Turkish expansion strategy set to pay off as sea bass and seabream production growth throttled back.

The Turkish seabass and seabream industry has been steadily increasing production volumes for the last decade or so, to the point where Turkey is now the world’s major  producer of seabass and also closing the gap on the Greek seabream sector. At the beginning of 2015, it now appears that the production growth stage of the Turkish expansion is winding down and the focus is instead switching to turning production into profit.

A number of factors have contributed to the Turkish success. For one thing, Turkey’s major competitor, the Greek industry, has been struggling to maintain profitability for some years now, while the economic crisis has severely restricted  access to credit. Meanwhile, the Turkish sector has received substantial investment and government support, on top of its existing advantage in terms of production costs. This has allowed Turkish exporters to price their product well below their Greek counterparts in many cases, leading to a steady influx of Turkish fish into established and emerging markets alike. More recently, the Russian ban on imports of seafood products from a range of Western nations, including Greece, has played into Turkish hands. Although, prior to the ban, Turkey was already the major supplier to the Russian market, the difficulty that Russian imports are facing obtaining other species, such as salmon, appears to have boosted demand for Turkish bass and bream substantially.

The fourth quarter of 2014 continued to be a stable period for Turkish seabass and seabream producers. Average prices (domestic and export) for both species were stable during last quarter of the year. The end of year festivities  period in Europe boosted the exports in the latter part of December. Seabream sales were strong for 300-400 and 400-600 g fish during December and 2013 generation seabream stocks were cleared out by most producers.

According to industry experts one of the main challenges remaining for Turkish seabass and seabream producers in 2015 are bio-technical problems associated with decline in quality of fish feeds. As the global prices for fishmeal and oil increase, feed producers tend to use lower priced alternatives (e.g. soya meal and oil), which have a negative impact on quality of fish feed in terms of  feed conversion ratios (FCR) and fish growth rates. Poorer FCRs and growth rates are expected to increase rearing periods and production costs. Lower fish growth rates and longer grow out periods may create some bottlenecks for supply of 300-400 and 400-600 g fish, which are most in demand by international markets. At the same time this situation can create an advantage for producers with shorter grow out periods.

In Greece, meanwhile, companies continue to focus on debt servicing strategies and corporate restructuring in an attempt to return to profitability. Progress is being made, however, and this year there have been a number of reports of reduced losses. Medium-szied companies remain mostly profitable however. Though there are multiple underlying factors, higher international prices for gilt-head seabream, the primary export species, have eased pressure on margins. Although Greece has exported less fish overall in 2014, compared with last year, the higher price level has more than compensated, at least in the case of bream. For bass, the situation is somewhat less positive, as the average export price this year for fresh whole fish is lower than 2013, and volumes are approximately flat as of September. This is no doubt related to the greater penetration of cheaper Turkish seabass into traditionally Greek markets than there has been in the case of seabream.

Italy

Greek producers will have been somewhat relieved by the resilience of the Italian market in 2014, which has traditionally been the most important destination for Greek bass and bream. Italian figures show approximately the same quantity of fish imported from Greece this year, at marginally higher prices, particularly for seabream. This is despite the relatively slower recovery of the Italian economy compared with the rest of the Eurozone, although the slight reduction in domestic production in 2014 should also be taken into account. Also, Italian buyers are apparently not immune to the allure of cheaper Turkish fish, and the Turkish share of supply for both bass and bream continues to increase year by year. In this sense, many retailers use three product categories for the farmed fish; the large volume and low priced Turkish origin, Greek product as standard, and Italian product, which is somewhat larger sized as the top product. In addition is the wild product, which is priced at twice the top domestic price level.

Spain

Spain is another market that is increasingly supplied by Turkey, mainly at the expense of their Greek competitors. In 2014, Turkish fish accounted for just more than 29% of the total fresh seabass and seabream imported into Spain from January to September. In 2012, this proportion was only 18%. In the same timeframe, the Greek share has dropped from 73% to around 54%, while a substantial increase in imports from France was also noticeable in 2014. In general, demand appears to be improving on the Spanish market.

France

French retailers are focusing on promoting domestically-produced bass and bream this year and demand for imported farmed fish appears to be weakening. However, it should be kept in mind that a significant part of the French bass and bream market, particularly for bream,is supplied by capture fisheries, for which up-to-date price and production data is much more difficult to obtain, although price levels in general are quite high.  France also exports wild bass to Italy.

Other markets

Imports of Greek fish into the UK, particularly of seabream, have fallen drastically in 2014, while Turkish-origin imports have more than doubled. Demand appears to be firm on the German market, although here also we may observe a steady shift in importer preference toward cheaper Turkish fish. A similar trend is evident on the US market, where imports of Turkish more than doubled in 2014.

Outlook

Juvenile production data for the major bass and bream producers suggest that production growth, for at least the next two years, will be approximately flat for seabream and likely to be negative for seabass. This is in large part due to the reversal of the Turkish industry’s previously rapid growth. The future effect on the market is difficult to predict precisely, but strong growth in many emerging markets and evidence of slow recovery in many established ones suggests that demand is now outstripping supply. This in turn should see prices rise, which will bring some relief to cash-strapped Greek producers. It is the Turkish industry, however, that is set to reap the greatest benefits if sustained high price levels are indeed the result of tightening supply. Turkish fish is now present in large quantities in almost all the major markets, and Turkey is the dominant supplier to many important emerging markets including Russia, where the import ban will continue to represent a lucrative opportunity for Turkish exporters for as long as it lasts. In the short term, the usual cyclical pattern should see prices for both bass and bream trend upwards in early 2015.

Despite the more positive outlook, many challenges remain for the bass and bream sector. At a workshop that took place as part of Aquaculture Europe 2014 in October, a wide range of different stakeholders within the industry came together to try and identify the key issues that need to be addressed. Although a diverse selection of different topics were discussed, the following were emphasized by the participants as future areas of focus for the industry as a whole:

1) The need for increased investment in research and development activities to improve, among other things, techniques for breeding and genetic selection, nutrition and disease management;

2) The need for increased collaboration and collective marketing strategies, including product diversification, to increase the export market penetration of the species and reduce dependency on domestic market sales;

3) The need for improved data collection and dissemination;

4) The need for better environmental management regulations and practices.

The general feeling amongst the participants at the workshop was that, although the sector has struggled with profitability for some time now, and has thus been distracted from addressing these issues by the need to ensure its basic survival, it is now time to take proactive steps towards laying a more stable foundation to support and encourage the sustained growth of the industry in the future.