Small Pelagics - February 2014

01/02/2014

EU ban on mackerel and herring from the Faroe Islands brings Iceland to the negotiation table.

The EU has followed through with its threat to impose trade restrictions on the Faroe Islands in August, and Norway has followed suit. This means that mackerel and herring from the Faroes are banned in the EU and Norway, and the impact on the industry may soon be felt. There will be shifts in trade flows, and there may also be some price consequences as a result of this.  

The Faroe Islands ignored EU quota negotiations by setting their own parameters and are now facing some unpleasant consequences. In August, the EU decided to ban Faroese exports of mackerel and herring in response to the Faroes’ unilateral quota allocation earlier. 

At the same time, the EU is considering taking similar steps against Iceland. However the new Icelandic government has initiated a diplomatic approach to the situation and wants to negotiate a solution to the problem.

This problem has been an issue for several years now and stems from the setting of unilateral quotas for mackerel and herring by Iceland and the Faroes. The background for doing this is that the migration patterns of mackerel have changed in recent years, as the fish has moved into Icelandic and Faroese waters to a greater extent than previously. This has prompted Iceland and the Faroes to demand a greater share of the total quota, but the EU and Norway have objected to this. So Iceland and the Faroes set their own quotas, several times larger than earlier quotas. 

Over the past three years, the value of Faroese exports of mackerel and herring have increased dramatically. Mackerel exports went up by a factor of over 2.5 between 2010 and 2012, while herring exports increased by 22% during the same period.  For mackerel, the EU has become the most important market for the Faroes, and in 2012 the EU accounted for over 52% of the country’s total mackerel exports and 35% of herring exports. Consequently, an EU ban on Faroese mackerel and herring is very serious.

In this situation, Faroese exporters have to look elsewhere for marketing these products, and the most likely places are Russia, eastern Europe and Africa. Market share in the EU will most likely be taken over by Norwegian and Scottish exporters.

These changes have also had an impact on prices. In Russia, mackerel prices are increasing, and some buyers are now holding back because of the rising prices.

Mackerel

Meanwhile, bad weather off the coast of Norway hindered the mackerel fishery at the beginning of September. The catches that have been landed have consisted of larger sizes, though, especially in northern waters, although there is still a serious lack of >600 g fish. According to the fishermen there is plenty of mackerel in the Norwegian EEZ, but it is widely dispersed. This makes fishing somewhat more difficult. Some observers claim that the mackerel is now moving towards the Norwegian zone, and therefore Norwegian landings may be expected to rise soon. 

The abundance of mackerel in the North Atlantic is worrying some ocean researchers, who claim that the mackerel is depleting the ocean of food for other small species, such as capelin and herring. According to Norwegian researchers, the present management model does not take into account that some fish stocks can in fact become too big and too dominating, at the expense of others. The mackerel stocks are at an historic high at present. 

As a result of the very large size of the mackerel stocks, mackerel has started migrating to other regions, and is currently moving northward and eastward. 

In order to avoid a major collapse of some species in the region, mackerel stocks should be fished down to a more balanced level as soon as possible according to researchers. 

Iceland’s landings of pelagic species were down by as much as 55% in June. Mackerel catches were 40% lower than the same month in 2012, and herring catches were down by a staggering 90%. 

Norwegian mackerel prices during the second quarter of 2013 were down. Total sales of mackerel were down by 20%, but prices now seem to have stabilized. Norwegian exports of frozen mackerel dropped significantly in August, when only 3 340 tonnes of frozen round mackerel was shipped, compared with 5 478 tonnes during the same month in 2012 (-39%). In addition, the export price dropped by some 6.4%, from NOK 10.40 in August 2012 to NOK 7.73 in August 2013.

On the European market, mackerel prices are low and sliding slightly at the moment. Prices for larger sizes (>600g) are high, however, and increased dramatically in July and August. The main reason was a significant shortage of large sized mackerel during those months. 

During the first half of 2013 Norwegian frozen mackerel exports went down by 22% (by volume), and by over 41% by value. The average export price (FOB Norway) for frozen mackerel was down by 26%, from NOK 13.03 per kg in the first half of 2012 to NOK 9.87 per kg in the same period in 2013. 

Shipments to the main markets (China, Russia and Japan) all decreased, while exports to the Ukraine increased by over 50%. 

Herring

For herring, the situation is similar to that for mackerel. The Faroes have set a unilateral quota that is more than three times higher than its earlier share, and the EU and Norway have objected. In August, it was decided to impose a ban on imports of Faroese herring into the EU as well as mackerel. Again, Iceland has chosen to pursue the diplomatic path, and the country is critical of EU’s aggressive attitude. 

Coastal states Norway, EU, the Faroes, Iceland and Russia met in London in early September to negotiate the Norwegian Spring Spawning (NSS) herring quotas, but no agreement was reached during the first round. The quota for NSS herring was cut to 619 000 tonnes, down from 833 000 tonnes in 2012 and 1.17 million tonnes in 2011. Lower supplies of herring during this season are expected to push prices up, or at least maintain these at present levels. 

The USA reports that there have been problems with Listeria in Russian herring fillets in oil, according to an FDA alert. The product has been recalled after a routine sampling by New York State Department of Agriculture. Subsequent analysis of the product revealed a positive test result for Listeria monocytogenes. No cases of illness have been reported in connection with this so far. 

Prices of North Sea herring are lower this year than in 2012, especially for smaller sizes. Norwegian export prices fell dramatically in August, but that is a seasonal phenomenon, and it is worth noting that export prices for frozen herring in August 2013 were slightly higher than in August 2012. 

Availability of larger sizes has been very weak, so the price level for these is uncertain at present. Few observers are willing to predict what the autumn prices will be. 

Norwegian exports of frozen herring declined by 27% by volume during the first half of the year. The value of frozen herring exports dropped by over 34% as the average export price (FOB Norway) declined by 8.4%, from NOK 8.07 per kg during the first half of 2012 to NOK 7.39 per kg in the first half of 2013. As was the case with mackerel, a lower amount of product was shipped to the main markets in eastern Europe (Russia, Ukraine and Lithuania) as well as to markets in Africa (Egypt, Nigeria).

Dutch exports, on the contrary, increased by a healthy 65%, to almost 50 000 tonnes, during the first half of the year. The most noteworthy aspect of Dutch exports during this period was a dramatic increase in shipments to Nigeria (+137%).

French imports of frozen herring declined markedly during the first half of the year, from almost 4 500 tonnes in 2012 to just 1 600 tonnes in 2013. Shipments from Norway and Iceland were down significantly. 

German imports of frozen herring fillets also declined during the period, from 13 900 tonnes in the first half of 2012 to 9 800 tonnes (-29.5%) during the same period in 2013.

The Japanese market, in contrast, was stable with regard to frozen herring imports during the first half of the year. In fact there was a slight increase in imported volume (+8.6%) compared with 2012. However, the main supplier, Norway, saw a drastic reduction in shipments  from 6 200 tonnes during the first half of 2012 to just 3 300 tonnes this year. 

Export prices for herring have been on a downward trend since late 2011. Nevertheless there is a great deal more fluctuation in prices for larger sizes, as a result of limited availability. At present, export prices for large mackerel seem to be on an upward trend, while prices for smaller sizes (<600g) seem to have stabilized, although prices went down slightly in August. 

Anchovies and sardines

The species that has traditionally been used as raw material for the Brazilian canned sardine industry, Sardinella brasiliensis, has been in decline for some years now. In 1970 135 000 tonnes were landed but in 2012 this had fallen to 90 000 tonnes. Brazilian authorities are worried that the stock might collapse, and ordered a five-month fishing ban. At the same time, alternative species to use in the canned sardine industry are being sought, and at present there is some hope that the so-called Matrinxa (Brycon cephalus) may be a possibility. 

In Peru, two surveys to determine the quota for the second season of 2013 are under way. During the first season nearly the whole quota was landed: 1 982 239 tonnes were landed of a total quota of 2 050 000 tonnes.  

In Europe, the EU has approved a 17% cut in the Bay of Biscay anchovy quota, as the total allowable catch was set at 17 000 tonnes. The TAC has been gradually reduced over the past three years in an effort to build up the resource again. Spain and France are the only nations participating in this fishery. 

European imports of canned sardines have been relatively stable this year. There has been an increase in French imports, while there was a slight decline in imports into Germany and the UK during the first half of 2013.

French imports increased by 26.3%, to 9 600 tonnes. Most of this increase came from Morocco, which is the main supplier to France. 

German imports declined by 11% to just 3 000 tonnes. The main supplier to German is Morocco, and this country increased its shipments to Germany by about 10%, while other suppliers (Peru, Netherlands) lost market share.

In the UK imports went down by 5.7% to 6 600 tonnes. The main supplier is Portugal, but this country lost market share to Morocco during the first half of 2013. 

The US market for canned sardines is fairly stable, but imports during the first half of 2013 declined by 8.3% to 14 400 tonnes. There were some shifts in the relative positions of the main suppliers, as Poland increased shipments to the USA by 45% while Thailand saw a decline of 28.6%. There were only minor changes for most of the other suppliers, but notably Morocco increased canned sardine shipments to the USA by 23.5%.

Outlook

It is expected that the situation on the mackerel and herring markets will be volatile in the coming months, as the Faroes (and probably Iceland) will have to divert shipments away from the EU market to other parts of the world. This will leave Europe open to other suppliers, and some price fluctuations may be expected as a result. 

Supplies of mackerel will be abundant, but this does not mean that prices are expected to decline in all markets. Supplies of herring, in contrast, will be tighter, and stable or higher prices for herring can be expected. 

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