Snow Crab Outlook 2018 John Sackton Seafood Datasearch Shippagan, Moncton, Shediac March 20-22, 2018 1
40 Years in Seafood Industry Crab, shrimp and lobster market analyst since 1997 Preseason price and market outlooks on shrimp, crab, lobster Atlantic Canada, Alaska, US West Coast Price arbitrator for Alaska crab Shrimp, Crab, Lobster Analyst for NFI Co-Founder of NFI s Global Seafood Market Conference Publisher of Seafood.com News Background 2
Outline for Today Market History: Historic High Prices What Happened with Forecast in 2017 Canadian Supply Outlook and Global supply Japan Market US market Foodservice Product Sales Retail Product Sales Different Pricing Scenarios Outlook for 2018 3 3
In recent years snow crab has broken out of its price band Are we in a new $6.50 - $8.50 trading range? 4 4 4
Snow Crab Annual Pricing (5-8 NL) High Low Avg 9 8 7 = Sept 2017 6 5 4 3 2 1 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (sep) 5 5
Harvester prices also set record in Gulf $6.00 Vessel Pricing- $CA Midshore Fleet Pricing All NB Pricing DFO All Quebec Pricing DFO $5.00 $4.00 $CA Per Lb $3.00 $2.00 $1.00 $0.00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Shore Prices from Association des crabiers acadiens; DFO 6 6
Snow crab shore prices NS, NL, NB/PEI snow crab shore prices NL PEI NS $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 04/12/16 04/26/16 05/10/16 05/24/16 06/07/16 06/21/16 07/05/16 07/19/16 08/02/16 08/16/16 08/30/16 09/13/16 09/27/16 10/11/16 10/25/16 11/08/16 11/22/16 12/06/16 12/20/16 01/03/17 01/17/17 01/31/17 02/14/17 02/28/17 03/14/17 03/28/17 04/11/17 04/25/17 05/09/17 05/23/17 06/06/17 06/20/17 07/04/17 07/18/17 08/01/17 7
Long term impacts on shrimp 8
Long term impacts on crab Global Snow Crab Supply (Major Producers) 120,000 $9.00 100,000 Financial Crash Loss of Japan live Crab Increase in Gulf, NL Japan Buy Supply shock; raw frozen $8.00 $7.00 80,000 $6.00 $5.00 60,000 $4.00 40,000 $3.00 $2.00 20,000 $1.00 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Gulf + NS Newfoundland Alaska Russia NL 5-8 $0.00 9
Can crab prices stay in higher Shrimp Price volatility very low, except for disease years. Aquaculture product with strong growth in India and Ecuador Global supply Increasing Prices likely to weaken value range? Crab Wild product with decreasing supply More buyers competing for snow crab For several years buyers reacting to shortages, some of them short term. Demand has not fallen as much as supply (so far) 10
Totally wrong about 2017 Season 2017 Thinking Crab supply is up due to Gulf Buyers already cutting back in US Talk at Seafood Show was for Sales Prices $7.00 or under in US. Market has potential for correction Best scenario: prices remain close to last year s spring prices, perhaps a little higher. Bad scenario: buyers walk away from crab, leaving processors with high cost inventory What Actually Happened Crab Supply to US Went Down Buyers Fearful of Not Getting Crab Prices Started at $7.25 in NL and rose to $7.85 Market Did not Correct Prices in 2017 much higher than 2016. Processors do not have inventory 11
Why Were Prices High Japan s Buying Stronger than Expected US overall supply declined despite increased Gulf Landings Even though retail and foodservice cut back on crab, market remained short Significant speculative buying in Gulf Price competition at Wharf with new players With raw material cost locked in, sellers had no room to discount 12
Japan Took 40% more Crab from Newfoundland in 2017, Despite Production Falling 23% NL Snow Crab Japan US Total Sections PERCENT OF PACK 90 80 70 60 50 40 30 20 10 0 2015 2016 2017 30,000 25,000 20,000 15,000 10,000 5,000 0 METRIC TONS OF SECTIONS Japan s willingness to buy snow crab set the market tone in 2017 13 13
US Imports of Barents Sea Snow Crab declined in 2017 Russia Norway Lithuania China (mainland) Greenland Latvia 20,000,000 18,000,000 16,000,000 POUNDS 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 2014 2015 2016 2017 Snow crab 14 14
Alaska Opilio production has declined US Domestic Japan Japan (via China) 30,000 25,000 METRIC TONS 20,000 15,000 10,000 5,000 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Est Source: Japanese customs, NMFS, Estimates Seafood Datasearch 15
US Snow Crab Supply fell 10.2% in 2017 180,000,000 Alaska Canada Russia Norway/Grn/Latvia Other US Exports 160,000,000 140,000,000 120,000,000 100,000,000 80,000,000 60,000,000 40,000,000 20,000,000 0-20,000,000 2010 2011 2012 2013 2014 2015 2016 2017-40,000,000 16 16
Japan s Snow Crab imports fell in 2017 despite increased buying from Canada 30,000 crabmeat snow crab 25,000 20,000 15,000 10,000 5,000 0 2014 2015 2016 2017 17 17
Is China keeping more snow crab? Chinese Imports of Frozen Snow Crab vs. Crabmeat Exports Metric tons 35,000 30,000 25,000 20,000 15,000 canada to china China from world China to Japan Total china imports Canada exports to China Sources Russia, Korea N&S US Canada Norway 10,000 5,000 Crabmeat to Japan 0 2010 2011 2012 2013 2014 2015 2016 2017 Est 18
Global snow crab supply projected to decrease in 2018 Global Snow Crab Supply 160000 Russia Pacific Barents Sea Can-NL Can-Gulf etc Alaska Greenland 140000 120000 100000 80000 60000 40000 20000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Seafood Datasearch estimates 19 19
US share of snow crab increasing; but stable past 3 years 160,000 US and Japan Consumption 70% 140,000 60% 120,000 100,000 80,000 60,000 40,000 50% 40% 30% 20% 20,000 10% 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 US Japan Japan Live/Fresh US Percent 0% 20
Factors Affecting 2018 Prices How much competition at dock for crab How quickly Gulf quotas are harvested Will Japanese continue to pay high prices Will the US market continue to care about snow crab. Are cutbacks in quotas greater than falloff in demand Will Russia ship less snow crab to US 21
MSC Impacts MSC has suspended the certification for Gulf Snow Crab. Matters most at retail Retail prefers large size crab from Gulf Chains likely to react differently Will Make Effort to procure from other sources Some may use substitutes Dungeness Will not affect sales to Japan, China 22
Canadian Landings will decrease in 2018 140000 120000 100000 80000 60000 40000 20000 0 2010 2011 2012 2013 2014 2015** 2016** 2017 2018 Newfoundland Gulf NB & Quebec, NS 23 23
Alaska Could See a snow crab rebound in a few years 2017 survey found abundance of recruits If they survive, Alaska Opilio could rebound in the future 24 24
Snow crab volumes likely at bottom In both Alaska and Newfoundland there are some positive signs about recruitment. Barents Sea crab production is increasing year by year. Russian Far East Quotas rising Upshot is that market supply will likely begin to improve in 12 to 36 months. 25
Retail Promotions of Snow Crab decreased again in 2017 16000 Retail Snow Crab Promotions 2016 and 2017 14000 12000 10000 8000 6000 4000 2000 0 1/1/16 2/1/16 3/1/16 4/1/16 5/1/16 6/1/16 7/1/16 8/1/16 9/1/16 10/1/16 11/1/16 12/1/16 Seafood Datasearch and Urner Barry snow crab 2016 snow crab 2017 3 per. Mov. Avg. (snow crab 2016) 3 per. Mov. Avg. (snow crab 2017) 26 26
90000 80000 70000 60000 50000 40000 30000 20000 10000 0 Retail Demand Began to Shift to Shrimp From Crab Retail Promotions (Stores) shrimp crab lobster Linear (shrimp) Linear (crab) 1/1/16 2/1/16 3/1/16 4/1/16 5/1/16 6/1/16 7/1/16 8/1/16 9/1/16 10/1/16 11/1/16 12/1/16 1/1/17 2/1/17 3/1/17 4/1/17 5/1/17 6/1/17 7/1/17 8/1/17 9/1/17 10/1/17 11/1/17 12/1/17 Promotions as proxy for volume 2017 Shrimp +1.44% Crab -35.8% 4 th Qtr Shrimp +6.76% Crab -24.43% Note lobster promotions exceeded crab in most of 2017 27 27
Higher Prices Led to Less Usage of Snow Crab Foodservice: most decline in snow crab Retail 52 week data thru November showed a slight increase in dollar sales for entire crab category. Volume usage appeared similar across the entire crab complex, likely due to some Dungeness replacing snow crab. Pounds 60000000 50000000 40000000 30000000 20000000 10000000 Crustaceans Foodservice 2016 2017 0 snow crab King Crab dungeness crabmeat Fzn lobster Seafood Datasearch 28
Dungeness vs Snow Crab Pricing $11.00 $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 UB Crab, Dungeness, Whole Ckd, 1 1/2-2 lbs. UB Crab, Dungeness, Cluster, Ocean Run UB Crab, Snow, Newfoundland, Cluster, 5-8 oz. Snow crab higher than dungeness for first time in many years 29
Per capita consumption of crab remains in narrow band; Changed Little in 2016 Pounds of Crab (all products) per capita 0.70 0.65 0.60 0.55 0.50 0.45 0.40 0.35 0.30 crab 2001200220032004200520062007200820092010201120122013201420152016 Crab consumption is still 20% below its peak in 2006, 2007. With prices increasing, overall consumption will be declining 30
Moderate interest in crab At the Boston Seafood Show, there was little interest in crab. Buyers appear to have accepted high prices, but are decreasing purchases. Initial price contracts for Newfoundland from Japan in the $7.75 range. Alaska sales to Japan around $8.35 cif ($8.05-$8.10 fob) 31
Japanese paying higher prices to maintain supply 60,000 Japanese Supply was stable in 2017 $8.00 50,000 40,000 $7.00 $6.00 $5.00 30,000 $4.00 20,000 10,000 $3.00 $2.00 $1.00 0 1 2 3 4 5 6 7 $0.00 NF Total Canada incl gas Russia U.S. same (via China) others japan FOB price 32
Japan may import less this year due to quota cutbacks 33
Market share of global snow crab 60,000,000 Estimated market share for Global Snow Crab JAPAN CHINA US 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 0 2013 2014 2015 2016 2017 34
Sales pricing was strong in 2017 35
Price spread among sizes has widened 36
2009, 2012, 2014, 2015 Prices were lower at end of season than April/May Prices Go Down in April and May 2009 2012 2014 2015 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 Dec-Mar April May June July Aug Sep Oct Nov 37
2010,2011,2013,2016 Prices higher at end of season Prices Rise in April and May 2010 2011 2013 2016 2017 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 Dec-Mar April May June July Aug Sep Oct Nov 38
Years when Harvester Prices decline are the years when prices have fallen Gulf NB $6.00 $5.00 $4.00 $3.00 2018? $2.00 $1.00 2012 2013 2015 $- 2009 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Shore Prices from Association des crabiers acadiens; DFO 39
Currency factor in US sales April - May current 2017 has been slightly strong vs dollar than 2016 (bad for exporters) 40
Issues for Gulf Landings in 2018 Pressure to land crab quickly to avoid interaction with Right Whales. Heavy landings in a short period of time can hold down shore prices. Initially demand is very strong because of low inventory Later in the season it will become more apparent if buyers are backing away. Impact of MSC withdrawal uncertain Alaska now has some unsold crab; which was not expected this year 41
Consolidation Change in Buying Crab purchases have become more concentrated in Newfoundland; New competition from buyers in the Gulf Impact With more market strength, large crab buyers can withstand market softness without lowering prices Competition at the wharf is a major factor in determining pricing in the Gulf. A compressed landing period lessens competition, as all buyers can get crab they need. 42
No predictions this year In 2017 it appeared in March that the market was soft: Buyers at Boston seafood show talked of prices at $6.95. Many said they would not order if prices over $7.00. Season opened to strong Japanese buying quickly pushing prices up to $7.25 in Newfoundland, and they continued to go up from there. 43
Factors to Watch This year Keeping Prices High Overall reduction in volume. Lack of inventory, strong market demand. Expectation that Japanese will want to maintain supply in face of global decline in stocks. Disciplined sales tactics by big producers maximize prices. Pushing Prices Lower Heavy landings early in the season to avoid whales. Buyers may not be very interested in snow crab. 3 rd year of high prices gives many buyers ability to walk away. Rising interest rates and possible trade disruptions make it harder to finance crab 44
Outlook My personal gut feeling is that prices will start out strong, but by the middle to later in the season, will see some flat prices or declines. It may not be a good year to speculate on crab. Little upside, but significant downside. 45
Thank you. Time for Questions 46