Bleak outlook for groundfish as COVID-19 impacts intensify

07/01/2021

Although demand in general has been fairly stable, it is expected that it will weaken as the economic effects of the pandemic start to be felt. Prices are expected to decline with both weakening demand and purchasing power in many markets. Supplies are expected to decline somewhat, particularly for Alaska pollock.

The Atlantic cod fisheries of the US Northeast and Canada have been a tale of abundance, overfishing, decline, and doom. While this fishery produced 300 000 to 400 000 tonnes annually in the 1960s and 70s, and in the early 1980s catches jumped to over 560 000 tonnes, by the turn of the century it was all over. In 2017 total US catches of Atlantic cod had dropped to just 842 tonnes, while Canadian landings had dropped to 22 743 tonnes.

The European Commission proposed further cuts in the total allowable catches (TAC) of cod in the western Baltic by 11 percent, to 3 395 tonnes, and for the eastern Baltic the Commission proposes a 70 percent cut to just 595 tonnes. According to Commission Implementing Regulation (EU) 2019/1248 of 22 July 2019, fishing for cod is prohibited in ICES 24,25 and 26 Baltic subdivision.

In September, it was rumoured that the Alaska pollock sector in the Russian Federation could face a 50 percent cut in the 2021 quota, but the Russian Pollock Catchers Association expects that the quota will decline by 15 to 20 percent by 2024, to between 1.60 to 1.65 million tonnes. The 2020 quota of 1.83 million tonnes is the highest in 20 years, and as much as 1.2 million tonnes was allocated to the Sea of Okhotsk alone. As of 14 September 2020, Russian landings of Alaska pollock had reached 1.545 million tonnes, an increase of 4.5 percent compared to the same period of 2019.

Markets

The Association of Genuine Alaska Pollock Producers (GAPP) is stepping up marketing efforts in Europe. The association is undertaking market research in some of the main markets for Alaska pollock, including France, Germany, the Netherlands, Belgium and the United Kingdom of Great Britain and Northern Ireland, and they are investing more than USD 1 million in building demand for Alaska pollock in Europe. The emphasis is on origin: “Wild Alaska Pollock”.

GAPP is also very active on the North American market and is now planning to expand its “Wild Alaska Pollock Week” from its base in Seattle to other cities. In particular, GAPP is targeting the restaurant sector, which is suffering very badly from the effects of the COVID-19 pandemic. While Alaska pollock has been a popular item in fast-food restaurants and as a frozen food in the retail sector, it has not had much success in the white-tablecloth restaurant segment. GAPP hopes to change this with its campaign that is aimed at “expanding the placement of wild Alaska pollock into more fine dining establishments.” Demand for Alaska pollock in the European Union is rising, and reached an all-time high in 2019, when a total of 305 000 tonnes were imported (all product forms). This represented an increase of 9 percent compared to 2018. Prices also went up, so that the value of these imports, at EUR 840 million, increased by a healthy 38 percent.

Among the importers, the United States of America (95 000 tonnes), European Union (44 000 tonnes) and China (165 000 tonnes ) accounted for the bulk of imports in the first half of 2020. China was the main processor of Alaska pollock destined for the European Union market. As much as 93 percent of Alaska pollock imports from Europe consisted of frozen fillets. The strong trend of 2019 continued into 2020, and European imports increased by 2 percent to 87 000 tonnes during the first half of the year.

Trade

Norwegian exports of whole frozen cod have been remarkably stable over the past three years. Exports during the first half of 2020 reached 29 923 tonnes, slightly higher than in the same period in 2019. Exports to China declined a bit (-7.3 percent) to 11 804 tonnes, while exports to Lithuania went up by 23 percent to 9 923 tonnes. Norwegian exports of fresh cod declined slightly during the first 6 months of 2020, from 28 211 tonnes in 2019 to 27 317 tonnes in 2020. However, the unit price went up, so that the FOB value of exports increased from NOK 1.05 billion (USD 115 million) in 2019 to NOK 1.09 billion (USD 120 million) in 2020.

Russian exports of Alaska pollock during the first half of 2020 went up compared to the same period last year, from 497 957 tonnes to 510 800 tonnes. Again, there was a small decline in exports to China, but a strong increase in exports to the Republic of Korea (+23.2 percent) and a more moderate increase to Belarus. The Netherlands imported 34.5 percent more whole frozen cod during the first 6 months of 2020 compared to the same period in 2019. The largest supplier was Norway, with just over 50 percent of the total, followed by the Russian Federation and the Faroe Islands.

China’s imports of round frozen Alaska pollock stayed level with the same period in 2019, with just a 1.0 percent decline. The largest supplier, the Russian Federation, showed an increase of 2.4 percent to 434 958 tonnes, while imports from the United States of America dropped by 33.3 percent to 16 808 tonnes. China’s exports of frozen Alaska pollock fillets dropped by a noticeable 30 percent during the first half of 2020. Shipments to the largest market, Germany, declined by over 33 percent, while exports to the United States of America dropped by almost 40 percent. Round frozen cod imports into China declined slightly during the first six months of the year, from 89 885 tonnes in 2019 to 80 777 tonnes in 2020. The Russian Federation was the main supplier, accounting for 45 890 tonnes or 57 percent of the total, followed by Norway with just over 19 percent of the total. China exported 48 426 tonnes of frozen cod fillets during the first 6months of 2020, compared to 58 494 tonnes in the same period in 2019 (-17.2 percent). Exports to the United States of America declined by 10 percent, while exports to Germany dropped by as much as 35 percent.

Surimi

Surimi production in Alaska during the B season was off to a slow start, with lower catches and many small fish. Catch levels until 8 August 2020 were 67 percent of the quota, compared to 74 percent during the same period in 2019. Surimi production until 8 August was 41 000 tonnes, down by 23 percent compared to the same period in 2019.

US exports of Alaska pollock surimi to Japan have been falling. During the first half of 2020 (January to early July), exports fell by as much as 74 percent, to 18 896 tonnes, down from 73 131 during the same period in 2019. Unit prices also fell by about 7 percent. During the first half of 2020 there was a 30 percent increase in US exports of Alaska pollock surimi to the European Union. Export volume increased from 13 132 tonnes in 2019 to 17 070 tonnes in 2020. Prices also went up, so the value of exports increased from USD 34.1 million to USD 46.0 million (+35 percent).

Prices

The slow start to the Alaska pollock B season may result in higher prices. Prices for pin-boneout blocks have been declining since late 2019, but as supplies are now tightening, producers are expecting that prices will rebound. 

Cod prices had been on an upward trend for about five years, but the pandemic stopped this. The restaurant sector practically closed down, and sales through the foodservice sector weakened dramatically, while the retail sector took over part of the market. It is expected that low demand in the foodservice sector and strong sales in the retail sector will continue for the rest of 2020.

With the onset of COVID-19, prices for groundfish fillets in the United Kingdom of Great Britain and Northern Ireland dropped as a result of weakening sales in the fish-and-chips sector. However, demand has been quick to recover as shops first introduced home delivery and then opened again. Both haddock and cod prices recovered after the initial drop, and by early August demand was building. For the autumn, observers are expecting prices to remain stable and possibly strengthen, unless the COVID-19 situation does not deteriorate.

Outlook

The full effect of the COVID-19 pandemic has probably not yet been seen. Observers expect a global recession to set in, with weaker purchasing power for most people. This will have an effect both on demand and prices. Supplies of Alaska pollock are expected to tighten as the start of the B season in Alaska was slow and fish were small. This may counteract any effects that a recession would have, and thus higher Alaska pollock prices are expected. Demand for cod and some other groundfish species has been remarkably stable since the onset of COVID-19, but prices have begun to decline a little.

Sales of fresh fish have fallen as the foodservice sector closed down. There has been some recovery thanks to innovative sales approaches (home delivery and take-out services), but one must expect a decline in the sector as a whole. Latin American exporters are reporting strong demand for hake, while South African and Namibian producers experience a stable demand.

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