Although exporters have been able to develop a range of new markets in North America and the Middle East over the last few years, various factors are negatively affecting demand in important markets such as the UK and the Russian Federation. These factors are limiting the number of markets capable of absorbing further supply growth now on the horizon.
Prices for 300–450 g Greek bass on the Italian market reached its 2016 peak of €5.40 per kg in May, while prices for the same-sized bream hit their peak at the same price level in April. These represent decreases of €0.40 and €0.30 respectively from the maximum levels reached in 2015. In September, the equivalent declines compared with 2015 were €0.10 for bass and €0.80 for bream. This reduction is a consequence of the downward pressure of higher supply volumes coming out of Greece, Turkey and Spain. However, these lower mid-year price peaks were offset somewhat by relatively higher early-year prices, and in fact average Greek export prices in the first half of 2016 were flat year-on-year for bass and only 4 percent down for bream.
Despite the relatively small magnitude of the price fall, profit margins of Greek aquaculture companies –which in many cases had crept back into the black last year – fell back again in 2016.
This demonstrates the sensitivity of a still fragile Greek industry to even minor decreases in price, and emphasizes the importance of innovations at the farm level that can drive costs down.
Consolidation within the sectors, such as the absorption of Greek aquaculture Dias by another, Selonda, will also help to achieve cost reduction through economies of scale. In the meantime, however, increased production volumes will only benefit the Greek sector if demand is strong enough to support prices at sustainable levels.
On the positive side, demand appears to be strong in the major European markets for Greek exporters, of which the three largest are Italy, France and Portugal. This is particularly true in the case of bass, and supply of bass is increasing significantly faster than that of bream in response to this trend. Demand for both species was also boosted by the warm summer in 2016, as consumption periods for bass and bream are highly seasonal and linked to the level of activity in the restaurant industry. Greek exporters continue to largely confine themselves to traditional European markets however, and while this brings benefits when economic conditions are stable and summers are good, it nevertheless increases inherent risk through lack of diversification.
Despite the advantage of a weak currency, Turkish exporters have not been immune to price falls, and a downward price trend for Turkish bream continued in the third quarter of 2016, resulting in prices only sufficient to cover production costs. Regardless of size, mean ex-farm prices (ice-packed) of bream were down to US$4.06 and US$4.00 per kg in July and September respectively. Compared to mean prices in June, this translates into nearly an 8.9–10.3 percent decline. The situation was better for bass during this period. Mean ex-farm prices bass in September remained flat ranging from US$4.4 (200–300 g) to US$7.10 (600–800 g) per kg, which left some profit margin for producers.
In order to control fouling (small mussels) in the large bass cages (50 m diameter), bream are stocked with bass in large-scale farms. The bream to bass initial stocking ratio goes up to a maximum of about 1:9, with the bream gazing on the small mussels on the nets, thereby helping to extend its use. Bream is harvested together with bass mainly in the third quarter of the year, resulting in additional supply during July–September, pushing prices further downward.
Looking ahead to 2017, a major concern for Turkish producers is the expected excess of bream juveniles stocked in Greek farms. According to industry sources, this oversupply could have a negative impact on prices, both at the ex-farm and retail levels. Turkish producers are attempting to address this challenge by focusing on sales of small-sized bream. The core idea here is that small fish would mean lower production costs but more importantly lower volumes in overall bream production. In this way Turkish producers hope to hold bream supply at the 2016 level and prevent further price declines due to possible oversupply.
With flat domestic production and strengthening demand being driven by slowly increasing private consumption, Italy has been steadily increasing its import volumes of bass and bream over the last few years even as prices have increased. Relative proportions of bass and bream have remained approximately equal but one notable trend is the increasing share of supply sourced from Turkey, offset by decreasing imports from Greece. This development is the result of both the greater availability and lower prices of Turkish fish, together with the added advantage of the euro's purchasing power versus the Turkish lira.
French consumers differ from their Italian counterparts in their strong preference for bass and bream that is either domestically produced or grown as close to home as possible. This largely excludes Turkish product, despite the lower prices, and buyers instead turn to Greek or increasingly Spanish fish. Similarly to other major European economies, France has returned to slow but steady growth, which should boost demand in the long-term. This year, import volumes are back to 2014 levels after a dip last year.
Stronger demand from its major European markets, a more active domestic market and continuing investment in the Spanish bass and bream farming sector are all reasons for a positive outlook in Spain. However, in line with prevailing trend, prices at Spanish wholesale markets fell back from good early year levels and hit lower mid-year peaks this year. The balance between supply and demand will potentially be upset if production in the Mediterranean increases too quickly.
According to data from the Russian Federal Customs Service, as of September 2016, Russian Federation imports of fresh bass and bream amounted to 1 280 tonnes and 1 150 tonnes respectively. Turkey was responsible for 99 percent of the supply, while Morocco and Tunisia delivered the remainder. Russian Federation volumes have fallen significantly in the last two years as the depressed economy negatively impacts demand for seafood.
In the UK, the Brexit vote has resulted in a significant weakening of the British pound, which will make imports more expensive, thereby reducing demand for farmed bass and bream from the Mediterranean and likely boosting demand for domestic wild-caught bass. In Germany, meanwhile, demand for bass and bream is strong and growing, with import volumes steadily increasing each year.
The report analyses the market situation over the period January-October 2016