Price Panel Reconsideration Leads to an 8.5 Per Cent Hit
The soap opera that is the 2020 Newfoundland and Labrador Northern shrimp fishery continues to be played out on wharves and fish plants across the province.
On July 2, Newfoundland and Labrador’s Standing Fish Price Setting Panel accepted the Fish Food and Allied Workers’ (FFAW-Unifor) price recommendation of $1.18/pound for Northern shrimp landed at the plant and $1.15/pound for trucked shrimp.
Despite siding with the union, the selected price was still a 28.5 per cent reduction from the minimum price in 2019. Last year, fishermen were paid a minimum price of $1.78/pound. At the time, it represented an 18 per cent increase over the 2018 price and the highest minimum price ever for the spring shrimp fishery. The 2018 price was $1.46/pound, up from the 2017 level of $1.25.
The Association of Seafood Producers (ASP), which represented processors at the panel hearing, had offered $0.70/pound, which amounted to a 57.6 per cent reduction from the minimum price in summer 2019.
However, less than two weeks later, the Fish Price Setting Panel announced it had received an application from the ASP, dated July 10, requesting that it reconsider its July 2 decision, concerning the price and conditions of sale for summer shrimp in 2020. The application was based on the assertion that current market factors have significantly changed compared to those that were known and anticipated at the time of the initial Panel decision on July 2, 2020.
“The Panel conducted a preliminary review of the ASP and FFAW perspectives and market information available on short notice. The parties were advised by the Panel on July 12, 2020, that we were prepared to reconsider our 2020 shrimp pricing decision. The parties were requested to meet, with the assistance of the facilitator, to exchange perspectives on the market and positions on pricing, going forward in 2020,” the Panel reported.
In its decision, the Panel said that “the ASP offer is $0.85/pound, which is a $0.15/pound improvement over their original offer on June 26, 2020. It is also a 48 per cent reduction from the minimum price in 2019. The ASP points to two key factors that warrant a Panel reconsideration. The first being a decline in Urner Barry pricing in the U.S. and a further softening of prices in the U.K. They also point to the fact in recent weeks the issue of the need for a Canada/U.K. deal to replace CETA at the end of 2020 has become a concern in the marketplace. The market is aware there are significant risks that a deal might be ready for 2021 and U.K. tariffs on shrimp could come into play. ASP contends this has put a further damper on the market sentiment in the U.K. They claim there is also risk that China may impose restrictions on shrimp imports to address COVID-19 health concerns. ASP feels this adds to an already difficult situation caused by processors overpaying, albeit mostly through agreement, for shrimp in 2019.”
In its counteroffer, the FFAW came back with $1.08/pound, which is a $0.10 reduction from its original offer on June 26, 2020. It is also a 34.5 per cent reduction from the minimum price in 2019.
“They still contend that a summer to summer comparison of market returns is appropriate in establishing 2020 pricing. The FFAW feels strongly that markets have not significantly changed since the earlier decision of July 2, 2020 and the Panel should have denied the ASP request for reconsideration. The FFAW points to the fact that there has been much agreement between the parties on pricing levels in the past couple of years and the 2019 summer price of $1.65 was based upon the acceptance of the ASP offer at that time. They also pointed out that since the July 2, 2020 decision, exchange rates have marginally improved.”
At the reconsideration hearing, the main arguments articulated in the July 2, 2020 decision were reiterated by the parties, the Panel said in its report.
“There is agreement between the parties that the 2020 market is down significantly. However, the parties continue the disagreement over the right comparison and data to use to guide 2020 pricing decisions. ASP argued that markets were further deteriorating since the original decision, while the FFAW documented only marginal pricing changes that they felt were largely offset by currency improvement during the intervening period. Irrespective of the arguments on the extent of decline in the market, the Panel feels the 2020 shrimp market is poor, as is reflected in the reduction of the price offers by both parties. However, both parties maintained they improved their offers to better enhance their chances in final offer selection.”
The Panel added that it is concerned that the FFAW offer may put considerable pressure on the viability of shrimp processors in 2020, particularly if bonus payments continue to be in play in the competitive port market environment.
“However, the Panel must pick the offer it feels best shares the current market downturn between the two sides. In consideration of this and a review of the submissions, it is the decision of the Panel to accept the FFAW offer. Effective midnight on July 14, 2020, the average price for the species shrimp, based upon 2019 summer size distribution, will be $1.08/pound for shrimp landed at the plant and $1.05/pound for trucked shrimp.”
Despite the further drop in price, as of The Navigator’s press deadline, many shrimp fishermen were preparing to hit the water.
Along with the price reductions, inshore harvesters in shrimp fishing area (SFA) 6 are also up against 2020 quota cuts.
Earlier this year, the Department of Fisheries and Oceans (DFO) announced that the 2020 total allowable catch (TAC) in SFA 6 would be reduced by 7.5 per cent to 8,290 tonnes to maintain a 10 per cent exploitation rate.
Last year, DFO actually announced that the total allowable catch in SFA 6 would be increased by 2.6 per cent to 8,960 tonnes to maintain a 10 per cent exploitation rate. The first increase in several years. SFA 6, off the northeast coast of Newfoundland is the only shrimp fishing area in that region where inshore harvesters are permitted to catch shrimp. The more Northern shrimp fishing areas (SFA 4 and SFA 5) are only open to offshore vessels.
In 2018, DFO imposed a 16 per cent cut to the inshore northern shrimp quota in fishing area 6 — meaning the total allowable catch for SFA 6 went from 10,700 tonnes in 2017 to 8,730 tonnes in 2018.
DFO said the reduction was needed to achieve a 10 per cent exploitation rate.
The cuts in SFA 6 have been dramatic over the last few years. In 2017, the TAC was cut by 63 per cent — from 27,825 tonnes in 2016 to 10,400 tonnes. In 2015, the TAC was 48,196 tonnes.
