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International Sourcing: Eastern Canada

Suppliers adapt by shifting focus from volume to value

By Nicholas Gill
November 01, 2007

Canada, America's northern neighbor, is blessed with the world's longest coastline, stretching 151,485 miles. It may come as no surprise then that Canada is one of the world's top seafood exporters, with the eastern seaboard accounting for almost 80 percent of the volume.

Exports from Canada's Atlantic firms have amplified considerably, growing from $6.8 billion in 1992 to more than $20 billion in 2006. More than 80 percent of the region's exports are sold to the U.S. market, the majority heading to New England. With the demand for seafood growing in the United States and Europe, Eastern Canada's seafood industry is in a good position for restructuring and expansion in areas it has long ignored.

Newfoundland and Nova Scotia, along with British Columbia on the Pacific side, are the country's three leading seafood-producing provinces. The Eastern seaboard produces 78 percent of all seafood by volume and 84 percent in value. Nova Scotia leads the Atlantic provinces in terms of seafood production, with exports around $1 billion annually, followed by Newfoundland, Prince Edward Island, New Brunswick and Québec.

Nova Scotia's industry is divided into more than 200 small to medium-size processors, whereas Newfoundland is dominated by a few large producers.

"Being smaller, we have learned to be more flexible," says Estelle Bryant, senior planning and development officer with the Nova Scotia Department of Agriculture, Fisheries and Aquaculture.

Along with the pressure of China's rise to dominance, "We have had to get processing costs under control," says Bryant. "The smaller producers have adapted to the changing U.S. dollar and are discovering new markets that weren't there before," adds Bryant. "Prices have managed to stay relatively stable across the board and have seen expansion in areas such as salmon and mussels."

Nova Scotia has been a big part of Canada's Ocean to Plate movement, in which the seafood industry works toward a "sustainable, economically viable and internationally competitive" product.


Supply and conservation

Overfishing in the North Atlantic in the 1970s and '80s severely reduced the populations of cod, halibut, haddock, flounder and other species. Now, after a decade of moratoriums and strict harvest limits, Eastern Canada is experiencing a resurgence in the biomass for most species.

David Jermain, GM of primary management and ingredient sales at Fishery Products International, the largest seafood processor in Newfoundland, says the region's seafood supplies are now under control.

"Yellowtail flounder has made a comeback. It's back up to the supply it was in the late '80s, although it is still tightly controlled," says Jermain. "In Newfoundland we have had two moratoriums on cod fishing, but it's reciprocal. The decrease in cod leads to an increase in snow crab."

Measures to protect mature female lobsters and other adjustments have helped maintain a stable lobster supply in the region. The lobster fishery has been very consistent and certain areas on the Atlantic Coast have seen increases. December harvests, normally low due to the forbidding cold winter, have increased as have harvests in southwest Nova Scotia and other smaller fisheries. Many claim this is due to warmer water temperatures, although this ha s yet to be scientifically proven.

Eastern Canada's seafood supplies have gone through seismic shifts in the past two decades; so has the value. Supply and currency issues have led the region's seafood industry to reevaluate its products. Low-value species that were once the embodiment of Canada's seafood exports, such as herring and cod, are being replaced by higher-value species like farmed salmon, lobster, snow crab and hake.

Herring is still the largest fishery in terms of volume, but the numbers are not nearly what they were a decade ago and production has dropped below 450 million pounds since 2005.

Nova Scotia, like most of the Maritimes, has been experimenting with offering a wider variety of products, many of which are new to the region. Haddock fishing, which was unheard of in the region five years ago, is now common.

Canada exported 1.46 million pounds of fresh haddock to the United States in 2006, according to the National Marine Fisheries Service. The hake fishery has grown significantly, from 100 million pounds in 2000 to 220 million pounds in 2005.

Seafood prices have been stagnant since 2001 and dropped slightly in the past two years. Therefore, Atlantic Canada has shifted its attention to more valuable species like lobster.

American lobster has been the region's No. 1 seafood export for several years and is sold across the U.S. market. Roughly 110 million pounds are harvested annually and value hovers around $600 million each year. Seventy percent of the harvest is sold live, while 30 percent is frozen or processed.

Michael Tourkistas, president of East Coast Seafood and Paturel International of Lynn, Mass., and Shediac, New Brunswick, says that aggressive planning is being taken to help expand the worldwide lobster market.

"We can increase volume by getting into more value-added products," says Tourkistas. "A lot has to do with supply. If supply picks up, the demand is there."

East Coast recently began selling pasteurized lobster meat, which can extend the shelf life for up to 12 months. The company is focusing on products with shorter shelf life but higher quality. The product is best fresh with a seven-day shelf life, but the company would like to increase it to 15 to 30 days, adds Tourkistas.

Snow crab is the second most valuable species landed in Canada, while coldwater shrimp is third. Prince Edward Island leads with the largest shellfish production at 46 million pounds in 2005, valued at $30 million.

Nova Scotia is the leading 
prov ince in terms of value, with $647 million in harvests in 2005, followed by Newfoundland and Labrador with $494 million.


A shift to high-value species

Aside from growing lobster exports, Eastern Canada is also relying on coldwater shrimp production, which has grown more than 300 percent since 1990.

"At one point we were harvesting cod and groundfish. That has collapsed. Two species have mushroomed in its place: coldwater shrimp and snow crab," says Patrick McGuinness, president of the Fisheries Council of Canada. Canada is now the world's No. 1 supplier of both species.

Canada's seafood industry produces two main types of shrimp: shell-on and cooked and peeled. The cooked and peeled product has been selling well in Europe. The market for shell-on coldwater shrimp has expanded into the Russian and Chinese markets in recent years, but its introduction has been difficult in the face of massive quantities of farmed shrimp already on the world market.

The strength of the Canadian dollar compared to the weak U.S. dollar tremendously affects production and is perhaps the single-biggest factor controlling the overall health of Eastern Canada's seafood industry (see Top Story, page 24).

The major reason the Canadian dollar is strengthening is the natural resources in the Western half of the country, while the eastern part of the country depends on trading and exports to the United States. One side of the country is driving the economy, but it negatively affects the Eastern side.

"No question the exchange rate has a substantial impact. The increase from about 65 cents to 85 cents was shocking. Reality set in," says McGuinness. The further increases the region has been more prepared for, he says.

Consolidation is expected as Eastern Canada's seafood industry adapts to shifting resources industry wide. Government policies are a bit outdated and work against consolidation by favoring independent fishermen, but McGuinness foresees changes in many of them that will help facilitate it. Summits in the Atlantic provinces, including one on lobster in Halifax last month, are supporting consolidation.

"The challenge is bringing buyers, processors and harvesters together to develop strategies on sustainability, profitability and affordability," says McGuinness.

"The whole process has been an awakening for the industry and hopefully an awakening for the politicians," adds McGuinness.


Nicholas Gill is an author, writer and photographer based in Columbus, Ohio, and Lima, Peru



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