Sector’s emphasis on spot sales of fresh product adds to industry cyclicality

A particular characteristic of the bass and bream sector is that the market is mostly fresh-based with large price swings. It also suffers from limited value-addition and product development. The reason for the latter is partly in the biological nature of the species with a growth cycle and size that hardly lends itself to production of portion size fillets. However, the cyclicality experienced by the sector has an additional different cause, namely the fragmentation of the industry both at the national and the international level. Lack of industry cooperation and sharing of information make reliable estimates for biomass and production forecasts difficult, not only for outsiders, analysts and banks, but most importantly for the producers themselves.

PRICES

If a larger share of production could be sold on contract, as for famed salmon, some of the cyclical trends  and uncertainty could be reduced. This could also lead to a larger market for forward contracts useful for producers and retailers to hedge their exposure.

At the moment, bream prices are higher than those of bass, rather than the opposite, which is the more usual situation. In recent weeks, though, seabass supply has been increasingly reduced with prices firming. Bream prices, in contrast, are weakening, especially of the portion sizes around 350 gr. On the whole, prices are much higher than last year, providing welcome relief to producers in the Mediterranean who were hurt by tight finance, lower margins and uncertain demand in 2010.

MARKETS

Italy: strong import growth in 2011

Europe’s principal market for consumption and imports of bass and bream continues to surprise. The positive import growth during 2010 is continuing in 2011 with import volumes of bass and bream up 11% and 24% respectively during the first quarter. The higher prices this year showed up in dramatically higher values, up 23% and 41% respectively during the first three months.

Greece dominates supplies to Italy whereas Turkey remains firmly in place as the number two supplier. However, Greece continued to increase its shipments to Italy whereas supplies from Turkey are stagnant, or in the case, of bass, even declining. This is explained, at least in part, by strong domestic demand and high prices in the Turkish market.

What is surprising is the fact that despite the uncertain economic situation in Italy, bass and bream imports continue to increase. There are several explanations for this. On the supply side, domestic production is stagnant and any increase in consumption must be met by imports. Despite some higher prices, the species remain attractively priced and maintain an extremely positive image in the mind of consumers. For this reason, they do not seem to suffer direct competition from defrosted pangasius fillets from Viet Nam, at least not for the time being as the species are sold whole. Long term, however, the bass and bream sector should invest more in marketing and promotional activities highlighting the quality and specific attributes of these species, including the Mediterranean origin, rather than being dragged into competition on price alone. To this end, growing concentration on the production side should facilitate such developments.   

The import rise may also have an additional explanation: improved trade statistics.  As a matter of fact, significant volumes of bass and bream were imported to Italy in the past in the non-specific category. As this is being improved, official statistics now better reflect real trade flows and prices. However, that consumption and imports in Italy of bass and bream are increasing is a fact and can be observed daily in supermarkets and restaurants.
 
Spain: focus on prices is hurting quality
 
The difficult economic situation has reduced consumption. At the same time, price has become of paramount importance and wholesalers increasingly prefer imported product from Greece and Turkey over the domestic fish. The focus on price, and on cost, has also led many Spanish producers to start using lower-grade feed with lower quality fish as a result. The image of the species in the Spanish market therefore has weakened.

Overall, Spanish import volumes grew 16% during the first quarter. The increase was entirely represented by higher bream shipments whereas bass imports fell back slightly.

France: stagnant imports as consumers react against higher prices

The positive undertone in the French market observed during most of 2010 now appears to have been substituted by consumer uncertainty and reluctance to spend. Aggregate bass and bream import volumes fell back slightly during the first quarter, for the second year in a row. Higher prices were certainly a factor as bream imports dropped almost 30% as prices jumped 34%.

UK: strong first quarter

Imports of both bass and bream saw positive growth during the first quarter. Consumption is mostly of bass, which is well known as a traditionally caught species close to the British Isles. Although overall imports are modest at around 7-8 000 tonnes a year, the UK could have significant potential if higher and consistent quality could be ensured. A recurrent theme and complaint among wholesalers, retailers and restaurateurs is that the UK market is treated by producers as a marginal market with shipments often consisting of unsold product destined for the traditional markets in Italy, Spain and France.  Quality suffers and so does the image of the fish. On the other hand, UK retailers have developed new value-added products based on bass and bream that have found some success with consumers.

One example is the attractively packed skin-on frozen Sea Bass Fillets (2 per pack - 210g) retailing at GBP 18.10 per kilo (EUR 20.60).

Germany:  higher prices drive market sideways

With more than 80 million consumers and a significant market for imported seafood, the German potential for bass and bream should also be substantial. But with no concerted marketing activities by the industry, total import volumes have been stable for years at between 2 000 and 3 000 tonnes. Traditionally, bream has been the more popular of the two species but lately, during 2011, bass imports have been increasing rapidly because of the higher bream prices.

Outlook

The current situation with a price premium on bream compared with bass is bound to change as more bream production reaches market size between 350 and 450 grams. Demand is also quite sustained during the summer months in the coastal Mediterranean regions but overall prices can be expected to soften somewhat during August and September. Seabass, on the contrary, could end higher as supply is still not adequate to satisfy demand.

Overall, supply is expected to be less than last year, and prices higher. But biomass estimates are unreliable and the jury is still out on what the actual production will be for 2011.