Balancing the Scales : Surpluses, quality problems and high prices stall seafood industry’s momentum

The seafood industry’s two-year run of record sales and increased popularity has stalled rather abruptly.

Oversupplies of key commodities, chronic quality problems and consumer resistance to high retail prices have combined to slow the industry’s momentum just as the public’s eating habits have evolved to favor fish consumption.

Evidence of the lull was particularly apparent at Sea Fare ‘88, a recent international trade show at the Long Beach Convention Center, attended by more than 10,000.

During three days of seminars and exhibits, analysts discussed whether the industry’s current dilemma is a mere aberration or the precursor of more serious trouble ahead.

“The whole tempo of this year’s show is different (from past shows),” said Peter Redmayne, the Seattle-based publisher of Seafood Leader magazine and the convention’s sponsor. “Last year, (processors and wholesalers) selling seafood told the buyers, in many cases, to take a number, stand in line and they would sell them some fish if they got a chance.

“People thought that demand for seafood would be up forever, that prices would remain high and there would always be good supplies. Companies made money and didn’t even have to work that hard,” he said. “Today, everybody is wondering who out there is going to eat all the salmon, shrimp and scallops on the market.”

Redmayne’s comments were echoed, to varying degrees, by representatives of all processing and marketing segments attending the convention.

One reason for the noticeably changed atmosphere is increased supplies of several revenue-important species. Those fish and shellfish more plentiful now than in 1986 and 1987 include, among others, scallops, shrimp, Atlantic cod, Alaskan pollock, mahi-mahi, halibut, Atlantic Ocean perch and farm-raised salmon, according to both government and industry statistics.

Even shrimp, the leading seafood species in terms of total dollar sales, declined in price during 1987 as aquaculture ventures, or fish farms, expanded production at operations located in Asia and Central and South America. Prices for medium-sized shrimp dropped more than $1 a pound in wholesale markets. In recent years, such a decline was unthinkable, considering the strong global demand for the delicate pink meat. (Prices for the larger sizes were not affected, however, because aquaculture has yet to successfully enter this segment.)

“No doubt, a big influence on the shrimp market was aquaculture,” said William D. Chauvin, a New Orleans-based consultant and newsletter publisher. “In Ecuador alone, the 1986 shrimp farm harvest was 62 million pounds. Then, in 1987, the figure jumped to over 100 million pounds. It was an amazing development.”

Chauvin predicted that the price of mid-sized shrimp, which number about 40 to a pound, will continue to decline in the months to come as a result of the fish farms’ efficiency and expanding capacity.

Scallops, another important species in terms of total revenue, endured an even more severe price decline.

“Last year at this time, scallops in the mid-size range (with 10 to 20 in a pound) were selling for between $6.60 and $7 a pound wholesale,” said Gene Bergson, a sales representative with Atlantic Coast Fisheries Corp. in New Bedford, Mass. “Now they’re going for $4.80 a pound and less. The price decline has ranged from 33% to 50%.”

Bergson and others say that the scallop fishery resource rebounded in places such as New England and Florida at the same time that foreign harvests of the shellfish intensified.

“Scallops are a major Eastern Canadian export, and prices, right now, are very weak,” Henry Demone of National Sea Products Inc. told a Sea Fare seminar. “It seems that everywhere in the world scallop production is up.”

Salmon is soon to join the shrimp and scallop markets in uncertainty. Although the harvest of Pacific salmon was at its lowest point in five years, at just under 100 million fish, there is little chance of any shortfall developing. In the next two years, the amount of fish coming from salmon ranches around the world will increase by more than 50%.

“There are now 130,000 metric tons of farm-raised salmon produced in the world. By 1990, that total will increase to 200,000 metric tons,” said John Forster, president of Sea Farm Washington Inc., an aquaculture firm. “It looks like production will increase 30,000 to 40,000 metric tons a year for the next several years.”

At present, Norway is by far the leading producer of farm-raised salmon, but the process is also being used successfully in Scotland, Japan, the United States, Canada and Chile.

Despite Forster’s projections of a major expansion, he does not anticipate any domestic glut or market crash because U.S. per capita fish consumption is still far behind the levels for other protein sources such as poultry and red meats.

Others aren’t so sure.

Bob Rosenberry, publisher of Aquaculture Digest, foresees a major influx of farmed salmon and sharp price declines.

“Salmon will eventually drop to $2 a pound when all the farms being built come on line. In fact, there will be a lot of salmon from British Columbia entering retail channels in just the next few months that wasn’t even available in the past,” he said.

Rosenberry, an authority on aquaculture, said the industry is far from hitting its stride, and over the next decade it will revolutionize the seafood business.

“Eventually, aquaculture will put shrimp fishermen out of business, and the salmon fishermen will be next. In the long term, all commercial fishermen will disappear because of the simple fact that a fish farmer’s costs are lower than those of the fisherman,” he said.

Poor-quality fresh and frozen fish is also an issue that has been dogging the seafood industry of late, particularly as the public becomes more educated about the various species. The damage from poor handling--bruises, freezer burn, texture disintegration--is evident in at least one or two types of fish at most retail counters around the country.

Correcting the problem, though, is difficult because it can occur from a variety of sources: in the fishermen’s nets, while stored on the boats, in the processing plants or at the supermarkets.

As such, the quality question is one that finds few answers even if most of the criticism about its elusiveness comes from industry representatives.

“Everyone in the seafood industry pays lip service to quality but few have made any efforts to improve it,” said Demone of National Sea Products, a company that has launched an extensive education program for its employees emphasizing proper fish handling from its trawlers to packing plants.

“The public is operating from a perceived value concept,” said Redmayne. “The price of chicken and beef is low now while fish prices (in 1987) were at historical highs. The quality of the seafood in many cases didn’t justify the price. . . . Certainly, mediocre-quality fish is not a good value.”

The upturn in supplies of key commodities, with its attendant drop in prices, comes at a fortuitous time for seafood marketers. It has become clear that there is a growing consumer resistance to fish prices that are closer to $10 a pound than to $2.

Several industry representatives, in fact, warned that the business faces tough times if fresh and frozen fish products do not become more competitive with other protein sources.

“The seafood industry needs to reevaluate its entire pricing structure,” said Greg Pendleton, a sales agent with State Fish Co. Inc., a San Pedro-based wholesaler. “Everyone raised their prices at once and the consumers said, ‘Hey, slow down.’ This year fresh and frozen fish are not even in the (competitive) marketplace. Beef and chicken are there but we’re not.

“Cod, for instance, used to sell for $1 a pound. Now it’s $4 or $5 a pound. It doesn’t need to be that high,” said Pendleton. He added that it’s become quite noticeable that supermarkets are not buying the volume of fish that they did two years ago, before the across-the-board round of price increases.

A. D. Chandler, a consultant with expertise on North Pacific fisheries, told another Sea Fare seminar that the price of chicken is an important barometer that seafood firms must keep in sight.

“You can’t get too far ahead of the competition,” said Chandler. “When seafood prices get too high then that is the point when supermarkets forget about the category and start advertising chicken.”

The situation would be even more severe for American fish processors and wholesalers were it not for the U.S. dollar’s weakness on international currency markets. Redmayne said that prices for several fish species would have fallen further if not for the sharp drop in the dollar’s value.

The dollar’s decline increased foreign, particularly Japanese, purchases of domestic fishery products, thus temporarily maintaining demand.

Eventually, a stronger dollar will lessen foreign sales and, in turn, cause a diversion of these exports back into American retail channels. Any such movement would force seafood prices further downward--an unwelcomed prospect for many of those at Sea Fare.

“The value of the Japanese yen says a lot about what ultimately happens with U.S. fish prices,” said Bonnie Elerding of B & B King Crab in Huntington Beach, who is selling Alaskan crab to Asia.

Even with the foreign demand, consumers can expect to see lower prices for certain seafood items. But seafood supplies have gotten so diverse and complicated that a projection of any length must be hedged in caution.

Redmayne emphasized just that by introducing the element of unpredictability into the equation.

“The seafood business is like no other business in the world,” he said. “There are hundreds of different species coming to market from countries all over the globe. . . . For now, at least, there’s a lot more fish around.”