After a period of relative stability, the next seafood commodity that may be buffeted by price swings will be whitefish.
Cod, the premium product in the complex, is likely to see shortages and rising prices in some specialty markets. But for buyers, there is instability throughout the complex.
Haddock, cod, tilapia, pangasius and pollock prices are all out of their normal relationship to each other. Disruptions in the cod market, possible major disruptions in pangasius and the fact that several species are out of their historical value patterns is going to make 2018 a very interesting year for whitefish, with the first effects seen during Lent.
The rapid change in cod prices is being driven by two things: the reduction in Pacific cod from Alaska and a 100,000-tonne reduction in the Barents Sea quota, which will not be made up by increased fishing in Iceland.
Almost all cod products saw upward price moves toward the end of 2017.
Cod is sold in a variety of products, each with its own market dynamics. But many of these products flow from the price of H&G cod, both Pacific and Atlantic. H&G Pacific cod prices have shot up, with some reports of sales for western cut (collar off) above $5,000 per tonne.
Sales of H&G Atlantic cod from Russia, the mainstay of Chinese processing, are also creeping up, but not that sharply yet.
H&G cod domestically in the U.S. is the basis for the huge refresh category, which is the primary way in which retailers and restaurants get their fresh cod. This group prefers longline cod.
In 2017, trawl gear catches of Pacific cod were 71,902 tonnes in the Bering Sea and 13,000 in the Gulf.
Longline (and pot) catches were 123,133 tonnes in 2017 for the Bering Sea and about 20,000 tonnes in the Gulf.
But for 2018, the acceptable biological catch (ABC) for Pacific cod in the Bering Sea is 188,000 tonnes, down from 233,000 tonnes in 2017. The catch last year was 197,000 tonnes through November.
If the total allowable catch (TAC) is set on the same percentage of the ABC and catches adjusted, it would be in the 172,000-tonne range, a decline of 16,000 tonnes. Further declines are expected in 2019.
In the Gulf, the TAC in 2017 was 64,000 tonnes, of which 33,000 tonnes were caught through early November.
For 2018, the recommendation is for an ABC of 18,000 tonnes. Again, if the same percentages are used, this would lead to a TAC in the range of 13,000 to 14,000 tonnes. Even if this was 100 per cent caught, which is unlikely in the Gulf, the supply would be cut another 20,000 tonnes.
So, the upshot is that somewhere around 35,000 less tonnes of cod will be produced in Alaska next year and this could lead to a reduction in longline cod of 10 to 15 per cent. Given the increased demand for cod in recent years, this will have a market impact.
We expect to see a narrowing of the price differential between Pacific and Atlantic cod, with Pacific cod getting closer to Atlantic in price. Pacific cod is by far preferred in the refresh market, as it provides a better texture after thawing than Atlantic cod.
Beyond cod, the haddock markets have not recovered from the price spike in 2014 and 2015. Haddock is still selling below the price of cod, a reversal from its normal position. A rise in cod prices will likely see a rise in haddock prices as well, as some users switch to what is still the cheaper fish.
The precarious situation with pangasius has also led to instability in the relationship of tilapia and pangasius pricing. Pangasius has traditionally sold for less than tilapia. However, there is a lot of uncertainty as to whether the Trump administration may shut down imports of pangasius at the end of March, when the USDA deadline for equivalency comes in force.
In the normal course of events, the USDA would extend the deadline and work with Vietnam as it was attempting to make progress.
But in the politicized atmosphere against imports, it is likely that pangasius could become a political pawn and could easily be banned. Importers have been rushing to stockpile against this possibility.
At the same time, Vietnam has rapidly diversified into other markets. The result is that pangasius prices will see a lot of instability and already they are trading at higher prices than tilapia.
Pollock has been in trouble for two years, as a large inventory overhang in Europe took a long time to work off. Prices for pollock blocks today are literally no different than they were 25 or 30 years ago, putting significant pressure on profitability.
But single frozen blocks are still selling free on board (FOB) New England at $1.20, a full 35 cents below their 10-year average. The problem is that the overall category for breaded and battered fillets is continuing its long-term decline.
There are some indications that the market has worked through its problems and that seasonal production will be priced higher based on a lack of inventory.
So, the upshot is that no matter where you may be as a buyer in the whitefish complex, the pricing and product value relationships you have built programs on over the last few years will be rapidly shifting in 2018.
This is a recipe for unexpected price spikes, or potentially opportunities to switch species. But whatever happens, 2018 is likely to be a wild year for whitefish.
This article was republished with permission of John Sackton and seafood.com.
