Turkey becomes largest producer but prices weaken and costs continue to rise

The increasing volumes of seabass and seabream that are coming to market have led to weaker prices. Although consumers have reason to be happy, producers are in a different position as margins have taken a serious hit. This is particularly the case for bass where volumes are up between 7 and 10% this year whereas bream volumes have actually fallen somewhat and prices remain at the level of 2012.

Companies have also been suffering from tight credit and rising costs on feed, putting many firms in the red. The largest of all the companies in Greece, and in fact the largest producer of bass and bream in the world, the merged Dias-Selonda company, applied for bankruptcy protection in September.

In general, the build-up of supply in a weak market was bound to cause lower prices in the short term. Over time, markets will certainly be able to absorb the larger volumes but for a more stable long-term balance in the market, more product innovation and the development of additional markets is clearly needed.

Prices

Generally, in the bass and bream market prices remain strong and firming during winter and spring as most suppliers have no fish available for sale during this period. With rising water temperatures and new growth, the fish reaches market size in early summer and the additional volumes coming to market start exerting pressure on prices. This pattern is fairly cyclical and repeats itself year after year. Compared with 2012, however, seabass prices were significantly lower in the first half of this year whereas seabream prices were quite similar to 2012 levels during the same period.

Lower prices have stimulated demand but most markets remain weak with only limited signs of recovery in sight. In some markets such as France, the abundant catches of wild cod from northern Europe at attractive prices may have created some additional competition for bass and bream, although normally the species are not seen as direct competitors.

Supply

Strong increases in shipments from Turkey of bream (+66%) and bass (+81%) during the first six months of the year caused Turkey’s export to reach 16 300 tonnes (+73%) for the period. Undoubtedly, this has led to weaker prices and margins as the market was not able to absorb such increasing quantities in a context of uncertain demand. It could be argued that Turkey’s exports also go to new and emerging markets such as the Middle East, Russia and the US and not exclusively to the EU, but Italy remains Turkey’s largest single market at 3 100 tonnes (+48%) followed by the Netherlands at 2 900 tonnes (+190%). Turkish exports to Spain with 2 000 tonnes are also substantial (+43%). Overall, therefore, the rapid increase in shipped volumes has led to increased demand as consumers benefit from lower prices but at the expense of prices and margins. Turkish producers have also developed new value added products, especially frozen fillets for a number of catering markets.

At the same time Greece, which remains the leading producer and exporter, saw export volumes drop 6.5% to 37 100 tonnes for the period with Italy (-12%), Spain (+12%) and France (-6.4%) as the principal destinations.

Markets

Italy: declining sales in Europe’s largest market for bass and bream

The Italian market continues to suffer from falling purchasing power among consumers. The decision to increase the VAT in October will not improve matters and the economy remains in recession with hope of a modest rebound postponed to late 2014.

Both values and volumes for the first two quarters were down. Despite low prices buying interest was hesitant and imported volumes dropped by 3.4%.

The drop in sales in Italy is not limited to bass and bream but the whole seafood segment is affected. This time retailers cannot be accused of overcharging for products; to the contrary, supermarkets have done much to promote the product and for most of the year portion sized fish from Greece has been on sale at around EUR 5-6 per kilo.

During the period, shipments from Greece dropped whereas Turkey increased sales to Italy.

France: the rebound continues after weak 2012

As observed during the first quarter, France represents a positive element in an otherwise difficult market. Import volumes were up a significant 30% from 2012, which, however, was the worst year since 2008 for bass and bream imports. Import values were up only 10% during the semester given that prices were lower than in 2012.

Of note is the fact that both Greece and Spain increased their shipments to France during the semester. Spanish producers have for some time intensified their export activities as a result of a difficult domestic market and this is evidently having some success. For Greek exporters, France has become an important market although some of the volumes may include re-exports from Turkey.

Spain: higher imports but growing exports as well

Together with France, Spain represents a positive sign in the bass and bream market. The domestic economy continued to suffer but at least the bass and bream market has shown signs of new vigour, with volumes in fact bouncing back an impressive 38% during the semester. Of note is the fact that total bass imports doubled from 2 000 to 4 000 tonnes, whereas bream imports were up a more modest 11%.

UK: market expands thanks to product innovation

The encouraging development in the UK market was sustained with imports reaching 7 300 tonnes, up a remarkable 26% for the period. Greece continued to be the principal supplier for the UK followed by the Netherlands, which mostly represents re-exports from Turkey. The UK market is different from Continental Europe as frozen fillets are very popular in the supermarket chains thanks to inviting packaging and constant product innovation. As frozen fillets are not included in the above numbers the real size of imports, and thus the extent of the UK market, is even larger.

Germany

The German market continued to increase its imports with volumes up 69% during the first semester to reach almost 3 000 tonnes. Although some volumes may be for re-exports, there is no doubt that the German market has developed significantly over the last few years.

USA: Strong growth

US import volumes of bass and bream rose by a remarkable 40% during the first 6 months of 2013 to reach almost 2 200 tonnes. Fresh bass made up 86% of the volume whereas fresh bream constituted around 10%. Greece, with 60% of the market, is the leading supplier although Turkey has been gaining ground lately to reach 10%.

The growth in the US market is indeed a positive phenomenon. Although the quantities are not huge, the US market provides additional possibilities for Mediterranean producers in a difficult overall market. Suppliers should be aware however that the US fresh market is extremely price sensitive and exposed to the health of the dining-out market.

Middle East: Sharp rise in Lebanese imports

Turkish and Greek producers have for years sought to introduce their products in new markets. That this is bearing fruit is shown by the strong demand represented by Lebanon, which during the first six months of 2013 reached 2 100 tonnes of bass and bream imported from Turkey alone, up 110 % from the previous year.

Outlook

The UK, US, German, Middle Eastern and Russian markets are all developing nicely, and traditional markets such as Spain and France have also rebounded in 2013. However Italy, the largest market, remains difficult and is not expected to turn this year. Likewise, volume growth for the most part has been caused by lower prices, especially for bass.

This situation is not expected to change in the near future. Plentiful supplies from Turkey will keep markets well replenished and prices can be expected to weaken even further over the coming months with recovery in prices only to be expected during early 2014. Bass prices are particularly under strain as production increases for this species have been the most pronounced.