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« August 2006 Table of Contents

U.S. catfish industry put to the test

Domestic producers battered but proud after basa conflict

National Catfish Month, observed annually in August, will be celebrated in ways both big and small. Belzoni, Miss., the Catfish Capitol, will be buzzing, and hundreds of kids visiting the Tennessee Aquarium in Chattanooga will playfully tug on the whiskers of its mascot, "Cat Fish."

In addition, thousands of NASCAR tailgaters will get to vote on their favorite catfish recipe, choosing among dishes crafted by Dale Earnhardt Jr. and other top drivers on the circuit.

In a high-speed race of its own, the U.S. catfish industry sees a hard-charging rival in its rearview mirror: Basa, a catfish species farm-raised in faraway places like Vietnam and Thailand. Domestic catfish's top challenger looks and tastes like catfish, is typically 10 to 20 percent less expensive than U.S. catfish, and has a foothold in desirable markets like Europe.

But with facts and figures shrouded in mystery and rumors of mislabeling becoming reality, basa's true share of the U.S. market until now has been left to speculation. It's impossible, some argue, to rely on import statistics from the U.S. government to tell how much basa enters the country.

The National Marine Fisheries Service reports that the United States imported a record 30 million pounds of basa or the similar tra in 2005, including 17.4 million pounds of frozen fillets from Vietnam. It was likely much, much more.

Since basa can't be sold legally as catfish, and protective tariffs await its arrival at U.S. ports, an untold amount of product is imported as "non-specific freshwater fish fillets" or is flagrantly mislabeled as another species. Some may enter the country without physical inspection, but as the U.S. government secures its borders, those days may soon come to an end.

Still, it's clear that catfish's competitor is here to stay - despite measures to protect the domestic industry, basa imports continue to roll along. Meanwhile, domestic production is down - to 600 million pounds in 2005, a drop from 661 million in 2003 and 630 million in 2004 - and sales in recent years have hit a plateau.

U .S. catfish producers have battled basa in courtrooms and in Congress. Now the conflict centers on image and the forum is public opinion - it's a fight that domestic producers say they can't afford to lose.

In short, they say basa built its market on the catfish legacy and therefore threatens U.S. farmers' and processors' livelihood.

"Cheap imports undermine the backbone of America, which is our agriculture," says Roger Barlow, president of The Catfish Institute in Indianola, Miss., which markets on behalf of the U.S. catfish industry's 1,000-plus farmers in 13 Southern states.

No one will deny that basa imports have had a tremendous impact on the domestic industry. As basa took the U.S. market by storm, pond-gate prices for domestic catfish dipped below the cost of production, and some farmers barely survived.

Only now are the economics turning around, fueled in part by lower feed costs. In 2003, catfish farmers received a $34 million drought-relief package to help them buy feed.

"We're enjoying the best pond prices in recent years, 82 cents [a pound]," says Hugh Warren, VP of Catfish Farmers of America, which represents U.S. farmers' legal interests. "It'd be a lot better if energy costs weren't working on that margin. It takes a little shine off the 82."

There are other concerns: Will production pick back up after two down years? Can suppliers penetrate new markets? Is tilapia vying for the same market share? Can small family farms survive today in the face of corporate consolidation?

Yet, in the end, it's all about basa.

The battle begins

In 2001, U.S. catfish-industry lobbyists got Congress to ban the use of the word "catfish" to market any species outside of the family Ictaluridae, especially basa or swai (Pangasius bocourti) or tra (Pangasius hypophthalmus), the top catfish-family species from overseas. "Catfish" would be strictly reserved for channel catfish (Ictalurus punctatus).

That year, U.S. basa imports jumped to 18 million, up from the previous record of 8 million pounds in 2000, according to NMFS. When the ruling established the official nomenclature, imports fell to 10 million pounds in 2002, but basa had already gained acceptance in the U.S. market.

Its quality was consistent and met the requisite price-point criteria for cost-minded buyers.

TCI also launched its U.S. Farm-Raised Catfish brand in 2001 to bring attention to domestic product. When U.S. foodservice operations - some in the heart of catfish country - switched to basa to cut costs, it was time for further action.

In June 2002, the Catfish Farmers of America filed an antidumping petition, accusing Vietnamese exporters of charging below-market value for their product. They won the ensuing lawsuit, and basa imports plummeted to 5.4 million pounds in 2003 after the U.S. government slapped basa imports with tariffs ranging from 37 to 64 percent.

"It was a matter of survival," Warren explains.

The downturn proved to be only temporary. Rumors spread of disreputable exporters capitalizing on the spiked demand by transshipping through other countries or labeling their product as grouper, dory, sole, bass and other species to avoid tariffs. In May, two Florida importers were indicted on 42 counts of selling tra as wild grouper.

Now, as basa imports climb again, folks like Barlow and Warren are taking off the gloves, using words like "inferior," "imposter" and "invader."

"[Basa is] not raised in clean water, it's not fed the scientific protein like ours," Barlow says. "U.S. farm-raised catfish is from man-made ponds with pure underground water, not the Mekong Delta, the toilet bowl of Asia."

Matt Fass, VP of Maritime Products International of Newport News, Va., says that is "a gross misrepresentation of reality." MPI has imported basa from Vietnam since the late 1990s.

"Let's not kid ourselves," says Fass. "Basa's got whiskers and no scales, but the meat tastes more like orange roughy than domestic catfish. It only competes with catfish in the sense that it's a fish.

"It's been disheartening to see all the barriers put up against [basa]. It's a great fish. Transshipping and mislabeling are shameful. But so was the antidumping suit."

All in the family

Competing with imports has also taken a toll on small family farms, once the face of the industry. When the market price crashed a few years ago, many chose or were forced to drop out.

Rob Mayo, president and founder of Carolina Classics Catfish in Ayden, N.C., sources catfish from several 
contracted area farmers in what has 
become a symbiotic relationship. Others aren't as fortunate, he says, and were pushed out of business by imports.

"But the overall seafood supply has been 75 percent imports ever since I've been in the business," Mayo adds. "The threat of competition, it's always been there; it just wasn't perceived."

That's little consolation for small farmers like Jim Popejoy.

Once the proud owner and operator of a 58-acre catfish farm in Eudora, Ark., Popejoy says he's now "surviving with caution, waiting for the axe," after lenders liquidated his farm and its assets in early 2005, saddling him with sizeable debt. He says it's all because the industry was unprepared to compete with the influx of basa imports.

"The import of Vietnamese fish was not immediately addressed by the industry, as it did not feel the fish-import volume would increase as rapidly as it did," he says.

"The oversupply of live fish on U.S. farms [caused a] downward cycle to a 24-month average of 53 cents, below the cost of production of 68 to 73 cents a pound. It was a no-win cash-flow situation."

The protective measures TCI and CFA took to stem the flow of imports were intended to protect folks like Popejoy and the catfish-reliant eco­nomies in some of the South's poorest areas. But an extended period of low prices was simply too much for some small farmers to bear.

"There's no question that there are stresses on all U.S. agriculture," Barlow says. "Catfish is no different. The farmer always will be the one that really has the hardest road to hoe. To make a profit in farming is difficult."

Catfish's importance to the region cannot be understated, Barlow says. He notes that catfish has a multiplier of seven: For every dollar of catfish raised, seven other dollars in the region are directly or indirectly affected. So it's no coincidence that a lot of catfish producers use the word "pride" in their company titles.

"We have probably the greatest aquaculture product in the world," Barlow says. "U.S. farm-raised catfish is truly a product that distinguishes itself from its competitors."

However, Mayo and Popejoy say TCI hasn't sufficiently marketed a positive message about catfish; instead it has focused on cutting costs and filing lawsuits.

"There's been no imagination and no effort in telling the great story of our product," Mayo says. "Our industry has been asleep on that. I think that catfish needs to be reintroduced to the public as a tasty, versatile fish that does well on the environmental and health scorecards."

Randy Rhodes, VP of national sales and business development for Inland Seafood of Atlanta, recently left American Pride Seafoods of Greens­boro, Ala., formerly Southern Pride Catfish, a division of American Sea­foods Group, after 23 years. He says the domestic industry had little other choice than to wage a legal war.

"We wish we could have done more proactive marketing, but we had to pick the best medicine at the moment," Rhodes says. "Basa made it obvious that it's a global market. Now, the Chinese are producing catfish, the same species as domestic, and that may provide an even bigger obstacle."

From 2004, when the United States first began documenting catfish imports by species, through May 2006, U.S. imports of channel catfish total 5.9 million pounds - 83 percent from China.

Has tilapia also taken a bite out of catfish's demand? While Rhodes says tilapia has "made a dent," others aren't as sure.

"In the overall whitefish situation, the resource is stretched out," says John Victoria, seafood specialist for Western Edge Seafood of Claysville, Pa. "There are heavy demands on whitefish. But tilapia is its own industry now. It's got its own profile; it's mainstream."

Going to California

The National Fisheries Institute's 2004 Top 10 species-consumption list ranked catfish No. 5, at just over 1 pound per capita, behind shrimp, canned tuna, salmon and pollock (tilapia, which debuted on the list in 2001, is on catfish's heels at No. 6). Conversely, there's much room for growth.

With overall demand for seafood at record highs both in the United States and abroad, there's never been a better time to explore new markets and attract menu makers. Can catfish grow beyond a regional favorite and find its way onto menus in places like New York and Los Angeles?

"We're moving outward; there's U.S. catfish in every state," Barlow says. "The bulk [of sales] is in heartland states, but California in particular offers a tremendous opportunity, as do large metro areas like Chicago and Detroit. And we still have not saturated our present opportunities in places like Atlanta, Memphis and Dallas."

What would it take for hushpuppies to hit Hollywood? A promotional effort unlike any before it, one that Barlow says is already under way. TCI has invested in a new identity, he says, which was difficult to do with an annual budget of less than $4 million.

"We're looking at marketing in a way we never have before, analyzing every dollar we spend," Barlow says. "Everything we do today is new - new ad agency, new PR agency, new partnership program with Viking ranges, new processor-partnership program, new Web site.

"A lot of bright lights will shine on this industry in the future," Barlow says, confident that U.S. catfish will get up to speed and take the checkered flag.

Gentlemen, start your engines.

Assistant Editor James Wright can be 
e-mailed at jwright@divcom.com