Download - ANNUAL LOBSTER MARKET REVIEW John Sackton SeafoodNews.com MARCH 24-25, 2014 New Brunswick
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ANNUAL LOBSTER MARKET REVIEW
John SacktonSeafoodNews.com MARCH 24-25, 2014
New Brunswick
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Background
• Crab, shrimp and lobster market analyst since 1997
• Preseason price and market outlooks on shrimp and crab for 17 years – Atlantic Canada, Alaska, and US West Coast
• Price arbitrator for Alaska king crab, snow crab annually since 2005
• Publisher of Seafood.com News
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INTRODUCTION
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LOBSTER 2014
• Low prices and ample supplies expanded the market. • Lobster tail prices have fallen steadily from 2011 until this
summer.• For first time in five years, landings slowed this fall, and the
smaller volumes led to a run up in prices• Chinese demand continues to be a major factor- sales of Nov-Dec lobster now continue right to the
Chinese new year• Live market prices are volatile, having already peaked for
this year.• In 2014 high prices will impact customer demand
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Are We Seeing the End of Low Priced Lobster
• Overall demand has increased• Supply has stabilized, not increasing • More processing in Maine; competition for raw
material• New markets for tails- New England retailers and restaurants- EU will get more Canadian tails and meat with no
tariff- More substitution for shrimp, scallops
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Topics covered today
• Review of supply situation• US Market• Other export Markets, including China• Recent price history and price issues• Outlook: What are some issues on the Horizon- Market expansion- Promotion- Lobster Aquaculture
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SUPPLY
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US Supply Continues at a High Level
NA Lobster Tail & Whole
Warm Wtr Lobster Tail
Lobster Meat Live coldwater Other CA0
10000000
20000000
30000000
40000000
50000000
60000000
US Lobster Imports from Canada and others
201120122013
Imports from CanadaIncreased 3.5%;Mostly from Live
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Total US Imports Increased in 2013
1 2 30
20000000
40000000
60000000
80000000
100000000
120000000
140000000
Total US Lobster Imports Increased in 2013
OtherCanada
poun
ds
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US IMPORTS OF LOBSTER BY SPECIES
Source: Urner Barry and US customs data
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US LOBSTER SUPPLY WITH EXPORTS
Source: US Census Data, Canadian Export Data, NMFS
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Global Supply of Homarus is Increasing
FAO Fishstat database; 2011-2012 data are industry estimates
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
0
20000
40000
60000
80000
100000
120000
140000
Global Supply Of Homarus Sp vs Spiny/Rock Lobsters
Homarus spp Spiny Lobster
MT
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HOMARUS LOBSTER LANDINGS DECLINED SLIGHTLY IN 2013
Source: FAO data plus estimates for 2012 and 2013 based on Canadian and Maine lobster councils
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LFA 34 had lower reported landings in 2013-14
Gulf PEI Maritimes NL0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
Canadian Lobster Landings 2011-2012
20112012
Met
ric T
ons
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REASONS FOR DECLINE• Some LFA’s in Canada had
strong or record landings, but bad weather this fall / winter and slow catches have meant lower landings in Nova Scotia, the largest single landings area.
• Maine did not experience the glut of lobsters in 2013 as in 2012 but ended up at 126 million lbs vs 127.2 in 2012
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MAJOR TRENDS IN 2013
• More Maine processing capacity meant expansion of market for tails and meat – especially at retail in New England
• Global landings of spiny lobster trending upward again; US Imports increased
• China increased its imports of lobster over 2012 despite luxury crackdown
• Volatility in pricing this spring may impact customers as costs for raw materials are up
• We may have seen the end of low priced lobster
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US MARKETS
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US REMAINS THE LARGEST MARKET FOR CANADIAN LOBSTER
NEW BRUNSWICK
PEINOVA SCOTIA
DEMAND IN US MARKET STILL MOST IMPORTANT FACTOR FORCANADIAN EXPORTERS
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US DEMAND HAS BEEN INCREASING BECAUSE OF LOW PRICES FOR PAST TWO YEARS
• RETAIL- Expanded use of Frozen
lobster- Walmart added 3
lobster items this year- Whole Foods increased
promotion
• Foodservice- Took Advantage of low
priced tails- Used in competitive
market position- Red Lobster helped by
‘lobsterfest’ in February
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US LOBSTER CONSUMPTION IS HIGHLY REGIONALIZED:
63% in Northeast
• With change in laws regarding processing in Maine, more lobster tails, meat consumed in Northeast
• Retailers offering tails as well as live lobster
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Retailers Doubled the number of lobster promotions in the US in Jan-Feb 2014
2013 20140
1000
2000
3000
4000
5000
6000
7000
8000
9000
US Retailed Lobster Promotions doubled in Jan-Feb
Stor
es w
ith Lo
bste
r Spe
cial
Retail promotions up100% in Jan / Feb
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Lobster was seen as a value compared to shrimp and crab
Source: Urner Barry Retail Database
lobster shrimp snow crab0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Retail Promotions for Jan/Feb
20132014
Num
ber o
f sto
res w
ith p
rom
otion
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Lobster tails on sale at Whole Foods
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Changes in Massachusetts laws helped market
• Massachusetts is one of the highest per capita consumption areas for lobster
• Until two years ago, lobster could only be sold whole in many circumstances
• Change in processing laws meant opening market to tails
• Has had a big impact on volume of frozen tails sold in New England - especially from Maine processors
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Foodservice expanding as well
• Lobster appeared on 35% more menus in 2013 than in 2012 according to data essentials, a menu tracking service
• 2013Restaurants with lobster specials include- Golden Corral, Darden, Quiznos, dozens more
• Based on 2013 tail prices: Golden corral bought 200,000 lbs at $13 per lb., a 20 year low price according to their buyer
• Even Long John Silver’s featuring ‘lobster’ – although actually a Nephrops which the FDA allows to be called lobster
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Monthly Supply of live, meat and tails to US market
Domestic produced tails and meat is still a very small amount
Source: Urner Barry Lobster Insider report
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Price and Volume for Canadian frozen lobsterimports
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11Jan
-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12Jan
-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13Jan
-14
Mar-14
12
13
14
15
16
17
18
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
CA Tail Import4 Oz Tail price
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EXPORTS
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EXCHANGE RATE WILL BE HUGE FACTOR IN 2014: CANADIAN DOLLAR HAS WEAKENED
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BUT CA DOLLAR HAS WEAKENED EVEN MORE AGAINST EURO
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CHINA’S CURRENCY HAS WEAKENED AGAINST CANADA
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CURRENCY WILL MAKE US A VERY ATTRACTIVE MARKET THIS YEAR
• The US is a better market for lobster exporters
- In the past, being tied to US when the CA dollar was at parity was the kiss of death, now the movement is the other way
• A weaker Canadian currency will also help exporters to Europe
• It will not help sales to China, but with only an 8% swing in value, currency is not the major factor in whether Chinese buy more Canadian lobster or not
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GROWTH OF CHINA’S IMPORTS OF LIVE N. AMERICAN LOBSTER
Source: Global Trade Atlas, GTIS, China Customs
2013 YTD OCTPROJECTED FULL YEAR
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CETA agreement will be major boost to Lobster Exporters
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New Brunswick Fzn Exports
US Japan Europe China / HK Other Asia0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
NB Fzn Exports decline
201120122013
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PEI Exports
US Japan Europe China / HK Other Asia0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
PEI Frozen Exports
201120122013
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Nova Scotia Exports
US Japan Europe China / HK Other Asia0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
20,000,000
Live Lobster Exports – Nova Scotia
201120122013
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Export Summary
• New Brunswick is seeing less exports to both US and Europe, China, although US shipments increased in 2013
• PEI has seen big gains In US exports – likely due to larger companies like Mazzetta and Red Chamber/Aquastar buying plants to serve US customers
• Nova Scotia is seeing jump in live sales to both US and China
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PRICING
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Lobster tail prices began rising this summer
Source: Urner Barry Comtell
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
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
12
13
14
15
16
17
18
4 oz tail
Prices haveReturned to2011 levels
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Long term picture of 4 oz tail price is mixed:Below PPI index; but at same level that caused
market reaction in 2011
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US volumes have increased and prices are increasing also
Source: Urner Barry
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
12
13
14
15
16
17
18
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
CA Tail Import4 Oz Tail price
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Live Prices have come down from their seasonal peak
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What happened to tails and meat?
CK 2 lb vac pack
4 oz tail
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LOBSTER MEAT SHOWS LESS VOLATILE PRICING BECAUSE IT IS A FOODSERVICE PRODUCT
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Pricing Outlook
• Shore prices heavily impacted by two factors:- Overall market demand- Pace and quantity of landings
• We had a very strong year for demand, and it will not continue the same in 2014 in all areas:- Users of tails will back off due to higher prices- Live buyers will gain due to currency- Currency factors allow cushion for sellers to better
compete- Chinese buying shows no signs of slowing for North
American Lobster• Cannot predict pace and quantity of landings for opening
May 1st.
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OUTLOOK AND DISCUSSION
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LOBSTER MARKET IS CHANGING: Processing
• Bigger and Financially strong companies have entered market: Red Chamber/Aquastar and Mazzetta in PEI.
• On the US side: Harbor Seafoods, Mazzetta’s Gloucester Plant; East Coast / Paturel new Plant in Maine; Linda Bean’s in Maine, and general growth of Maine Processing
• These companies have better financial ability to hold inventory and develop programs for value-added lobster products.
• Positive development for market expansion
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FINANCING MAY BECOME ISSUE IN 2014
• Lobster Processors have historically depended on advances to pay for purchases
• Some major purchasers facing problems with debt repayment – leading to uncertainty about loans.- Some outstanding loans may not be paid by start of
season- May be harder to get loans to pay harvesters; that
would lessen competition on the wharf- EDC could make adjustments in companies it
supports this year; could have impact• However, some stronger financial players could see
opportunity to expand market share
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Changing Live Market• Historically live market has responded to supply change
with big swings in price.• The reason is that the US live market can only absorb
limited product; when there is a glut no one wants lobster.
• Chinese demand is changing this equation- Sales of live now continue to Chinese New Year (Feb
1st)- Other Asian demand increasing also- N. American lobster is well positioned in China as a
‘value’ product• Live Prices to China declined this year, according to
Clearwater, which saw increased volume but lower price.
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AQUACULTURE LOBSTER COMING
• In the 1980’s, Alaska salmon producers had great markets and a strong industry. Then came farmed salmon and by the mid-1990’s salmon values had plummeted and many companies/fishermen went bankrupt.
• In Malaysia, a massive Darden lobster Aquaculture Project has developed the first closed cycle aquaculture for warm water lobster.
• They grow to stage 4; then supply local farmers with seed to grow out in local cages. First lobsters are now being shipped to China.
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POTENTIAL CHANGES
• In ten years, wild lobster will see competition from aquaculture, and it will have a price impact.
• Costs for aquaculture product generally decrease.• Canadian lobster prices won’t be set by local supply alone.
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IMPORTANCE OF PROMOTION
• These changes make lobster promotion very important• Lobster currently is in a very favorable climate with
expansion of demand- Good time for promotion; not a time to relax- Promotion has higher benefit in expanding market
• Important to help establish a positive image for wild lobster- MSC is a big step forward in this context- Need to position lobster in terms of animal welfare - Need to prepare for competition from Aquaculture
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LOBSTER HAS RANGE OF PRODUCT FORMS
• LIVE• WHOLE COOKS• TAILS• MEAT• VALUE ADDED PRODUCTS• SOUPS, BISQUES, DIPS
Important that pricing in one area – such as live – not cripple markets in other areas. With a large supply, all product forms needed.
China can be a destabilizing factor when live supplies may be short.
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Whole cooks
• Untreated: 86% of live weight• Treated with retention agents – 91% of net weight• Live weight of .8 lbs (350 gms) = whole cooked weight
of .72 lbs, or 315 gram• Still get 12-14 whole cooks in 10 lb. box at 76 mm.
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Buffet and Cruise lines
• Major users of whole cooks are Casinos and cruise lines, which put them on buffets.
• Buyers care about piece count• Change in lobster size will not make much difference,
piece count for 10 lbs will still be around 12-14, which is widely accepted.
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Tails
• Small tails (2.5 oz) are not economical for processors to produce because of high labor cost for throughput.
• Some buyers have in the past used small tails when prices were much higher.
• No economic advantage to produce small tails in current pricing environment
• Higher profitability in larger sizes for entire industry.
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LOBSTER SUMMARY• Shortfall in production in US and Canada in fall 2013 • Going into 2014 raw material costs are higher• China’s buying of North American lobster now major factor in
pricing at shore • China’s long term appetite for lobster is changing the market• US consumption is highly regionalized by geography and
product form; more use of tails and meat in New England is a new phenomenon
• After big expansion of market based on relatively low prices, lobster prices are returning to more average levels. We have seen the end of low priced lobster.
• Market will react to current price levels, favorable currency will help Canadian exporters manage sales
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Thank youTime for Questions