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Top 10 Species: Cod

Iceland's problems shake cod industry, but demand remains strong

A tight Icelandic cod market may be offset by steady
    Pacific cod supplies. - Photo courtesy of Alaska Seafood Marketing
    Institute
By Christine Blank
December 01, 2008

When it comes to cod processing, Iceland rules. And anyone looking for signs of financial troubles in Iceland would have been wise to look at the cod market, where signs of financial troubles were seen way before Glitnir and other Icelandic banks were seized by the government early last month due to the global credit crunch.

While Iceland's financial situation, tight supply and high demand has rocked the cod market this year, the 2009 catch is expected to yield strong demand and consistent supply. Cod ranks No. 8 on the U.S. per-capita consumption list, according to the National Fisheries Institute, and is also favored by European and Scandinavian buyers.

Iceland officials have not indicated that they will increase the cod quota for 2009, which is expected to put more pressure on haddock supplies. Already, the tight Iceland supply and financial collapse has affected fishermen, processors and all businesses related to Icelandic cod.

"When the financial collapse hit in September and the Icelandic banks failed, the effects rippled through the cod markets rather dramatically," says Cathy DuPuis, marketing product manager for American Seafoods Group in Seattle. "Buyers, in some instances, found an unhealthy combination of their credit lines being pulled back or that foreign buyers had less purchasing power, at our historically high prices, as the dollar strengthened over 20 percent from its summer exchange rates with the Euro," she adds.

As a result, suppliers say that one of the biggest challenges for the cod industry in 2008 - and likely into 2009 - is Iceland's financial collapse.

However, the 20 percent increase in cod quota for Norway and Russia to 525,000 tons for the 2009 season is meant to boost the industry.

"The quota increases will stimulate greater activity, and can secure jobs and ensure profitability in a situation of great economic uncertainty," Helga Pedersen, minister of Fisheries and Coastal Affairs, Norway, said in a prepared statement on Oct. 17.

On a brighter note, the Pacific cod supply remained steady to higher this year. The Alaska Department of Fish & Game's total allowable catch (TAC) this year was set at 489.8 million pounds, slightly lower than last year's catch of 498.6 million pounds. While the 2009 TAC won't be approved until this month, it may end up fairly even with last year, says Laura Fleming, communications director at the Alaska Seafood Marketing Institute (ASMI).

 

Demand remains strong

Despite problems with supply and financing this year, the cod industry is expected to remain strong in 2009 due to foodservice demand.

"There was, and still is, core demand for cod as the traditional whitefish, even against the backdrop of attractively priced alternatives like saithe or haddock," says American Seafoods' DuPuis.

In addition, consumers who are eating out less may buy more cod to prepare at home, say DuPuis and other suppliers.

"Cod is the ultimate whitefish. There is a tremendous interest because it is white, mild and flakes. The challenge has been to deliver this incredibly popular species to the marketplace at a price point where it will compete against other seafood and proteins," says Keith Moores, president of F.W. Bryce in Gloucester, Mass.

"As cod prices become more palatable, we will see better demand from the retail sector and the 
foodservice sector," says Moores. Already, multi-unit restaurant chains continue to use cod for their fish 'n chips and other entrées.

That business may grow throughout 2009, according to Moores. "We do see some growth possibilities for cod in the U.S. market. As a result of the increased supply, we anticipate there being better price points for the market," he says.

The 34-unit Legal Sea Foods restaurant chain in Boston is just one foodservice operator that plans to continue using cod as both a center-of-the-plate item and as an ingredient in 2009.

"We have it in a number of forms: it is in our fish chowder, our fish 'n chips, our Italian-style fishermen's stew, and is featured in our baked cod with crumbs and tomatoes, a traditional New England dish," says Jeffrey Tenner, executive director of culinary operations and corporate chef for Legal.

While the chain's chefs continually try new preparations with cod, the more traditional uses in fish 'n chips and a crispy fish sandwich are still the most popular takes on cod for Legal's customers.

Tenner anticipates continued strong demand for the fish in the near future, as a mild, flaky, less expensive alternative to other fish.

"It has a mild flavor, and, from a price standpoint, you are able to put it on your menu for $19.95 or just over $20. Particularly in these economic times, people are making choices with their pocketbooks," says Tenner.

Because Legal buys more than 10,000 pounds of cod a week, pricing from the restaurant chain's suppliers has remained steady.

"So much of what we focus on is North Atlantic waters, and you're able to get it most of the year. It is such a staple fish, that we don't fluctuate much on pricing," says Tenner.

Aria Restaurant in The Fairmont Chicago hotel plans to use cod in the coming year, utilizing it more as a center-of-the-plate fish in its banquets.

"I will be doing something different in banquets, and experimenting more with cod," says Brad Parsons, executive chef of aria.

Overseas demand for cod is also expected to increase in 2009. "You will see better demand in Europe, which seems to have a higher tolerance for the higher prices than the United States and is loyal to the species," says Moores.

Frozen cod processors may have more global opportunities as Norway increases production of farmed cod. "As that becomes more viable, that goes into the European market fresh and should create more frozen opportunities for cod in the global markets," says Moores.

Norway's production of farmed cod has increased steadily over the last few years to reach nearly 10,000 tons in 2007, according to the Marine Research Institute in Reykjavik, Iceland.

However, the progression of the farmed cod industry is slow, based on current financial markets. "Large capital is required to build up biomass in cod farming, and the banks hesitate to grant loans while the world market is down. It is likely that the cod farming industry will grow slowly for the next few years," writes the institute's Bjorn Bjornsson in "Cod Farming in the Nordic Countries 2008."

Meanwhile, ASMI is putting more emphasis on cod promotion than in past years.

"A lot of people are aware of Alaskan salmon. It is important to us to elevate our whitefish varieties to universal appreciation," says Fleming of ASMI.

To that end, ASMI is publicizing the various uses of cod as well as the "sustainable nature of our fisheries," says Fleming.

To further the sustainability image, Alaska Pacific cod is expected to achieve Marine Stewardship Council certification for all longliner and trawl fleet sectors in early 2009.

"This should be a nice inducement to promote the sustainable, traceable aspects of our fishery, and a key point of differentiation," says DuPuis of American Seafoods.

 

Prices may impact demand

On the flip side, stronger prices for both Atlantic and Pacific cod in recent years may keep some buyers away.

"Cod is a healthy protein, but has become a more premium or behind-the-counter choice in the last several years due to price," says DuPuis.

"We see cod in 2009 adjusting to global supply trends. Cod will have to re-position itself in the U.S. market in terms of the value it provides its end user,' says Moores.

U.S. foodservice demand for cod is flat to down slightly overall, depending on the region of the country and type of restaurant chain, says DuPuis.

"For example, Southern California and Las Vegas were more negatively affected by real estate problems, so you can see that reflected in cod demand at the restaurant and foodservice levels [in that region]," says DuPuis.

Cod prices are expected to stay strong in 2009, even with the increased Barents Sea quota.

"Individual firms will chase the best product form to put the cod into, given less scarcity of supply and stable demand," says DuPuis.

 

Christine Blank is a business writer and editor from Lake Mary, Fla.

 

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