Aquaculture is based on more species and it comprises a vast array of different technologies, which tends to complicate the analysis of emerging trends. It is clearly the most international of the food subsectors.
For example, in the United States of America (USA) we import more seafood than we do all beer and wine combined. We import more seafood than we do coffee. It is also the most fragmented food subsector: you have people harvesting from canoes, and at the same time, you also have large, multinational companies investing resources in the trade.
It is an industry that basically argues with itself all the time: fishermen fight with aquaculturists; offshore fishermen fight with near-shore fishermen; those that support transferable quotas fight with those that do not. The list goes on and on. It is incredibly volatile because of its nature and because of its fragmentation.
The sector is very bureaucratic, being trapped in a messy regulatory environment in most cases. It is clearly our most wasteful food sector, and it is misunderstood by both consumers and chefs. The marketing of seafood tends to lack transparency. Given all these factors, I argue that the countries and companies that can address these problems—in other words, become less fragmented, reduce volatility and become less wasteful—will be the leaders in international seafood trade.
And I also argue that those countries and sectors that adopt primarily rights-based management and technologies that use aquaculture will be the subsectors that will lead. Aquaculture currently accounts for about 40 per cent of world fish production. However, if we remove the non-food fish, such as fish for animal feeds, corals, pearls, etc., aquaculture accounts for nearly 50 per cent of the seafood consumed, and it represents an even larger share of international trade.
If we take a look at the world harvest of certain fish groups, such as flatfish, we observe that the global harvest is either stable or declining. The world harvest has been declining, but actual trade has been increasing somewhat, according to FAO data.
Actual trade figures may be higher, as one of the key world traders, China, has a strong tendency to report a large portion of their exports as “fish fillets not elsewhere indicated.” Thus, we can observe a declining harvest but a gradually increasing trade. This trend is observed also with pollock and cod.
Now, an examination of seafood consumption in the USA will illustrate two key points . First, per capita consumption of aquaculture species has increased remarkably over the last two decades . Consumption of shrimp, the number one seafood, increased by 92 per cent between 1987 and 2006. Consumption of salmon, third in the ranking, went up by nearly 360 per cent over the same period.
Consumption of catfish (sixth on the list) increased by more than 60 per cent, while tilapia, a species virtually unknown in 1987, is now making great strides in the top ten list. It becomes obvious that growth in seafood consumption is being fuelled by aquaculture, while consumption of certain wild-caught species, such as cod, is declining.
Thus, USA seafood consumption is currently dominated by imported aquaculture products. Second, seafood consumption is becoming concentrated on fewer species, at least in the USA . The top five species accounted for 72 per cent of consumption in 2006; in comparison, they accounted for only 56 per cent of consumption just two decades ago. The top ten species comprised 71 per cent of consumption in 1987; they now represent 90 per cent. At this point, some might wonder: Why are we seeing the industry getting less complicated and more concentrated, at least in the USA and probably in many developed countries?
The answer to this question lies in the fact that growing markets and growing trade will come to those who can consistently deliver a high-quality product at stable or declining costs. In the seafood sector, this is what aquaculture producers have been doing for the past few decades.
It can also be argued that sector diversity in the future is going to come from the “sauce” (i.e. the value-added component of the fish) and from image issues, such as ecolabelling, rather than being created through the production of a large number of species. Thus, despite the fact that over 1 500 different species are harvested—and will continue to be harvested—around the planet; in proportional terms, more and more of the supply is going to be concentrated in fewer and fewer species. Likewise, more of the diversity is going to come from the marketers because, as you take control of and manage the fish, you can market it better and start selling additional attributes.
This report will briefly touch on four different species (salmon, catfish, shrimp and tilapia) to emphasize the points made above. In the first place, farmed salmon production already accounts for about 70 per cent of world supply, while the wild sector has remained relatively stable.
Regarding USA imports of salmon, most of the growth in recent years has come in the form of boneless, skinless fillets produced primarily in nations with significant aquaculture industries. A natural consequence of having an industry based on something that has control of production systems is that more value-added and more processing activities take place. In Norway, the farmed salmon industry is now even more important than the traditional cod fishery.
What is remarkable in a country like the USA is that we used to be the world leaders in salmon production. The USA had a US$650-million trade surplus in 1992. By 2007, this surplus had evolved into a billion-dollar deficit, which continues to increase year after year. In conclusion, the industry is currently dominated by portion-control, valueadded products.
It must be mentioned that the negative media campaign associated with salmon aquaculture has had some impact on demand, while there has been some positive media reaction towards wild salmon. An analysis of these recent developments is beyond the scope of this report. For the purposes of this discussion, the point that must be emphasized is that salmon aquaculture has moved forward and gained market share, while there is still room for wild salmon in the special-premium segment.
Catfish aquaculture production in the USA has also increased significantly over the last 30 years. The case of catfish is interesting because it is a fish that many people did not think could be sold. Nevertheless, because of the control associated with processing, it is being sold based primarily on the diversity of the sauces, not the fish.
Catfish is also interesting because it epitomizes another key trend in at least the USA: trade barriers, mostly in the form of anti-dumping cases. The industry moved forward in the 1990s and then a surge of imports from Viet Nam in 2000–2001 drove down prices, which stimulated anti-dumping litigation. Domestic producers in the USA are particularly prone to these efforts. Increasing production volumes in the 1990s turned farmed catfish into the top fish species by value harvested in the USA, ahead of salmon and pollock.
The success of catfish farming made Mississippi the second largest state in the Union in terms of fish production. An important feature of the industry is the trade aspect. The industry developed with almost no trade, meaning that the USA did not export much and it did not import much either, and then a developing country (Viet Nam) came along exporting basa and tra, which precipitated the anti-dumping case.
Trade litigation has also been stimulated by escalating shrimp and salmon imports. An important question that comes to mind is: Are these anti-dumping cases effective? Vietnamese catfish imports dropped after the Catfish Farmers of America filed the anti-dumping suit in 2002 but rebounded again in 2005, 2006 and 2007. The increase in imports has paralleled a decline in domestic production. Despite the fact that, in general, these anti-dumping cases are ineffective, the USA domestic industries seem eager to waste millions of dollars hiring trade-litigation lawyers.
Another important development is that the Vietnamese catfish is not being sold as catfish; it is being sold as tra or basa and it is also sometimes being passed as grouper and many other kinds of fish. This illustrates another international-trade issue, the problem of labelling and fraud. To summarize, the USA catfish market, even though historically it has been supplied primarily by a domestic industry, illustrates two key trends: a trend towards trade barriers (anti-dumping) and a trend to misrepresent the product in order to get higher prices.
In the case of the shrimp industry, growth has come mostly from export-oriented developing countries (China, Thailand, Viet Nam, Indonesia). World shrimp farming is increasing at an annual rate of about 16 per cent. A very high percentage of this production enters international trade.
We have seen rapid growth, but market development has not kept track or pace with supply. An interesting trend, observed also with other species, is that value-added processing is taking place outside the USA and outside many developed countries. In other words, as developing countries improve their production technologies, a consistently higher proportion of their processing is occurring within their borders.
China and Thailand, in particular, are doing much more processing than the USA; this trend has been reinforced by the recent anti-dumping case against shrimp producers, as anti-dumping margins were applied on uncooked shrimp. In response, China is now processing their shrimp, and, as a result, our processing industry is going out of business. Imports of breaded shrimp into the USA exploded after 2004 on the heels of the shrimp anti-dumping case.
Tilapia also supports strong aquaculture industries in developing countries (Egypt, Philippines, Indonesia, China). As observed previously with salmon, USA imports of tilapia are experiencing a shift from whole to processed fish. Tilapia is seen as a substitute for flounder, snapper and all kinds of white fish. In addition, many environmental groups actually favour tilapia. Based on my own forecasts, I expect USA tilapia imports to potentially pass salmon imports by 2012 or so.
Another key point in this discussion has to do with the structure of costs. In the traditional fisheries, the primary costs are labour, fuel and maintenance of the boats. In the aquaculture sector, the primary costs are feed and fingerlings. This is an important difference, as aquaculture has immense opportunities to reduce costs through genetics research and feed substitutions.
In contrast, fisheries have less room for improvement unless a move is made towards more efficient management, such as rights-based fishing. The case of Norwegian Atlantic salmon is rather impressive, as production costs have decreased over 60 per cent in the last 20 years. No fishery on the planet (not even in rights-based fishing) has been able to do that. This is really a question of better management, biotechnology and related factors. The most impressive achievements have been attained in salmon aquaculture, but there is still much room for improvement with regard to production of tilapia and other new species.
It is important to examine real price trends of aquaculture species, as they indicate what might be in store for prices of wild-caught products. The real price trend for many fish species is going down because of the declining trends observed for shrimp and salmon. Competitive pressures in the last few years have led the prices of salmon, catfish and cod to converge.
China is becoming a remarkable country in terms of its export and import values. It is now the number one seafood exporter and the number six seafood importer in value terms. In quantity terms, it is the number one seafood exporter and the number one seafood importer, which illustrates the emerging trend whereby large volumes of seafood are sent to China to be processed for subsequent re-export.
In the case of the USA, China has become the major source of finfish, frozen seafood and breaded shrimp imports. China is also the major supplier of tilapia, processed flatfish fillets, cod fillets and pollock fillets. The emergence of China as a major force in the USA import market has occurred in just the last five years. China illustrates the case of a developing country that has basically taken control by sourcing products all over the planet and then selling them back to other nations. In terms of USA exports of seafood, China is actually number two in quantity and number three in value.
China has also become the major destination of USA salmon exports, as well as exports of groundfish and flatfish. This has occurred because USA processing plants are closing down, with processing taking place now in China. This trend has just started and has been in place for about the last five to seven years.
Finally, the USA, Japan and the European Union (EU) are net importers, but most other countries are net exporters. All the countries in Asia, except Japan, are net exporters. Net exporters are primarily developing countries (but not always). Comparing the list of top exporters in 1976 vs. 2004, it is evident that the countries that have recorded the most gains in export value (China, Norway, Thailand, Canada, Chile and Viet Nam) have all embraced aquaculture.
These are all countries that have taken control of their processing, handling and distribution systems. In terms of imports, it is interesting to see to the extent that China has risen in the ranking. The main reason for this is that China has become a re-processor, but it will become a major consumer in the next few years. This is a fact we cannot afford to ignore.
Conclusions
- Growth in the seafood industry will be fuelled by aquaculture imports.
- There will be increases in per-capita seafood consumption; however, consumption will be concentrated on fewer species, with diversity coming in the “sauce” and on labelling issues, such as ecolabelling.
- The growth of aquaculture parallels a shift in the market towards value-added products. Technology, innovations, better nutrition, and disease management will continue to reduce costs in aquaculture. Lower production costs will increase supply from aquaculture and hold prices down for all fish. The trend towards value-added creation will drive processing to countries where labour costs are low (China, Viet Nam).
- Despite criticism from environmental organisations, aquaculture will not go away. The potential constraints for aquaculture development, in particular the fish meal trap, will be circumvented by new technology and substitution.
- Aquaculture will dominate the commodity market, but there will be increasing opportunities for wild market products in the upper-end segments, especially the niche market.
- Retail outlets are becoming increasingly important. Supermarkets and club warehouses, at least in the USA, are major distribution channels. Chain
restaurants have also become important outlets. All these channels care about quality and portion control, a important phenomenon that extends control all the way through the system. Supply, stability and product standardization will be foremost for these companies. We are starting to see more long-term contracts, which were very uncommon in the fish industry just a decade ago. - Anti-globalization trade barriers are likely to increase. This is unfortunate because economic growth will be undermined, not just in developing countries but also in developed countries.
- There will also be an increased use of labelling and certification programmes (Marine Stewardship Council, organic production, etc.). All these are important strategies for diversifying a product and making it seem different from others. Credibility issues might emerge as competing certification programmes will tend to conflict with each other.
- China will become an increasingly important force, both as a food processor and a significant consumer.
July 2009
