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Top Species: Blue crab

Importers experience extreme highs, lows

By Joanne Friedrick
April 01, 2009

After years of steady prices, the blue-swimming crab industry experienced one of its most volatile seasons ever in 2008.

In the first three quarters of the year, prices soared for all grades, reaching $23 per pound for jumbo lump and $9 per pound for claw meat before settling in at current prices of around $14 and $6, respectively.

Even with double-digit price declines in the second half of the year, claw and special prices ended up 33 percent and 31 percent higher, respectively, at the end of 2008 compared to the beginning. Backfin crabmeat prices also stayed higher at the end of year, up 15 percent. The exception was jumbo crabmeat, which experienced the same highs as the other grades, but saw prices fall 17 percent in the third quarter, ending at the lowest price for all of 2008.

The volatility in the blue-swimming crab ( Portunus pelagicus ) market was linked in large part to the poor harvest in Indonesia, which meant higher bidding for the remaining inventory.

Prices rose as suppliers sought crabs from co-packers in other countries to meet customer needs, says Paul Opitz, president of Phillips Foods' international division, based in Thailand. While prices rose steadily through the peak crab-consuming summer months, they then dropped as reduced demand and the recession took hold in the late third and fourth quarters. Prices at the end of the year, says Opitz, matched those of 2006.

Steve Harmell, VP of sales and marketing for Miami-based Blue Star Food Products, says while prices hit historic highs in the third quarter, by late in the year, as prices fell, suppliers were scrambling to sell off their high-priced inventory. Even into the early part of 2009, he says, "there is still a great deal of high-cost merchandise on the market."

While Harmell was expecting the industry to become more balanced as it headed into the second quarter, "this is still a complex category," he explains, "subject to a great deal of volatility based on the needs of large users."

He notes that even a single large restaurant chain can throw the industry for a loop with a request for a large amount of a single grade, such as jumbo lump.

Opitz wouldn't predict how the imported blue crab market will fare for the remainder of 2009, but notes, "we're not seeing the same level of demand (as in 2008)."

Phillips Foods, the No. 1 U.S. crabmeat importer that claimed a 19 percent market share as of November 2008, sources its crab from India, Sri Lanka, Indonesia, the Philippines, Venezuela, Thailand, Mexico, Vietnam and East Malaysia.

Even in an off year, through November last year Indonesia exported 16.6 million pounds of blue-swimming crabmeat to the United States. This outpaced China, which exported 11.8 million pounds and Thailand, an exporter of 6.71 million pounds, according to National Marine Fisheries Service data.

China, however, is fast becoming a key competitor in the pasteurized crabmeat segment, registering a 52 percent increase in exports to the United States in 2008 over 2007, while Indonesia's numbers fell by nearly 13 percent.

 

Buyers switch to lower grades

Byrd International in Salisbury, Md., experienced the same dramatic highs and lows for the crabmeat it imports from the Philippines, Indonesia and China, says General Manager Kimberly Tilghman.

"The bottom dropped out in late September," says Tilghman. "That, coupled with the economy, saw an increase in demand for lower-price grades."

Byrd sells 95 percent of its pasteurized crab to foodservice companies. Those distributors base their purchases on what restaurants are demanding, which these days are the more economical grades such as claw, backfin and special or even other species, such as red-swimming crab ( Charybdis paucidentata ).

Opitz has gotten pushback from customers on premium grades, as has Blue Star's Harmell.

"Even fine-dining establishments are going to lower grades or cutting costs through blending," says Harmell.

Some buyers are exploring cost savings by having Blue Star customize crab cakes for them, rather than buying the ingredients to make their own. Blue Star also is innovating with different delivery methods, such as its refrigerated pouches, adds Harmell.

Caroline Tippett, director of marketing-strategic development at Phillips, says the Baltimore company is focusing on value-added items, such as crab cakes, to meet the retail and restaurant demand for more protein-based products.


Sustainability concerns

A major initiative within the processing arena, says Opitz, is sustainability. The blue-swimming crab "is a resilient resource," he notes, "but sustainability is one of our major concerns now."

Phillips is one of the founding members of the Indonesian Crab Producers Association, which is evaluating the status of the crab stocks, including agreeing on guidelines for a minimum crab size and initiating an education program for fisherman.  

Tippett says while the blue-swimming crab industry has been sustainable, "it is a data-deficient industry," so formalization of efforts and information is needed.

Along with moves to preserve crab stocks, Tilghman says 
importers are adhering to food-safety regulations so customers can feel confident in what they are purchasing.

"FDA is taking a stronger look at what is coming into the country," she says, based on "greater public awareness of where things are coming from."

She says Byrd follows strict HACCP (Hazard Analysis Critical Control Points) regulations and doesn't plan to source outside of its current suppliers in Southeast Asia.

"We've always been on the cutting edge of different countries of origin," says Blue Star's Harmell, who identifies India as one of the up-and-coming countries for producing blue-swimming crabs. Still, he says, "there's a lot of work to be done to get the product quality up to snuff," noting in some countries it is more difficult to impose the quality standards required by U.S. importers.

 

Domestic crab 
suppliers struggle

For the domestic market, especially blue crabs from Chesapeake Bay ( Callinectes sapidus ), stricter regulations have meant reduced supplies. From a recent high of 118.3 million pounds in 1993, commercial blue crab harvests have declined steadily. In 2007, harvests from Maryland and Virginia produced 43.5 million pounds.

And the numbers for 2008 were likely to be even lower because of a new sustainability framework instituted by the governors of both states.

Based on the low number of spawning adult crabs and young crabs in the 2007 population, and higher-than-expected removals that year, emergency recreational and commercial harvest regulations were imposed, reducing the female blue crab harvest in Maryland for 2008 by 34 percent. In Virginia, changes were instituted to allow undersized crabs to escape from crab pots, while also increasing the size limit for peeler crabs.

Noreen Eberly, director of the aquaculture and seafood program for the Maryland Department of Agriculture, says the plans by Maryland and Virginia to decrease the 2008 harvest were designed "to make sure stocks are healthy."

The limits, she says, didn't 
negatively impact the supply to the 
market of domestic crab, because larger crabs were available from other states such as Louisiana, North Carolina and Texas.

Even with a decreased harvest, prices remained similar to 2007, she says, with the season starting off with higher prices and dropping through fall.

The catch limit for the 2009 season will be based on the Department of Natural Resources' winter crab survey.

With 40 years of experience in the domestic blue crab industry, Harvey Linton, president of Linton's Seafood in Crisfield, Md., says each year brings new restrictions on the catch, and higher prices.

However, with the recent limits imposed on catching egg-laying females, Linton predicted the catch limits might be increased in coming years.

Prices are seasonal, says Linton, with June, July and August bringing highs of $125 to $135 per bushel and then dropping off through fall.

Because prices decline as the season continues, Eberly says the Maryland Department of Agriculture has launched promotions that focus on the affordability and availability of fall crabs.

Linton, who sells crabs and crabmeat online, through retail stores and wholesale, has to pick his targets, such as high-end restaurants and crab houses, because some local buyers have turned to imported crabmeat.

"A lot of people are using imports because local isn't as available as it once was," he explains, adding local suppliers "are falling like flies this year because it costs so much to operate this type of business."

While Linton says imported crab doesn't have the same flavor as Maryland-caught crab, there are customers who don't know the difference. "With so many importers, there's nothing you can do to stop it now," he says.

At Chandler's Crabhouse in Seattle, Chef Kevin Rohr offers East/West Crab Cakes made with Dungeness crab and jumbo lump blue-swimming crab that is imported from Taiwan.

Karma Wick, marketing manager for Schwartz Brothers Restaurants, which operates Chandler's, says Rohr also offers softshell blue crab from Florida when it is in season. Although the source of the blue crab in the crab cakes isn't mentioned on the menu, Wick says servers do offer that information to customers.

Phillips' Opitz says while there may have been some competition for market share when imported blue crabs first arrived in the United States, today imported and domestic blue crab represents two different and distinct markets. The pasteurized crab market, he says, is based on the convenience and safety of the processed product. With domestic crab, he says, "it's more of a flavor profile."

Find other SeaFood Business articles with blue crab here.

Contributing Editor Joanne Friedrick lives in South Portland, Maine

 

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