s own reaction to the falling margins and weak consumer demand in late 2008 and 2009 in combination with drastically lower liquidity available to producers. This has resulted in lower stocking volumes and earlier harvests, both contributing to lower supplies available to the market in 2010. The supply response is a shared response in all the major producing countries with reduced production volumes for 2010 forecast in Greece, Turkey, Italy and Spain. This has caused bream prices in particular to rise to levels not seen for years.

Unfortunately, although the rise in prices is positive as it returns profitability to the sector, it is also evidence of the cyclical nature of the seabass and seabream sector. Of course, similar cycles can be observed in other aquaculture sectors as well as in agriculture and commodity production in general. The lag in supply response time causes margins to shrink in periods of overproduction or of economic decline, resulting in falling supplies and rising prices only when the markets start to improve. In general, production volumes are then increased drastically, available supplies jump to new record levels the following season and prices start falling again.  It must also be noted that this behaviour from the individual seabass and seabream producer’s point of view is quite rational. For the industry as a whole though, reduced variability would lead to better profitability. In order for this to be achieved, statistics and data regarding biomass and trade would have to be vastly improved from the current situation, enabling producers to make more informed decisions about both stocking levels and harvesting times.

Relief after the 2009 crisis

As the major producer, the situation in Greece strongly affects the markets for bass and bream. On the one hand, rising prices of bream are bringing relief to a domestic sector in crisis during most of 2009. On the other hand, the ongoing economic problems in the Greek economy have made access to finance more difficult. As a result, the industry cut back on production in both 2009 and 2010, with new growth expected only in 2011 at the earliest. The industry, however, is expected to emerge stronger from the crisis with a more rational structure. Some of the weaker players have lately been absorbed by their competitors rather than refinanced by domestic banks.

Turkish production of bass and bream has increased tremendously over the last decade, helped both by vibrant domestic industrial groups as well as foreign investment, not the least from Greece. It is noteworthy that Turkish producers continue to benefit from official subsidies. One of the reasons cited for the provision of subsidies in Turkey is to give incentives to companies to enter fully the official economy. However, production or export subsidies will by definition cause increased production levels and exports, leading to trade distortion and subsequent calls for subsidies to producers in other countries. Therefore, most industry observers (and all mainstream economists), would advocate a phasing out of these subsides over time.  Like other producers, Turkey is reducing production volumes in 2009 and 2010. Turkey has also been helped by strong domestic demand for bream, leading many producers to direct supply to the internal market in 2009 and 2010, instead of exporting at the very low prices seen during last year.

Spanish production has always been targeted at domestic markets and with the weak current demand, this has hurt producers badly. Falling margins have led to large losses with producers cutting back on stocking levels as well as trying to increase exports, especially to France.

Record Italian imports

Italy continues to dominate European seabass and seabream demand. The product has penetrated widely all available channels, ranging from the catering sector and restaurants to the multi-store retail chains. Wild product is preferred over the farmed variety and domestic origin over imported fish. Segmentation has become the norm with distinct price levels for wild, farmed domestic and farmed imported. Among domestic products, the lagoon variety is preferred in some regions. Product development is limited with more than 90% sold fresh whole. Frozen demand is scarce and mostly at lower price levels.

Present prices in supermarkets are between EUR 9 and EUR 11/kg for imported farmed product in the 300-450 gram size category and between EUR 15 and EUR 20/kg for the local branded product in the 600-800 gram category. Wild domestic product, normally of larger sizes, usually retail at around EUR 30/kg.    

Despite falling consumer purchasing power in 2009, Italy’s import volumes bounced back from a weak 2008, setting new record levels at above 40 000 tonnes, most of which is imported from Greece with Turkey as a distant number two supplier.  There is, however, great concern about the reliability of trade statistics for bass and bream since vast additional quantities are imported in the non-specified category. Actual import figures and the real size of  Italy’s bass and bream consumption are therefore much higher than official import statistics show.

The outlook for 2010 is fairly positive. The economy has stabilized and although growth prospects look dim, consumption has proved quite resilient with Italian consumers continuing to give high priority to their food purchases.  Higher prices in 2010 will certainly not boost demand, but competing products such as farmed salmon are also facing drastically higher prices this year.

The difficult state of the Spanish economy is influencing all consumer spending and subsequently also demand for bass and bream. Local producers are hurt the most as they rely heavily on the internal market.  2009 import volumes were down to 17 000 tonnes and the total import value dropped from EUR 76 million to EUR 71 million. The outlook in the short term is not rosy although the higher prices for bream should bring relief to producers.

France is one of the more resilient of the European economies, and thus French imports of bass and bream in 2009 were up from 2008. More surprisingly, volumes imported  were 35 % higher than in 2007, reaching almost 14 000 tonnes. Greece is the major supplier, with bream imported also from Spain.

A traditional market for local bass, the UK has proven a welcome market for farmed bass and bream from the Mediterranean. Despite the weak state of the local economy, imports reached 7 200 tonnes in 2009. Prospects for 2010 are not good with consumers still uncertain about jobs and the health of the local economy. 

The European seabass and seabream sector continues to depend predominantly on demand in traditional Mediterranean markets such as Italy, Spain, France and Portugal. Increased production and supply over the last decade has for the most part been absorbed through higher penetration and growing average consumption per capita in these markets. In addition, rising demand in producing countries such as Greece and Turkey, especially for bream, has also expanded markets. At the same time, the industry has tried to expand new markets as well, with Germany, Austria, Switzerland, the UK, and also Russia and the USA, becoming important export destinations. Overall the new markets have improved significantly the diversity and range of demand. 

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