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One Man's Opinion: How bad will it get?

Property of SeaFood Business magazine
By Peter Redmayne
December 01, 2008

The global seafood industry is sailing in uncharted waters. Like the price of oil, seafood prices are plummeting as the global economy contracts.

Take Maine lobster, for example. Boat prices tanked to less than $2.50 a pound in late October, about half the normal level. While a fall off in restaurant sales was widely blamed for the collapse, the situation was made more dire when Canadian producers had to dump inventory when they lost their credit lines, including those from Icelandic bankers like Glitnir.

Prices of snow crab sections also took a hit, losing almost 10 percent of their value in a few weeks in October. Again, the combination of weakening demand and a lack of financing, which forced some companies to dump inventory, were the culprits.

Adding to the mess was a dramatic shift in currency values, which has seen the dollar and yen soar at the expense of almost every other currency in the world. Currency shifts that normally take a year or more were taking place over the span of a few short weeks. That has caused some countries to place extraordinary conditions on currency outflows. Companies selling seafood to Russia, for example, have seen their markets evaporate because their customers can't make payments. One West Coast processor, for example, was desperately looking for a new home for almost 200 containers of hake that were already on the water to Russia in early November.

With demand plummeting and prices falling, buyers know there's plenty of blood in the water and they're calling the shots.

"Buyers are buying hand-to-mouth because they think prices are going to fall more and they want to wait until there's a bottom," says one Los Angeles importer. "That only makes things worse because it forces the weakest sellers to drop prices even more because they need to sell inventory to raise cash. It's the worst mess I've seen in more than 30 years in the business."

A lot of people in the fish business are looking to China, hoping that booming demand for imported seafood there will continue. And there are some encouraging signs. Even though China's GDP is expected to decline 30 percent next year, it will still be about 8 percent and Beijing is pulling out all the stops to keep its economy running at a rate other countries can only dream about. At the recent China Fisheries & Seafood Expo in Qingdao, Canadian snow crab producers reported that for the first time they are seeing significant sales of snow crab for consumption in the Chinese market.

But consumption of some popular local seafood delicacies are slipping in China, too, a sign that no country is immune to the economic downturn. This November, sales of hairy crab, a seasonal delicacy because the crabs are full of sweet, buttery roe at this time of year, are off at least 10 percent, say Hong Kong seafood dealers.

The bad news is that there will be a shakeout in the seafood industry and it will get worse before it gets better. But the good news is that lower seafood prices will encourage consumption. The trick is to not be caught holding the bag when prices are on their way down.

 

Contributing Editor Peter Redmayne lives in Seattle

 

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