2014 may be turbulent for seafood industry
With the expected growth of the U.S. economy and continued weakness in many other parts of the world, 2014 looks to be a rough year for seafood traders whose fortunes are tied to foreign currencies, according to a story by John Sackton at Seafoodnews.com.
For importers, a strong dollar is positive and helps moderate prices. For exporters, the strong dollar weakens overseas sales by raising the relative cost of exports, and with more products sold at home, also moderates prices.
For Alaska fishermen, a strong dollar generally means lower ex-vessel prices for fish exports.
The overall trend is for a strengthening dollar. This means cheaper imports and a reduction in competitive price pressures felt by U.S. importers. One of the major reasons for the 40 percent inflation in imported seafood prices since 2010 has been the weakness of the U.S. dollar, which has made U.S. buyers less competitive when bidding against buyers in other countries. This now seems to be reversing.
In Japan, the yen reached a trading level of 105 yen per dollar at the end of December, the highest it has been since 2008. The economic policy in Japan is aimed at weakening the yen to spur manufacturing exports and to stimulate some inflation. One result has been the record prices for Alaska snow crab in yen.
In the past three years, Japan’s ability to pay higher prices for crab, surimi, cod and other products due to the stronger yen has helped these prices either maintain their levels or go up. Sackton reports that right now there is a tension between the stronger Japanese economy — with demands for more seafood imports — and a weakening currency — which makes those imports more expensive. In his view, this balance will shift in 2014 toward the weakening currency being a primary factor — and this will make crab negotiations this spring in Canada very dicey.
In Europe, the euro traded at a two-year high against the dollar last week. This has helped U.S. exporters sell salmon, pollock and cod to Europe. It also will help Canadian shrimp exporters if the trend continues.
However, there has been some weakness in Europe as evidenced by some central banks lowering interest rates — and it is possible that the euro will not maintain its current relative position as the dollar strengthens.
By this summer it may be a drag on export pricing.
In China, the renminbi or Yuan, is now trading at a 20 year high against the dollar, although its rise is tightly controlled by the Chinese authorities. However, it has made imports more expensive and as many Chinese seafood reprocessing companies operate on extremely tight margins, a weaker currency makes it harder for them to bid up prices for raw materials.
Alaskan processors ship relatively little pollock to China for reprocessing; less than 57,000 metric tons in 2010. Much of that volume was already filleted, whereas pollock from Russia often arrives in headed-and-gutted form. In the case of Russian pollock, it must be defrosted, filleted, packaged, and then re-frozen as opposed to pollock sourced from Alaska which is “once-frozen.”
Right now the Canadian dollar has moved from parity to around 1.06 per US dollar, ie weakening about 6 percent. This trend is expected to continue.
David Watt, chief economist at HSBC Canada said he expects the Canadian dollar to weaken to about 90 cents (U.S.) in the coming year (i.e about $1.10 CA per US dollar).
“Our view is that once the Fed tapers, the U.S. dollar will have some momentum behind it,” Watt said. “That will result in strength of the U.S. dollar relative to a range of currencies.”
Sackton says that the bottom line is that the environment of the past two to three years where a weak dollar contributed to the rise of seafood prices in the US is changing, and as the dollar strengthens it will be a moderating influence on domestic seafood prices.
The North Pacific Fisheries Association is holding its annual meeting at the Kachemak City Community Center on Friday, January 10 at 6 p.m.
The guest speaker is Ph. D. student Megan Peterson who has been studying whale depredation on longline sablefish gear.
Peterson said she specifically looks at killer whale interactions in the longline fishery, where the cetaceans pluck the oily fish from the hooks while the line is being hauled off the bottom.
“It’s not great for the fishermen, and it’s not a great interaction for the whales,” she said, “so it’s something that we kind of want to minimize.”
Other than using pots to harvest the fish, Peterson said there is no silver bullet. However, she will be talking about some deterrents that have been tested, including acoustics, catch protection devices that encircle the fish and fishing methods.
“The research is ongoing,” she said.
Peterson said that part of her talk will be an economic evaluation of some of the costs of whale depredation.
“That’s kind of exciting new stuff,” she said, “in that nobody has looked at it from that angle.”
Peterson said that there have also been some new models developed that show just how much fish the killer whales are taking, which she will also talk about.
“It’s a lot,” she said.
This presentation is something of a full circle for Peterson, according to NMFA board member Malcolm Milne.
“Her whole road started with NPFA, coming to Homer and interviewing some of the (fishermen), and she ended up going around the state doing her doctoral thesis,” he said.
Milne said that the NPFA has not taken an official position on the use of pots for catching sablefish, which is illegal in the Gulf of Alaska but allowed in the Bering Sea, although they did support studying the issue.
There is a proposal in front of the International Halibut Commission to allow halibut caught in sablefish pots to be retained in the Bering Sea.
Cristy Fry has commercial fished out of Homer and King Cove since 1978. She can be reached at email@example.com.
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