State of the Seafood Industry Looking to 2021€¦ · spending and company survival • Canada...

1

State of the Seafood Industry Looking to 2021

John SacktonSeafood Datasearch

Fisheries Council of CanadaOttawa

October 2020

2

Background• 40+ Years in Seafood Industry• Crab, shrimp, lobster and cod market

analyst since 1997• Price and market outlooks for Atlantic

Canada, Alaska, and US West Coast• 2005-2018 Price arbitrator for Alaska crab• Expert on Mussel and Oyster Markets• Co-Founder of NFI’s Global Seafood Market

Conference• Annual Market Review for Fisheries Council

of Canada• Founder of Seafood.com News and

Seafood Datasearch

3

Covid Disruption has replaced Trade War for Seafood Industry

• Lastyearwefocusedontradeissues,especiallythebenefitstoCanadaoftheUStradewarwithChina.

• ThisyearCanada’sSeafoodIndustryhasbeenveryresilientinfaceofCovid-19

• DiversificationofMarketsinlobsterhasbeenkeydriver

• HoweverUSremainslargestmarketbyvolume• USisonaknifeedge,withpotentialforlower

purchasesfromCanada• FoodserviceandRetailSaleshaveseenmajorchanges• OurMarketReviewforMajorSpecieswillinclude

– Lobster– SnowCrab– Salmon– ColdWaterShrimp– Others:scallops,cod,musselsandoysters,etc.

4

Review of this spring

• Earlyfearsofharvestdisruptionsdidnotmaterialize– Vesselsabletofish– Nowidespreadplantshutdowns

• Adaptationtofoodserviceshutdownhasbeendramaticatbothwholesaleandconsumerlevelleadingtosurgeinretailseafood

• TheUSPPPprogramandfederalincomesupportthroughJulyhasbeencriticalinmaintainingconsumerspendingandcompanysurvival

• Canadamanagedtocompletespringcrabandlobsterseasons

• Seafoodhasbeenthefoodmost‘missed’withrestaurantshutdowns.

• SeafoodSuppliers/Producersreceivednearly$1billioninPPPfunds.

• Seafooddemand,helpedbyincomesupport,hasledtoshortagesandpricespikesforsomeitems

5

Lobster and Crab had real growth in 2019

Source: Canadian customs data

0

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

lobster crab shrimp salmon(inclwild)

$CA

MajorSeafoodExportCommodities

2015 2016 2017 2018 2019 YTD2019 YTD2020

2019

Salmon and shrimp were slightly lowerComparing YTD July 2020 with YTD 2019, lobster and crabhad lower value, but not shrimp and salmon

YTD Comparison 2019/20

6

Canada is still heavily tied to US MarketMore so in first half of 2020

Source: Intracen customs data

61%63% 63%

60% 59%

59%

65%

0%

10%

20%

30%

40%

50%

60%

70%

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

$4,500,000

2014 2015 2016 2017 2018 2019 2020

$CA000’s

TotalCanadianSeafoodExports

US

China(inclvietnam,HK)

EU

OtherAsia

Other

USpercent

Chinapercent

EUpercent

OtherAsiapercent

Otherpercent

7

US is dominant market for snow crab and fzn lobster; Less so for live lobster

Snow crab

Live Lobster

Fzn Lobster

Fresh salmon

8

Coldwater shrimp by QtrShell on offshore

Cooked and peeled

Q2 similar to 2019

Q2 far below 2019

9

China is first major country to recover economically from pandemic

• China’sSeptemberpurchasingmanagerIndexwas51.5,60%HigherthantheConsensusforecast

• ChinaistheonlymajoreconomyexpectedtopostGDPgrowththisyear

10

China has become Canada’s 2nd most important seafood partner

Despite improving diversification, Canada’s seafood industry still depends on US market, and this increased in 1st half 2020.

0%

10%

20%

30%

40%

50%

60%

70%

80%

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

Exportedvaluein2015-Q3




















$USD000’s

US China(InclHK&Vietnam) Europe

Japan OtherAsia Other

USPercent

11

Canada is dominant exporter to china for lobster and fzn coldwater shrimpMarketshareformajorexports:

Lobster72%Fzn Lobster100%Coldwatershrimp45%FrozenCrabs39%LiveCrab(Dungeness)15%Hake55%

0%

20%

40%

60%

80%

100%

120%

0

200000

400000

600000

800000

1000000

1200000

LobsterLive

LobsterFzn

ColdwaterShrimp

Crablive(Dungeness)

CrabFrozen

Turbot&Halibut

Hake

Other

$CA000's

SnapshotofCanada'sExportstoChinain2019

CAExp ChinaImp CanadaMarketShare

12

Questions for today• Isimpactofcovid-19differentthanotherseafoodsupplyimpactsinthelast10years

• Ifso,whatisthedifference• Aresomemarketsforspecificspeciesreactingdifferentlythanothers

• Whatdynamicwilldrivesalesin2021

13

Pandemic has hit different sectors unevenly

• 70% of US Seafood dollar sales are at Foodservice

• Shut down of foodservice sector has had huge impact

• But impact was initially mitigated

• Next few months critical in determining extent of long-term damage

14

US restaurant performance lags Germany and Canada

-80

-60

-40

-20

0

20

40

1-Aug3-Aug5-Aug7-Aug9-Aug

11-Aug

13-Aug

15-Aug

17-Aug

19-Aug

21-Aug

23-Aug

25-Aug

27-Aug

29-Aug

31-Aug2-Sep

4-Sep

6-Sep

8-Sep

PercentChangeinSeatedDinersYearoverYear

SeatedDinersSinceAugust1st

Canada Germany UnitedStates

Linear(Canada) Linear(Germany) Linear(UnitedStates)

15

Seafood Distribution is not out of the

woods

$2.2 Billion in uncollected debt

RecentCongressionaltestimonyfromSladeGorton:• Lost70%oftheirbusiness• Hugeproblemwithbaddebt;

restaurantscan’tpayforwhattheyorderedlastspring

• Nationally$2.2billioninbaddebtisoverhangingseafooddistributors

• BankLendingsecuredbyinventoryisfreezingupasinventoriesgetsmaller

16

Industry got reprieve from retail seafood

100

110

120

130

140

150

160

170

180

6/14/20

6/21/20

6/28/20

7/5/20

7/12/20

7/19/20

7/26/20

8/2/20

8/9/20

8/16/20

8/23/20

8/30/20

IRIWeeklyRetailData:Seafood,Meat,DeliMeat

100=nochangeYOY

deliMeat Meat Seafood

Seafood

DeliMeat

Meat

17

Frozen category very strong at retail

100

105

110

115

120

125

130

135

6/14/20

6/21/20

6/28/20

7/5/20

7/12/20

7/19/20

7/26/20

8/2/20

8/9/20

8/16/20

8/23/20

8/30/20

IRIWeeklyRetailData:Frozen,GeneralFood,Refrigerated

100=nochangeYOY

Frozen GeneralFood Refrigerated

18

Three trends helping seafood consumption

• BigIncreaseinhomecooking

• Bigincreaseinuseoffrozenfood

• Continuedemphasisonhealthduringpandemic

Data from informal survey of changes in seafood consumptionby SeafoodNews

19

Survey shows increased retail buying, buying from home delivery service

20

US small business revenue makes up 45% of GDP: it has not recovered

21

Restaurant traffic recovery is stalling as summer ends

-100

-80

-60

-40

-20

0

20

1-Jun 8-Jun 15-Jun 22-Jun 29-Jun 6-Jul 13-Jul 20-Jul 27-Jul 3-Aug 10-Aug 17-Aug 24-Aug 31-Aug 7-Sep 14-Sep 21-Sep

OpenTableRestaurantvisits

US Caanda 5per.Mov.Avg.(US) 5per.Mov.Avg.(Caanda)

22

Spending growth stalled as stimulus programs ended

Consumerspendingstalls Personalincomefalls

-10.00

-5.00

0.00

5.00

10.00

15.00

20.00

Jan. Feb. March Aprilr Mayr Juner Julyr Aug.pMonthlyChangeinPersonalIncom

e

Changeinrealdisposableincome

23

Economic factors are key risk for fall and first half of next year• The US economy remains on a

knife edge, with a serious risk of extreme disruption from a contested election.

• Consumer confidence and spending will rebound or contract based on election results.

• Moody’s and other analysis says that a Biden win and a democratic senate would provide a huge boost to the Economy.

• 18.6 million jobs projected over 4 years

• unemploymentofjustover4%,bythesecondhalfof2022

• averagehousehold’srealafter-taxincomeincreasesbyapproximately$4,800

Beginningofrecoveryboostedoptimismforseafooddistributors

Withrecoverystalled,riskisnowthattemporarylossofrestaurantandfoodservicebusinessmaybecomepermanent

Changesinseafoodbuyingpatternshelpedbymaintenanceofincomelevels– whichnowisatrisk

24

We are not out of the woods• Looking only at strong fish

price data suggests a normal recovery

• But huge debt burden could derail purchasing if it is not addressed

• Summer recovery based on stimulus

• In August personal income fell after improving in June and July

• Without new stimulus fall and winter could be bleak

• 25% of US restaurants expected to close

• Virus surge is also causing instability and low traffic for those that remain open

25

Diversification in export markets away from US remains key for Canadian Seafood

• Manyspecialtyexportmarketsalreadyexistforshrimp,turbot,yellowtailetc.

• Forlivelobster,ChinesevolumesimpactUSprice,evenwhileChineseexportpriceremainsconstant.

• EuropeanmarketsandKoreastillaredeveloping,butatmuchlowervolumes

26

China’s demand is key for lobster pricing, even in US

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

11/1/18

12/1/18

1/1/19

2/1/19

3/1/19

4/1/19

5/1/19

6/1/19

7/1/19

8/1/19

9/1/19

10/1/19

11/1/19

12/1/19

1/1/20

2/1/20

3/1/20

4/1/20

5/1/20

6/1/20

Percentoftotallobsterexports

$CAKg

UnitedStatesofAmerica

China

UnitedStatesofAmerica

China

Korea,Republicof

France

Spain

3per.Mov.Avg.(UnitedStatesofAmerica)3per.Mov.Avg.(China)

Periods of high volume in China, at stable prices, are followed by higher prices in US

27

Recovery in smaller markets will help seafood exporters

• BesidesChina,recoveryinEurope,JapanandKoreawillhelpexportersonthemargin.

• However,exceptforChina,thesemarketsarenotlargeenoughtooffsettheimpactoftheUS.

• SalmonandcrabarebothmuchmoreconcentratedintheUSmarket,leadingtoadifferentdynamicinpricevolatility.

• Onsalmon,bothwholefish,fillets,andfrozenfilletsgo99%totheUS.

28

Pandemic is likely to increase Canadian dependence on US market in short term

• Aircapacityandtravelissueshavedistortedtradeflows

• Asiacargorouteshaverecoveredmoreduetoecommerceboom

• EuropeN.Americaroutesfardown

29

Species review• Lobster• Snowcrab• Shrimp• Salmon• Other

30

Live lobster pricing

2019

2018

2017

2020

31

Price of live lobster compared to fzn lobster tail

Vs 4 oz fzn lobster tail

Live Lobster$US per Lb

Fzn 4 ozlobster tail $US per Lb

june

june june

june

32

2020 Prices supported by lower landings

LFAlandingstrendingdown CanadianshipmentstotheUSweredownin2nd qtr.

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019p

Lobsterlandingsbyregion

NL QB Gulf Maritimes US

Widespread reports of lowerlandings in Maine

33

Strong demand for frozen lobster has increased Canadian processor purchases from US

USlobsterexportsYTDJuly

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

Canada China HK

2018 2019 2020

34

Lobster and Crab Mostly eaten in restaurants

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

Shrimp Salmon Crab Lobster Whitefish(cod,haddock,tilapia,

catfish

Swordfish ClamsorOysters Flounder

restaurant home

Data from informal survey of changes in seafood consumption by SeafoodNews

35

But crab and lobster had biggest retail sales gains

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Crab Lobster Shrimp Salmon

36

Pandemic impacted live lobster buying

• FearoflackofmarketslettolowpricesinSpring

• Heavydemandatretailseafoodledtomoresales,especiallyoncrabandlobster

• Frozenlobstersawincreasedinterestfromfoodservicethatwasopen

• HeavylocaltourismalongtheEastCoastsupportedoutdoordiningforlobster

37

Current situation

• Rightnowlivepricesarehigherthanprocessorscomfortablewith

• Processorsreluctanttoraiseprices,butshortagesanddemandispushingpriceshigher

• ThesetrendscouldsupportstrongholidaysalesforlobsterifexportmarketsinChinaandEuropearehealthierthantheUS

38

Snow crab is at historically high prices

39

After an initial drop of 20% below prior year, prices recovered sharply

This is a success story, not a storyof a missed pricing opportunity

40

Retail performance of crab very strong in 2019

41

Snow crab at foodservice

42

Trend in Snow Crab usage

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

2015 2016 2017 2018 2019

USSnowCrabImportsandPrice

volume AvgPrice5-8NL

0

10000

20000

30000

40000

50000

60000

70000

20012002200320042005200620072008200920102011201220132014201520162017

Metrictons

SnowCrabImports(LiveCrabtoJapanconvertedtoFznSections)

Japan US

• US now dominant market

• Usage expands even at higher prices

• Japanese usage is declining

43

Recent prices are now above last year, but stable

Snow crab is oversold, leading to heavy demand for Russian imports

44

US Snow crab supply increased in 2019

-20000

-10000

0

10000

20000

30000

40000

50000

60000

70000

80000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

MetricTonsSectionWgt

USSnowCrabSupply

Alaska Canada Russia Norway Greenland/latvia Other USExports

45

YTD July 2020 shows surge in US snow crab imports from Canada and Russia

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

90,000,000

100,000,000

2017 2018 2019 2020

Canada Russia Norway Greenland

46

Snow crab outlook• USdemandremainsvery

strong,withhighpricesandproductshortageslikelyuntilnextspring

• SpringpriceadjustmentwilldependonUSeconomicsituation

• JapaneseusagewillfollowUSpricing,willnotsetthemarket

• Alaskaoutlookisforstabilityratherthansignificantincrease;nonewsurveythissummer

47

Salmon pricing has been volatile

• Salmonvolumesatretailhavebeenstrong,butimpactedbytransportationproblemsfromChileandNorway

• Canadianwholefishexportshavesufferedduetothecollapseoffoodservicedemand

• ButCanadianmarketsharehasincreased

48

The two price spikes since May were related to transport and production issues

49

Canadian whole fish has gained market share from Norway, UK

50

Whole fish pricing declined more than fillet pricing

51

Outlook for salmon• Fresh whole fish mostly used in

foodservice, is still under pressure with light demand

• Trucker strike in Chile pushed markets up at end of August

• Now Northeast whole fish is trading above its three year averages, and seasonally this is a period of increasing prices.

• Air cargo space continues to be a problem for European shippers, with European imports now the lowest since 2016.

52

Both UK and Danish prices down on coldwater shrimp

UK 100-150 / GBP DK 175-275 / DKK

53

US prices down also• WestCoastshorepricesaverage$0.50perlb

• Canadiansummerpricesare$CA1.08landedatplant

54

Coldwater shrimp hit by lack of foodservice sales

• UKandUSpricesallhitbylackoffoodservicesales.

• Continuationoftrendoflowerpricesthatpredatespandemic

Iceland double fzn to UK

55

Brexit is now posing new risk of disruption in shrimp market

• Ano-dealBrexitwouldremovetheUKfromtheCETA

• TariffscouldsnapbacktoWTOlevelsuntilsomenewagreementisreachedbetweenCanadaandtheUK

• EconomicimpactsofnodealBrexitontopofCovidmaykeeptheUKinaperiodofeconomicdecline.

56

In general, fresh fish markets have been hit more than frozen• Canadianhalibutisexperiencinglowerfreshfishdemand

• Wheresupplieshavebeenreducedpriceshaveheldupbetter

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

January

February

March Ap

ril May

June

July

August

September

October

November

December

2018 2019 2020 $/lb $/lb $/lb

57

Scallop prices responding to cutback in supply

• 2020fishingyearwillresultina17%reductioninUSlandings

• Paceofactuallandingsandimportshasbeenlowerduetofearsoflowprices

58

Low prices at start of new fishing season have recovered on low volumes

CA 10-20 IQF

US domestic 10-20 dry and all natural

59

HaddockHaddockwholefishvolumesnotsignificantinspring

Freshfilletvolumesdownsignificantly

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

$1.60

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

January

FebruaryMarch Ap

ril MayJune

July

August

September

October

November

December

2018 2019 2020 $/lb $/lb $/lb

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

January

FebruaryMarch Ap

ril MayJune

July

August

September

October

November

December

2018 2019 2020 $/lb $/lb $/lb

60

Oyster pricing is not changed, but volume has collapsed

• YTDfarmedoystervolumetotheUSisdown45%

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

$5.00

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

January

FebruaryMarch Ap

ril May

June

July

August

September

October

November

December

2018 2019 2020 $/lb $/lb $/lb

61

Frozen redfish fillet prices have held up well, with lower volumes

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

0

50,000

100,000

150,000

200,000

250,000

January February March April May June July August September October November December

2018 2019 2020 $/lb $/lb $/lb

62

Holiday and Lent outlookFavorable

• Manyspecieshaveseenpricerecoveryassupplycutbacksbalancedemand

• Seafoodconsumptiontrendscontinuetobefavorable

• Trendsincrabandlobsterindicatestrengthfortheholidays

• Chineseexportmarketshouldbestrong

Unfavorable

• TheUSisinaperiodofextremeuncertaintybecauseoftheelectionandunknowneconomicresponse.

• FailuretocontrolCovid-19couldleadtoseriousdownturnoverthewinter.

• Anyincreasesinseafoodsupplylikelytoputdownwardpressureonprices

63

LFA 34 Lobster Season is key• Generallymajorpricechangesoccurwhennewsuppliesareavailable

• ShortageoflobstersinMaineissupportingcurrentpricing.

• IfLFAseasonisslow,priceswillgohigher.

• Significantworld-widedemandforlobstershouldabsorbheavylandings

• Thisistheprimaryreasonforoptimism

64

Snow Crab demand is now a cultural phenomenon in the US

• Snow crab consumption has become a cultural phenomenon in the US

• The extreme popularity of crab, plus the easy availability at retail, has made snow crab an iconic food in parts of the US.

• This cultural propensity is the same phenomenon that drives high value seafood products in Asia

• Unless there is a very serious economic collapse, there is no reason to think snow crab is going to fall out of its current trading range

65

Salmon offerings continue to be disrupted, providing Canadian opportunity

• Air transport problems will not be solved quickly, leading to a longer-term advantage for Canadian fresh salmon producers

• Foodservice weakness and the possibility of debts paralyzing seafood distribution is a risk, as the Canadian industry is heavily foodservice oriented

66

To answer our original question: the pandemic is not a unique disruptor

Theseafoodindustryhascontinuouslyexistedwithinaframeworkofsupplyuncertaintyandtradedisruption

InMarchofthisyear,notknowingwhattoexpect,itappearedpossiblethattheindustrycouldnotoperateatall.

Sixmonthslater,thedisruptionsarespeciesspecific,andsomespecieshaveseenincreasesinvalue.

67

Canada will continue to depend on the US Market

• ThecurrentcrisisintheUSremainsaverybigthreat

• Competentgovernmenthasthetoolstoaddressbothhealthandeconomicissues.

• IfUSauthoritariancorruptiontrulytakeshold,CanadawillhaveasignificantproblemonitssouthernborderandcannotcontinuetorelyontheUSasastabletradeandmarketpartner.

• Thisproblem,obviously,wouldbebiggerthanjusttheseafoodindustry.

68

Thank You

• TimeforQuestions

State of the Seafood Industry Looking to 2021€¦ · spending and company survival • Canada...

Documents

Transcript of State of the Seafood Industry Looking to 2021€¦ · spending and company survival • Canada...