Early January 2010 market overview for seafood exports from Russia's Far East and other producer countries

In early January 2010 the general market conditions for seafood produced in the North Pacific were more or less formed, mostly thanks to brisker operations of the Russian fleets which opened a new roe pollock season in the northeast part of the Sea of Okhotsk. While their US colleagues were only finishing preparation for the dedicated trawl fishery of pollock in the east of the Bering Sea, the Russians were fairly quickly covering their quotas mostly in the Kamchatka Kurile subarea traditionally contributing ca.80% of the total harvest, according to the overview prepared by analysts of www.fishnet-russia.com (www.fishnet.ru) based on Japanese and Russian sources.

The fishery operations were active even despite the fishermen's discontent with the price positions of the Chinese buyers of frozen pollock and serious concerns as regards prospects for sales of frozen pollock roe at spring auctions in Pusan.

According to the official figures, already by 11 January 2010 the total pollock harvest in the Russian Far East reached 70,000 tonnes (including catches in the very last days of 2009 and those in the Bering Sea and in the Kuriles), thus accounting for at least 10% of the quota share for the winter-spring A season in the Sea of Okhotsk, which was increased to nearly 970,000 tonnes, 100,000 tonnes up on the respective volume for 2009. The quota for the A season has been calculated as 70% of the annual pollock TAC, with the remaining 30% left for the autumn B season in the Sea of Okhotsk. Such ratio has been applied last year and, if Vladivostok-based Alaska Fishermen's Association does not decide to change it, such model will evidently be used in 2010 as well.

Judging by the official data, production of pollock roe amounted to 1000 tonnes, fillet output also approximated 1000 tonnes, production of w/r pollock amounted to ca.8000 tonnes, and the output of headed and gutted pollock was recorded at ca.29,000 tonnes.

Evidently, with such good results of seasonal HG pollock production its active shipments to export markets will start already before the end of January 2010, though the price situation still remained unfavourable for the product sales. Some players say that the Chinese and South Korean buyers of more or less standard-size pollock stuck to the offer prices of 1450-1500 USD per tonne (CAF), while for pollock lots with larger share of small fish they offered prices of 1400 tonnes per tonne and even less (up to 1350-1370 USD per tonne). For comparison, the previous year took off with prices leveling at 1450-1600 USD per tonne, while prices for products with not very good size range amounted to ca.1500-1550 USD per tonne. Therefore the Russian fishermen feared that if the price situation developed under the 2009 pattern, in spring 2010 leading Chinese buyers would try to use their strong position and command the prices down to 1200 USD per tonne, and the sales of frozen pollock roe would therefore fail to bring such financial results so as to improve the export proceeds.

Pollock roe

Forecasts for the current year 2010 have been strongly complicated by a number of uncertainties, however the market experts mostly agree that the level of prices for frozen raw may decrease even more. On the Japanese market of salted and other processed as well as final pollock roe products users have been waiting for a further decline of prices thus exerting strong downward pressure on frozen pollock roe prices.

In 2010 capture quotas for the US and Russian fisheries have been finally set in such a way that frozen pollock roe production in Alaska can descend even further, while its Russian production in the Sea of Okhotsk may increase. Conservative forecasts as per early January 2010 say that such development will result either in persistence of the total supply of frozen raw at the level of 2009 (namely at 40,000-41,000 tonnes) or in its slight decline. The raw material will presumably be offered for auction sale after general closure of the production seasons, and the main problems will evidently arise when the actual demand for frozen raw may grow smaller the supply at least from the Japanese market due extremely weak market for ready products.

Japanese producers of final products have to adjust to current consumption trends which are formed under the influence of deflation trends. Therefore, the market players say, the prices will remain low or even lower both for products in premium holiday packs still made mostly from the Alaskan raw and for medium and low end products for everyday consumption which are mainly made from the Russian raw and sold via large retail chains. Actually the chains which have suppressed already large price fall for ready-to-eat pollock roe are now poised for sticking to such policy fraught with harmful effects as no one can guarantee maintenance of low prices for the raw material. Nevertheless, in a situation of anticipated decrease of prices for final products both importers of the raw and the Japanese processors cannot but be extremely cautious when approaching the conditions for the purchase of frozen raw material from the new fishing season. The situation grows even more difficult in the psychological aspect as well, because the consumers easily and quickly get used to low prices, the latter actually ceasing to encourage retail trade and demand. It is vitally important to widen the narrowed channels of product sales, otherwise competition between the market players will continue bringing no fruits thus withdrawing from efficient means of maintaining the market activity.

Import of frozen pollock roe to Japan in 2008-2009

As per late November 2009 the total volume of the Japanese import of frozen raw amounted to ca.33,500 tonnes, at least 8000 tonnes or 20% down on 2008, but the average import price (CIF) amounted to only ca.920 Yen per kilo, nearly 30% down on the corresponding result of the previous year. Shipments from the USA went down by 19% to 17,500 tonnes, and the average import price amounted to ca.970 Yen per kilo, 25% or 330 Yen per kilo down on 2009. Import of Russian products went down by 20% to ca.15,700 tonnes with the average import price amounting to only 860 Yen per kilo, 31% or nearly 400 Yen per kilo down on 2009. Such a strong fall of prices for frozen raw pollock roe against the background of decreased shipments had no precedents in the past, but in 2010 the trends may remain unfavourable for the producers and the prospect of the Bering Sea pollock TAC recovery in the USA from less than 815,000 tonnes to 1 million tonnes can weaken the market even more.

In such a situation production decline and deliberate reduction of the catch rates could support the market at least for some time, but in the first ten days of January 2010 the Okhotsk fishery was contrariwise progressing brisker with the average catch rates rising from less than 4000 tonnes to nearly 7000 tonnes. There were speculations that some large companies, including those based in Vladivostok, were thinking either on limiting the quota take-up or on restraining sales of processed products, but it was not clear if those rumors were true to life or not. Besides, it was not clear if Vladivostok-based Alaska Fishermen's Association was going to react to the markets' weakness and emergence of real prospects for their further weakness.

According to some of the market specialists, one of cardinal steps could be the TAC's redistribution in favour of the autumn season, but such decision would require a grounded assessment, thorough preparation and persistence when putting it to practice. However, as there was practically no time for that, very few market specialists thought such step to be implemented. Evidently, such possibility did not concern the Chinese, South Korean and Japanese buyers either, as they were expecting purchases of the Russian raw material at even lower prices than in 2009.

Crabs

In 2009 the general situation on the Japanese market of frozen crab products was characterized by extremely weak sales which were directly attributed to dominating deflation as well as continuing strong shipments of live crab by Russian fleets. Specialists called the year 2009 unprecedentally painful for all the market segments, however by the end of the year the market showed signs of buoyancy thus inspiring hopes for a gradual market recovery and a price rise.

Shipments of red king crab continued to decline due to a complete ban for commercial fishery at the shores of West Kamchatka on the year-round basis, but even under such conditions no price rise was observed with the indications practically freezing at 1700-1800 Yen per kilo. Prices for frozen snow crab of the Russian origin in the beginning of the year approximated 1000 Yen per kilo, however under the influence of slow sales and due to emerging problems with the product quality actual sales prices descended much below the latter level later on. Suppliers of Canadian snow crab opilio (blast frozen) evidently succeeded in selling off the whole import volume of 2009 until the end of the year, however the market specialists attributed that to a serious decrease of the import volume rather than to improved demand and thought that actual sales volumes were well behind the usual volumes.

As per the end of November 2009 the Japanese import volume of frozen red king crab and blue king crab from Russia was limited to only 5300 tonnes, 35% or 3000 tonnes down on the respective result of 2008. The average import price still declined nearly by 25% to below 1400 Yen per kilo. Despite such a strong decrease of shipments the price situation on the Japanese market remained extremely negative both for producers and importers. By the holiday turn-of-the-year season another 1000 tonnes of Russian products were shipped to Japan, though no substantial improvement of the price situation was observed (also due to a decrease of prices for red king crab of the US origin). The price limit at the level of 2000 Yen per kilo remained very rigid, prices even for high quality products in the end-of-the-year holiday season leveled only at 1800-1850 Yen per kilo, while contract prices for products with problem quality were much below 1800 Yen per kilo (up to 1700 Yen per kilo).

As for Bristol products, their purchases for shipments until the end of 2009 were cut by the Japanese side to approximately 2000 tonnes. Thanks to decline of purchase prices in USD and strong Yen rate prices for the first seasonal offers on the Japanese market were commanded at 2100-2200 Yen per kilo, though the sales dynamics made a number of sellers reduce prices to 2000 Yen per kilo. Red king crab in the course of the year-ruling holiday season is normally taken as an intrinsic part of the product range generating the highest sales value, but last year the level of red king crab prices itself was under the destructive influence of deflation processes dominating on the markets.

The Japanese import of frozen snow crab from Russia went down on the previous year not so much as the red king crab import (as per late November the customs cleared ca.11,000 tonnes, ca.9% down on 2008), but the price situation was actually as unfavourable as that for red king crab (the average import price amounted to only 870 Yen per kilo, also nearly 23% down on 2008). In the beginning of the year prices were mostly slightly up the level of 900 Yen per kilo and importers and first hand wholesalers counted on prices recovery, however that did not actually happen mainly due to emergence of products with problem quality (including badly frozen products). Worse product quality resulted into a weaker demand on the wholesale market. Due to the above developments prices even for products of good quality remained at the level of 900 Yen per kilo, while prices for products made by under-reputed producers declined to 800 Yen per kilo and even to 700 Yen per kilo. There were also sales even at lower prices which was characterised by the market specialists as an uncontrolled price fall.

Japanese import of live/fresh crab from Russia in 2008-2009

The situation on the market of Canadian snow crab opilio meat of the Chinese production also appeared to be very difficult. Reports said that those were products with added value normally fetching comparably high prices, which could in no way encourage the sales progress taking into account the current market condition. The negative impact was aggravated by the fact that against the background of generally unfavourable economic situation consumers started bypassing foodservice outlets, while that sector (especially sushi bars) was one of main sources of crab meat demand.

In the beginning of the year the market focus normally shifts towards the US opilio fishery in the Bering Sea. Talks on the Japanese purchases started in the end of last year, but noticeable progress at the talks was not achieved due to serious differences in the positions of the sides. The US producers hope that their products will fetch no lower prices than the Canadian products, which after a slight price decline appreciated to 7.70 USD per kilo as per early 2010 (contract prices at Boston Seafood Exchange). In the meantime, the Japanese importers had to take into account that the Bering Sea opilio was mostly exported for processing into meat products to China and the market structure for opilio meat of the Chinese origin remained weak. A considerable share of last year shipments of brine-frozen raw material from the North America remained unused, which pushed down dependence on additional shipments of the raw material from the new season from Alaska.

Therefore, the general situation as per early January 2010 still greatly differed from the situation in the same period last year, when the Chinese producers of meat suffered from a serious lack of the raw material. Therefore quick compromise making at the continuing talks was not expected as per early January 2010. Some market specialists thought that the whole thing might result into forced renunciation of purchases of Alaskan opilio 2010 by the Japanese importers for further mass shipments for processing to China and focus mostly on purchases of air frozen products for specialized consumers in Japan itself.

The general situation on the Japanese market of crab products shows that last year the sales were unprecedentedly weak mostly due to big economic problems. Activity of the end demand was affected first of all by the fact that crab products remained in the deli range, and their consumption suffered due to the consumers' wish to minimize unnecessary expenses. Thus, if the deflations trends remain strong the market demand, structure and prices will hardly recover. However, the last year price fall for conventionally expensive crab products was so large that the consumer could not but take notice of it. Theoretically that built up good chances that extremely cautious attitude to purchases of such products might change even despite the current economic conditions, thus opening way to strengthening the market conditions and restoration of the general activity of demand.

Shrimp

The shrimp fishery in the start of the year 2010 was progressing comparably stably and as per mid-January 2010 the fleets harvested ca.150 tonnes of shrimp (including coonstripe shrimp). In 2009 the dynamics of pink shrimp prices on the Japanese market was generally negative both for the products from the Russian Far East and for the North Atlantic products. In the course of the holiday season in December 2009 the prices sank to the bottom thus resulting into big problems for the market participants.

Shipments of the North Atlantic products to the Japanese markets in 2009 were very tight in the year's first quarter which could be attributed to favourable fishery situation in the waters of Greenland in the closing quarter of 2008. Activity of shipments of the above mentioned products concurred with emergence of negative consequences of the world financial crisis as to end consumption in September 2008. Hereupon the negative price dynamics got stabilized on the Japanese market. In particular, prices for shrimp of the count M, which in the beginning of 2009 leveled at 600-610 Yen per kilo, descended to 400 Yen per kilo and even lower and failed to recover in the second half of the year.

Japanese import of frozen pink shrimp Pandalus borealis in 2008-2009

At the same time, further prospects for shipments of North Atlantic products highlighted possible decline of the supply as the fishery situation in the waters of Greenland in the fourth quarter of 2009 was actually far from being as favourable as in late 2008. Besides, the outlook for shipments in the beginning of 2010 may also depend on the producers' readiness to shorter supply caused by decreased prices on the Japanese market. Such situation reportedly created conditions for increased prices, moreover consumption of greatly depreciated import products developed comparably quickly.

The price situation for the Russian Pacific products was characterized in 2009 by dramatic fluctuations with fast rises and falls, and the reasons behind that rooted from the situation in second half of 2008.

More specifically, in summer 2008 prices started to rise mostly due to reduced volume of import and increased level of purchase prices. In the beginning of autumn prices for the count 2L reached 1400-1500 Yen per kilo thus causing weaker demand in the course of the end-of-the-year sales season 2008. As a result, the year 2009 began with a decrease of prices which continued up to March and the prices in the course of the year leveled only at 1100-1150 Yen per kilo.

However, such level of prices for the Russian products unexpectedly caused a rise of demand from non-specialized users, which resulted into an increase of prices exceeding 1350 Yen per kilo in mid-summer. However, such a quick and strong price rise against the background of dominating deflation adversely affected the general activity of consumption, due to which by the end of the year prices returned to the level of 1100 Yen per kilo without any prospects of recovery in early 2010 even in case of decreased shipments.

The market specialists think that in the beginning of 2010 the price dynamics for the Russian products will most probably be negative in view of anticipated period of slack demand following market buoyancy in the turn-of-the-year period. The negative price trends are forecasted to continue up to the pause period between the fishing seasons in the Russian Far East.