Download - ANNUAL LOBSTER MARKET REVIEW John Sackton SeafoodNews.com MARCH 24-25, 2014 New Brunswick
ANNUAL LOBSTER MARKET REVIEW
John SacktonSeafoodNews.com MARCH 24-25, 2014
New Brunswick
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
INTRODUCTION
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
4
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
5
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
SUPPLY
8
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
11
US LOBSTER SUPPLY WITH EXPORTS
Source: US Census Data, Canadian Export Data, NMFS
12
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
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
19
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
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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21
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
EXPORTS
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30
31
32
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EXCHANGE RATE WILL BE HUGE FACTOR IN 2014: CANADIAN DOLLAR HAS WEAKENED
34
BUT CA DOLLAR HAS WEAKENED EVEN MORE AGAINST EURO
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36
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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39
GROWTH OF CHINA’S IMPORTS OF LIVE N. AMERICAN LOBSTER
Source: Global Trade Atlas, GTIS, China Customs
2013 YTD OCTPROJECTED FULL YEAR
40
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
42
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
43
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
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.
OUTLOOK AND DISCUSSION
54
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
55
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
56
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.
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.
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.
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.
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