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Top 10 Species: Tilapia

China freeze hampers supply, pushes prices up for the popular fish

By Christine Blank
September 01, 2008

With China's position as the world's largest tilapia producer, importers openly admit they were scrambling after a winter freeze there killed off a large portion of the farmed fish.

"When we were first aware of the freeze, we scoured the country. The goal was to gain a larger share of their production," says Charles Trager, director of procurement for Beaver Street Fisheries of Jacksonville, Fla., which lost 20 to 25 percent of its Chinese production at the time.

"Not all the farms and ponds were destroyed, but in some regions, they had to re-seed the ponds," says Troy Turkin, executive VP of sales and marketing at importer Newport International in St. Petersburg, Fla.

The freeze - along with continued high demand for tilapia - pushed up prices in the first half of 2008.

"Prices are substantially higher than they were a year ago. The days of $1 and $2 for mainstream fish are possibly gone for the long term," says Turkin.

As a result, frozen tilapia imports fell from 163 million pounds through June 2007 to 151 million pounds through June this year, according to the National Marine Fisheries Service. Imports of fresh tilapia, meanwhile, rose from 31 million pounds through June 2007 to 34 million pounds through this June.

Fresh tilapia volume from Tropical Aquaculture Products' farms in Brazil, Columbia and Ecuador had normal increases and decreases for the beginning and end of the first half of 2008, says John Schramm, president of the Rutland, Vt., company.

While Beaver Street Fisheries, one of the largest U.S. tilapia importers, was impacted by the China freeze, it quickly contracted with other plants for additional supply.

"By late July and August, we started to see some of that production arriving through the pipeline. Supply is steady, but not enough for the demand," 
says Trager.

As a result, Beaver Street's wholesale prices have risen to an average of $3 a pound wholesale for frozen 3-5-ounce fillets, according to Trager.

Suppliers have seen retail prices that are up $1 to $2 a pound over the same time last year, reaching up to $8.99 a pound.

Retail prices for Food Lion, the 1,300-store chain in Salisbury, N.C., owned by the Delhaize Group of Brussels, Belgium, have increased about $1 a pound over last year.

Tilapia is selling at supermarkets for between $4.99 and $5.99 a pound on average, and is typically promoted at between $3.99 and $4.99 a pound - about $1 higher than last year's promoted price, says Karen Peterson, a Food Lion spokesperson.

Retail prices at Publix Super Markets of Lakeland, Fla., have increased only slightly because the 940-store chain purchases only fresh tilapia from Central and South America. The average retail price rose from $5.56 a pound last year to $5.64 a pound so far in 2008, says Maria Brous, a Publix spokesperson.

"The lack of frozen in the marketplace has pressured fresh, but we have not been impacted," 
says Brous.

Food Lion, on the other hand, has raised its prices.

"The entire supply chain has been strained due to the harsh [China] winters of 2007 and 2008. Our [tilapia] supply hasn't been directly impacted, but costs have increased," says Peterson.

At the same time, retailers and foodservice operators are not pricing consumers out of the market, according to suppliers.

"Retailers are doing a really good job of getting the product to the consumer at a price that enables volume movement," says Schramm. Restaurant chains are also doing well with tilapia and have developed innovative recipes, he adds.

The price pressure will likely be felt more on larger fillets, since farmers will sell the smaller sizes for strong prices while there is a high demand.

"The traditional spread between your small, medium and large fillets has become greater," says Beaver Street's Trager.

 

Benefits debated

In addition to shorter supply and higher prices, the tilapia industry is also battling a study claiming that farmed tilapia contains a potentially harmful balance of omega-3 and omega-6 fatty acids for patients vulnerable to inflammation. The study, published in the Journal of the American Dietetic Association in July, found that farmed tilapia's ratio of omega-6 to omega-3 fatty acids is 11:1. The study was authored by Floyd "Ski" Chilton, Ph.D., professor of physiology and pharmacology and director of the Wake Forest Center for Botanical Lipids. He is author of the 2005 book "Inflammation Nation," which pegs inflammation as the underlying cause of heart disease, allergies and asthma.

Seafood groups, tilapia importers and medical organizations immediately criticized the study.

"Countering data was quickly released by others in the academic and medical fields, such as the Mayo Clinic," says Brous 
of Publix.

An international group of more than a dozen doctors and researchers published an open letter supporting farmed tilapia and criticizing the study.

"Tilapia and catfish are examples of lower-fat fish that have fewer omega-3s than oily fish … but still provide more of these heart-healthy nutrients than hamburger, steak, chicken, pork or turkey," wrote William Harris, Ph.D., director of the Metabolism and Nutrition Research Center at the University of South Dakota-Sioux Falls, and part of the group of doctors critical of the study.

"It is very misleading science. The health information about tilapia has been well published," says Schramm.

In addition, U.S. Department of Agriculture data shows that boneless, skinless tilapia features a 1.4:1 ratio of omega-6 to omega-3 fatty acids. Chilton has not disclosed his methodology and exact product form tested, notes Schramm.

In order to publicize the correct information on tilapia, Tropical Aquaculture and Aquamericas of Virginia Beach, Va., launched a Web site, www.abouttilapia.co m , supporting the farmed 
tilapia industry and tilapia's health benefits.

Fortunately, most suppliers and retailers have not noticed a sales impact from the study.

"We did not receive many inquiries regarding omega-6s. It is too early to tell if the story has impacted sales," says Brous with Publix.

However, Publix executives took quick action by getting information on omega-3 fatty acids and omega-6 fatty acids to its stores right away.

"Tilapia is on the lower end of the retail price per pound and seems to be most sensitive to price. Health concerns have had little impact on sales," says Peterson of Food Lion.

 

Consumer interest peaks

While tilapia buyers are dealing with supply problems and price increases, the good news is that consumers are still 
buying tilapia.

"It is still one of the best values on the market, compared to other widely available farmed species that are out there," says Turkin of Newport International.

"Tilapia consumption has increased significantly over the last three years and continues to surpass expectations. Low cost, ease of preparation and mild flavor allow this fish to appeal to a large audience," says Peterson of Food Lion.

As a result, tilapia is Food Lion's second best-selling fish, behind salmon. "At the current rate, it will surpass salmon within the next three years as the No. 1 fish item, excluding shellfish," says Peterson.

In addition, Food Lion and Delhaize's other banners have expanded tilapia offerings "through additional items and packaging sizes to meet the needs of the customer," adds Peterson.

Due to the lackluster economy, some consumers may be trading down to pork, chicken and other meats that are traditionally less expensive than fish. Once they get adjusted to the changes in the economy, they will likely return to purchasing more tilapia, suppliers say.

"Skinless, boneless tilapia fillets are arguably more expensive than chicken, pork and beef, so the health benefits [of tilapia] are going to be a major factor. It will take awhile for consumers to adjust their food budgets," says Schramm.

In addition, tilapia has 
consistently been one of the most popular fish species over the last few years and its popularity will likely only continue to improve.

"U.S. demand is still there. Retailers who raised their prices from $3.99 to $6.99 a pound thought they would lose sales, but that didn't happen … and foodservice sells a lot of tilapia," says Trager of Beaver Street Fisheries.

"Tilapia is popular in the United States because it meets that profile that our country likes: white meat and mild flavor. The fact that it is farm-raised makes it readily available and keeps the price low," says Brous of Publix.

Publix offers packaged, crab-stuffed tilapia fillets, among other value-added tilapia products. In addition, the retailer promotes tilapia via cooking demonstrations with its "Aprons Simple Meals" program.

Tilapia demand is expected to stay strong throughout this year and next. "Once kids go back to school and families start eating more normal meals, tilapia starts to ramp up again," notes Schramm.

Despite the decreased volume for the first part of this year, some suppliers anticipate steady to slightly higher volume this fall and winter.

"Supply is gong to stay relatively flat until September or October, with very modest increases for early 2009," adds Schramm.

However, importers and wholesalers do not expect much relief on price pressure.

"While prices may seem high, they are marginally survivable [for producers] as feed costs continue to increase. If prices decrease, it will cause more damage within the current supply chain," says Schramm.

"As long as there is a shortage, this [strong price] is going to continue. We're all in a bidding war right now, and farmers are willing to allow the price to go up and up, as we fight with each other," says Trager.

"Based on the life cycle of this fish, we expect the impact to be felt throughout the industry for another six to eight months," says Food Lion's Peterson.

 

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

 

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