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Introduction to World Crab Markets. Maximizing Value from the Crab Fishery in Atlantic Canada John Sackton Seafood.com. Description of U.S. Crab Market . Products Buyers Sources of Crab Market Structure Price History. Sections 3-5 oz 4 up 5-8 oz 8 up Ocean run. Crabmeat 5 lb block

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introduction to world crab markets

Introduction to World Crab Markets

Maximizing Value from the Crab Fishery in Atlantic Canada

John Sackton

Seafood.com

description of u s crab market
Description of U.S. Crab Market
  • Products
  • Buyers
  • Sources of Crab
  • Market Structure
  • Price History
crab products in u s
Sections

3-5 oz

4 up

5-8 oz

8 up

Ocean run

Crabmeat

5 lb block

70% body 30% leg

Specialty items

Cocktail claws

Snap and eat

Scored sections

Crab Products in U.S.
u s buyers
Retail

Crab is promoted on specials

Move large volumes

Very price sensitive

Out of Market over $4.00

Foodservice

Buffet Houses and Casinos Major Users

Asian Buffet

Heavy Seasonal Volume

Small crab (3-5 oz) not economical for Buffet

High Traffic Item

U.S. Buyers
canadian crab exports to us continue to increase in volume and value
Canadian Crab Exports to US continue to increase in volume and value

2000

2001

CA Avg Value

1999: $3.11

2000: $3.90

2001: $3.19

2002: $3.35

greenland crab a small factor in u s market
Greenland crab a small factor in U.S.market
  • Shipments from other Provinces much greater than imports from Greenland
  • Growth of Canadian imports have been faster than growth of Russian or Greenland crab imports to U.S.
market structure
Market Structure
  • U.S. Importers
  • Direct Sales by Canadian Processors
  • Direct Sales to End Users (Darden, Sysco)
  • Most distributors and retailers do not buy direct, but through importers who supply them other products
japanese crab market
Japanese Crab Market
  • Characteristics of the Japanese market
    • Crab a necessity for many buyers
    • Market has changed significantly over last few years
    • Major disruptions caused by shutting down of Russian fishery
    • Economy and Currency major factors for Japan
    • Japanese companies own overseas plants in China and Thailand
japanese crab products
Live Crab

Whole Frozen Crab

Gas Frozen Sections

Brine Frozen Sections

Crabmeat

Sushi merus meat

Other picked crab meat

Japanese Crab Products
japanese buyers
Japanese Buyers
  • Major Importers set prices
  • Japanese companies Processing in China also set prices
  • Complex multi-layer distribution system starts with importers, who take financial risk
market structure1
Market Structure
  • Foodservice
    • Vacation and luxury restaurants: Hokkaido
    • Sushi restaurants
  • Retail
    • Department stores
    • Seasonal Gift occasions
japan snow crab supply trends
Japan: Snow Crab Supply Trends

Data: Japan Marine Fisheries Assoc; Seafood Datasearch

japanese inventory problems
Japanese Inventory Problems
  • Problems selling high priced crab
  • Consumers moving to lower quality items
  • Took time for sellers to adjust
japan origin of supply
Japan: Origin of Supply

Data: Japan Marine Fisheries Assoc; Seafood Datasearch

world production of snow crab
World Production of Snow Crab
  • Dramatic Change in past several years
    • Collapse of Alaska
    • Rise of Atlantic Canada
    • Collapse of Russia
    • Greenland also a factor
alaska fishery
Alaska Fishery
  • Continues at Low level
  • Generally Highest Quality Crab
  • Undergoing restructuring and rationalization process, will go to Individual quotas with processor quotas
  • Significant Japanese Ownership of plants
  • Fishery is volatile, and can rebound
canada
Canada
  • Major increase in total production, especially in Newfoundland, but also in Nova Scotia.
  • Primary source for Japanese
  • Two types of crab: Gulf crab and Newfoundland crab.
  • Fishery is Volatile, can expect major changes in stock status
  • Currently World’s largest supplier
greenland
Greenland
  • Quotas are not Harvested due to lack of processing capacity.
  • Crab runs very large.
  • Year round fishery
  • Potential to increase landings
closer review of price history
Closer review of price history
  • Prices driven by supply
  • High prices call out substitute products
  • Changes in Supply Lead to Price volatility
    • Customers lag in leaving market
    • Once gone, hard for certain customers to return
  • Examples: crabmeat 2002, sections 2001
u s and japan competition
U.S. and Japan Competition
  • Importance of both markets to Canada
  • Prices set by internal dynamics of market
  • Prices also set by buying strategy
    • Cash flow needs of producers
    • Seasonality of price movements
seasonality of price movements
Seasonality of Price movements
  • Consistent pattern of price increases in the fall.
    • Storage costs
    • End of season, no need to buy new product
    • Prices tend to rise in the fall
newfoundland experience
Newfoundland Experience
  • 1997 Strike
    • Caused by Market Crash
  • Final Offer Arbitration put in place 1998
    • In season adjustment of prices
    • Third party independent market expert
  • Successful in reducing volatility
managing market declines
Managing Market Declines
  • Processor point of view
  • Fisher point of view
  • How to manage risk
    • Newfoundland example
1999 to 2001 experience better than 1995 to 1998
1999 to 2001 Experience Better than 1995 to 1998
  • Peak to Trough Value
    • 5-19-95 $5.30 for 5-8 Sections
    • 5-6-98 $2.25 (58 % Decline)
    • 2-19-99 $4.50 for 5-8 sections
    • 8-29-01 $3.25 (28% decline)
  • Success reducing volatility in Sections, no precipitous market collapse.
new problems emerge
New Problems Emerge
  • Overcapacity of Processors
  • Expansion of Licenses
  • Entire Profits of Fishery depend on Crab
price premiums and market formula
Price Premiums and market formula
  • Initial formula from 1997
  • Competition forced processors to pay premiums
  • Situation not stable
    • Some businesses will fail
    • Negotiations underway
outlook for 2003
Outlook for 2003
  • U.S. will have weak demand
  • Japan will have a weak demand
  • Prices will be pushed lower
price factors in 2003
U.S. Buyers Pull back from Market due to Price

Retailers not interested in crab

Buffer Houses cannot buy over $4.00

Everyone afraid of prices falling

Buyers are paralyzed

Japanese need Canadian crab

May face weaker currency

Do not want to price market too high

Russian crab a question mark.

Price Factors in 2003
conclusions
Conclusions
  • Current Situation encourages Market Volatility in Canada
  • Market volatility limits the size of the market
  • If resource is stable, volatility keeps total return below long term potential.
  • If resource is volatile, then stake holders get no benefit from long term value.
  • Next year, fishery will not return its maximum economic value, but prices will remain high.
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