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Top Species: Scallops

Success at home, trouble overseas shapes scallop market

Supply problems in Japan and China pressured the domestic scallop supply. - Photo courtesy of American Pride Seafoods
By Joanne Friedrick
October 01, 2011

Challenges on the international front and high demand for domestic product has pushed sea scallop prices higher — and kept them there.

Prices, which most suppliers say have stayed steady at $10 to $11 a pound (depending upon size), are influenced by a number of factors, says Sean Moriarty, product manager for sea scallops at American Pride Seafoods in New Bedford, Mass.

Prices are up about 40 to 50 percent over historic levels, he says, in part because of a 10 percent reduction in days at sea. A weak dollar has created a strong export market, he adds, particularly in the European Union. And reductions in other fisheries have also contributed to higher scallop prices. When the tsunami hit Japan in March, it also started speculation about the impact that could have on the Hokkaido fishery, says Moriarty.

Meanwhile, says Joe Furtado, EVP for Eastern Fisheries in New Bedford, Mass., China has been dealing with an oil spill in the Bohai Bay region that has been blamed for killing off large numbers of scallops.

This year Eastern began scallop farming in China, and its first harvest will commence in November. The mortality rate that was originally forecast — about 47 percent — will actually be closer to 30 to 33 percent, says Furtado. “And we’re getting the benefit [of demand for Chinese product] even before it comes out of the water.”

The decision to begin farming in China is part of Eastern’s continued focus on vertical integration and its desire to give customers assurances about accountability and traceability of its product.

Domestic market benefits

Taking all the factors that are challenging international supplies into account, Moriarty says, “This created strong demand for our domestic scallop, just as prices were beginning to ease with increased catches. Areas of the world that traditionally relied on Japanese product became interested in our domestic scallop,” he says.

The domestic sea scallop harvest for 2011 was expected to be around 50 million pounds of meat, says Moriarty, which “assures a healthy biomass of scallops and a sustainable fishery for the foreseeable future.”

The shift to domestic product was also noted by Bob Fitzsimmons, president of Trisome Foods in Stratham, N.H. “Through July, about 90 percent of our sea scallop purchases have been product of the United States,” he says, “where in years past we would rely on Japan, China and other countries for about 30 to 40 percent of our total sea scallop sales.”

Bay scallops are now coming from Peru instead of China, adds Fitzsimmons. “We are still buying product from China, but not as much due to the availability of the Peruvian product,” he says. The price for scallops from Peru is $1 per pound higher on popular sizes like 60/80s, 40/60s, 40/50s and 30/40s, but the quality is very good, he says.

But Will Moehrke, VP-sales and marketing for Omega Sea in Newport, R.I., has found scallops from Peru more difficult to obtain. “I’m going down there to see what’s going on,” he says, noting competition from the EU for product has tightened up supplies from Peru. The French are especially interested in scallops with the roe attached, he says, which adds to the weight and makes it more profitable for Peruvian suppliers to sell them.

“The weak dollar has been hurting us,” points out Eric Bloom, president of Eastern Fish Co., which is headquartered in Teaneck, N.J. As a result, he says, other countries that have jumped into the market to buy up product created a domestic supply issue.

“Although our domestic business remains robust,” says American Pride’s Moriarty, “we have been making an effort in overseas markets” because the weaker dollar has created favorable conditions for export.

With domestic prices on the rise, the rest of the world has taken that opportunity to raise prices as well, says Furtado. “Domestic has been the benchmark for pricing,” he says. There was a slight dip when Closed Areas 1 and 2 opened in August, he says, but that only lasted for a day “and now we’re at or above where we were.”

“Overall, this year has been a surprise to us in terms of the reception to the higher prices,” says Paul Joly, VP-domestic sales at Eastern Fisheries, with scallop sales up 15 percent.

Because prices have risen and stayed there, Furtado says some white-tablecloth customers looking for value have opted for the smaller sizes, which previously appealed more to casual-dining establishments.

The predominant sizes off the boats this year have been 10/20s, says Moriarty, “so most customers have used these to accommodate their demand.” But Areas 1 and 2 also yielded the larger U/10s, he says, which are also popular.

Retail customers usually look for U/10 or 10/20s for sea scallops, says Fitzsimmons, while the range for bays is typically 80/120 to 60/80. And some customers have expressed interest in mid-size scallops for promotions, he says.

Both Fitzsimmons and Moriarty note that the sustainability of the U.S. scallop fishery is taking on increased importance for suppliers and their customers. “The fishery is a sustainability success story,” says Moriarty, “having rebounded from a once-weak harvest of 20 million pounds to a peak harvest of 70 million pounds of meat weight in a five-year period that ended in 2005.”

This was accomplished, he says, by reducing the number of days at sea and adjusting gear to let more juveniles escape, as well as by closing some fishing areas on a rotational basis.

“I think the fishery has been managed very effectively,” says Fitzsimmons, noting that “stocks have never been stronger.”

Promotions pinched

Going into the holidays, Fitzsimmons would like to see prices settle at a level that will keep scallops on menus and in the supermarkets at prices consumers can afford. “I don’t think we will ever again see the prices we saw a few years ago, when domestic sea scallops were as low as $4 a pound,” he says. But he worries “we may be crossing the price line, especially in today’s economy with a lot of consumers hurting financially.”

Eastern Fish’s Bloom agrees that some buyers are trading down on the size of scallop they purchase or are opting for a different species. And because of the higher price, “supermarkets aren’t in the position now to advertise them,” he says.

The volatility in prices has made it more difficult to consistently run promotions, says Moriarty, “but we do try to take advantage of opportunities to offer fresh promotions to our customers when the landings are anticipated to be strong.”

Fitzsimmons says Trisome has plans with one of its retail partners to do a promotion around an anniversary. “We have several different marketing tools that we send out that give our customers information and education on things going on in the scallop industry,” he says, such as a video showing the boats at work and how the scallops are removed from the shells. “It’s funny how many people have absolutely no idea how scallops are caught and are fascinated by the process,” he says.

One restaurateur that was giving domestic scallops a promotional spot on its menu was Harrison’s Wine Grill & Catering in State College, Pa.

During July, the restaurant offered day-boat sea scallop specials for $19.99 in three preparations: pan-seared with lime beurre blanc, herb-crusted with goat cheese or grilled Mexicana style with avocado, corn relish and a crisp tortilla.

This is the third year Harrison’s has offered the scallop special, says Kit Henshaw, business manager for Harrison’s, which is named for her husband and chef, Harrison Schailey. “We try to feature if not local, then seasonal foods,” says Henshaw. The couple had previously operated a restaurant in New Jersey and decided to bring the fresh scallop concept to Pennsylvania. She says they prefer the day-boat scallops because “they are so delicious and don’t have all that water in them.”

The three menu preparations were equally popular among diners at Harrison’s, she says, providing a traditional, fusion and international option.

Despite the higher prices this season, Henshaw says it wasn’t an issue for menuing the scallops. She says prices for food are up in general.

Along with the scallops, Harrison’s features seafood in the summer, she says, offering a softshell crab menu in June and lump crab in August.
 

Contributing Editor Joanne Friedrick lives in Portland, Maine

October 2011 - SeaFood Business 

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