AQUACULTURE OUTLOOK March 5, 1998 March 1998, ERS-LDP-AQS-7 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- AQUACULTURE OUTLOOK, a supplement to LIVESTOCK, DAIRY, and POULTRY, is published twice a year by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20036-5831. Subscriptions to the printed version of this report are available from the ERS-NASS order desk. Call, toll-free, 1-800-999-6779 and ask for stock #ERS-LDP-AQS, $21/year. ERS-NASS accepts MasterCard and Visa. ----------------------------------------------------------------------------- Aquaculture Grows as Seafood Supply Source Over the last decade, average per capita fish and seafood consumption has remained relatively flat, at around 15 pounds, roughly 2 to 3 pounds less than turkey consumption. However, over this time period, the source of seafood products has been shifting away from wild harvest and toward aquaculture. In 1997, U.S. production of processed catfish products was close to 1 pound per capita, imports of farm-raised shrimp were likely over 1 pound per capita, and the combination of farm-raised salmon, trout, tilapia, crawfish, and other aquaculture products probably added another pound. With about 20 percent of U.S. fish and seafood consumption now being farm-raised, aquaculture is becoming a recognized segment of the livestock complex, larger than veal, mutton, and lamb combined. In 1998, a number of major trends are expected to effect the domestic aquaculture industry. First, there should be large supplies of competing meats, especially pork and chicken, available. Second, prices for catfish, the largest segment of the domestic aquaculture industry, are expected to increase as available supplies tighten. Third, with the devaluation of their currencies versus the dollar, the United States market should become more attractive to Asian seafood imports. Growth in Catfish Output Expected To Slow in 1998 Based on grower inventories reported for January 1, catfish sales by growers to processors in 1998 are forecast to expand to 535-545 million pounds, up 2-4 percent, after increasing 11 percent in 1997. Most of that growth is expected to come in the first and fourth quarters. In the second and third quarters, supplies are expected to tighten, due to a 20-percent decrease in inventories for stockers, and prices paid to farmers should strengthen. Falling farm prices in 1997 resulted in growers cutting back on inventories. The much smaller increase in production expected in 1998, combined with a strong domestic economy, is expected to put some upward pressure on both farm and processor prices, especially in the middle of the year. Sales to processors in January 1998 were 47 million pounds, up 10 percent, despite lower food-size inventories at the start of the year. Sales are expected to run about 5 percent above a year earlier through the first quarter, normally the strongest sales period. Farm Prices Expected To Strengthen in 1998 With a forecast of continued economic growth in the domestic economy in 1998, strong demand is anticipated from the restaurant and food service sectors. In 1995, the National Marine Fisheries Service estimated that restaurant and food service sales accounted for over two-thirds of all seafood sales. A strong demand picture combined with only slightly higher catfish production is expected to strengthen farm prices somewhat in 1998. After 3 years of farm prices running between 77 and 79 cents a pound, prices dropped to 71.2 cents in 1997, down 8 percent from a year earlier. Grower prices ended 1997 at 69 cents a pound, but in 1998 they are expected to strengthen in the second and third quarters as supplies of market size fish decline. Growers reported starting 1998 with about 8 percent lower inventories of food-size fish, and processors' inventories are also down slightly from the same time the previous year. However, the expected lower prices for pork and chicken products in first-half 1998 may tend to blunt any strengthening in catfish farm prices. Prices for hogs are expected to average over a third lower in first-half 1998 compared with a year earlier, and wholesale chicken prices are expected to decline about 7 percent. There is also the possibility of lower prices for imported seafood items from Asia such as tilapia and shrimp products. The currencies of Thailand and Indonesia, both major seafood exporters of the United States, have fallen considerably versus the dollar since third-quarter 1997. Growers Cutting Back Pond Building Growers reported that as of January 1, 1998, they anticipate 173,010 acres of ponds will be in use during first-half 1998. This is down about 3,500 acres from the previous year, which saw a large increase in acreage. Growers also noted that they plan on renovating or constructing about 8,300 acres of ponds. This estimate is only about a third of what it was for the first half of 1997, reflecting falling farm level catfish prices in 1997. Most of the acreage decrease was in the four largest producing states, Mississippi, Arkansas, Alabama, and Louisiana. The number of growers in these states was also down and the trend towards smaller numbers of larger farms is expected to continue as growers look for economies of size in larger operations. Growers are looking towards spreading the costs of specialized equipment over larger overall production to lower their average production costs. Food-size and Stocker Inventories Down, Fingerlings Up Grower-held inventories at the start of 1998, in terms of numbers of fish, were down for large and medium food-size fish, but up fractionally for small food-size fish. The smaller inventories of food-size fish are expected to reduce the supplies of fish over the first several months of 1998 and to exert some upward pressure on prices. Processors may be growing more sensitive to changes in supplies as their monthly ending inventories have become a smaller percentage of their monthly processing volume. In the first quarter of 1997, farm sales to processors were 136 million pounds, with an average farm price of 73 cents a pound. In 1998, the first quarter volume is expected to be higher and prices, while likely to show some strength from late 1997 levels, are expected to average lower, around 70 to 71 cents a pound. At the beginning of 1998, growers reported that the number of fish in inventory in the stocker class, those fish weighing from .06 pound to .75 pound, were down 19 percent, but the number of fingerlings, fish below .06 pound, were 18 percent higher than the previous year. While many of the stockers will likely achieve market size during first-half 1998, most of the fingerlings will not be ready for market until the latter part of the year. If processor demand remains strong during the second and third quarters, there could be periods of reduced supplies of food-size fish before the fingerlings in inventory at the start of the year achieve market weight. Aside from fingerlings, the only area where catfish growers indicated that their inventories increased was for broodfish stocks. The number of broodfish rose 2 percent to 1.19 million fish. However, the estimated weight of these broodfish was up less than 1 percent from 1997. Total egg production is a function of body weight, so the 2-percent increase in the number of broodfish in inventory is probably less significant than the very small decrease in the overall body mass of broodfish. This implies that 1998 production of fingerlings and stockers is expected to be roughly the same as in 1997. Total Farm Sales Decline Slightly in 1997 Total sales by catfish farmers in 1997 fell 1 percent to $422 million. Revenues from sales of food-size fish, stockers, and fingerlings were all lower. The poundage of food-size fish increased strongly (up 7 percent from 1996), but the poundage of stocker and fingerling sales were both down. Farmers reported total sales of food-size fish were a record 563 million pounds, but the higher poundage was offset by an 8-percent decrease in prices, from 77 to 71 cents a pound. Grower sales of food-size fish to processors accounted for 525 million pounds, so the remaining 38 million pounds were sold through other channels, such as direct to consumers or restaurants, or to brokers or wholesalers. The lower poundage of stockers and fingerlings sales helped to hold up their prices. Average unit prices for both size classes showed no change between 1996 and 1997. With lower inventories in most size classes reported for the beginning of 1998 and a strong domestic economy, prices for food-size fish are expected to move slowly upward. If this happens then the prices for stockers and fingerlings should also show some upward strength. However, for food-size fish the impact of lower supplies may not be felt until the second quarter. Another factor that could put additional upward price pressure on smaller fish would be if corn and soybean prices move lower and these declines result in reduced feed costs. If feed prices decline, growers may increase feeding rates to attempt to get their smaller fish to market size sooner. Processor Revenues Again at Record Levels Processor sales rose in 1997 for the third consecutive year. After increasing 5 percent in 1996, sales were up an additional 10 percent to 262 million pounds in 1997. The increase in processor sales was enough to offset a 4-percent decrease in overall processor prices. This was the second year in a row that overall processor prices have declined. Gross processor revenues in 1997 increased by just over $30 million to $591 million. This suggests that the demand for catfish over the last several years has been relatively elastic, at least at wholesale levels. Processor prices were lower throughout 1997, compared with a year earlier, and were the weakest during the summer months when sales volumes were posting their strongest gains. In 1998, gross processor revenues are again expected to increase as a small increase in sales volumes combines with slightly higher prices. Processor sales had very few weak spots in 1997. The only category where sales declined was for frozen whole fish, but this category only accounted for 5 percent of processor sales. Sales of both fresh and frozen product were at record levels, posting double-digit increases in 1997. Much of the growth in catfish sales in the coming years is expected to come from fillets and other prepared products. First, many chain restaurants and food services now use portion-controlled products ready to cook. Second, with increasing time pressure, many U.S. consumers are also looking for fully prepared products. In 1998, processor sales are expected to expand, but prices are expected to be under competitive pressure from other seafood products and meat products. Tilapia Imports Continue Upward U.S. tilapia imports are forecast to expand further in 1998. The strength of the dollar versus Asian currencies will also encourage more imports from countries such as Thailand and Indonesia. Domestic production is expected to increase, but will be limited to how much the live market, the biggest outlet for domestic producers, grows. Tilapia sales have also benefited from the growing Asian population in the United States. Tilapia is a commonly grown species in many Asian countries, so consumers from these areas are more familiar with it. While more grocery chains and seafood stores are carrying tilapia products, restaurants are still the primary sales outlet. The value of tilapia imports in 1997 increased 15 percent to $49 million. This follows on the heels of a 26-percent increase in 1996. Total imports of tilapia in 1997 were 53.9 million pounds, up 28 percent, with 33.7 million pounds imported as frozen whole fish and the remainder as fresh or frozen fillets. Live fish and frozen whole fish go mostly to Asian markets and Asian restaurants where many dishes call for whole fish. The changes in tilapia imports over the last several years would seem to indicate a highly elastic import demand. This implies that imports could increase strongly in 1998 with currency devaluations occurring for some of the major Asian suppliers. However, tilapia is a relatively new species in many parts of the United States and the overall demand may be increasing as more people become familiar with it. The increase in the value of imported tilapia was the result of a higher quantity of tilapia entering the country as the average price for tilapia imports fell from $1.03 to $.92 a pound. The falling average price was due primarily to a large increase in quantity and the declining prices for frozen whole fish. Frozen whole fish have a much lower average price than the filleted products. The average price for fresh fillets also declined, but only slightly, and the average price for frozen fillets increased by a nickel. On a liveweight basis, U.S. imports of tilapia in 1997 were the equivalent of 82 million pounds of foreign production. Imports of tilapia were higher in 1997 in all of the import classes (frozen whole and fresh and frozen fillets). On a quantity basis, frozen whole fish imports make up 78 percent of the total imports, but growth in imports of fillets has pushed their percentage of the market on a value basis to over 50 percent. Frozen whole fish comes mostly from Taiwan, and prices for frozen fish averaged only 57 cents a pound in 1997, down heavily from 71 cents a pound the previous year. Imports of fresh fillets come chiefly from Central and South America, while frozen fillets are from Southeast Asia and Taiwan. U.S. Salmon Imports at Record Level U.S. farm-raised salmon production in 1997 is expected to show little or no growth from 1996's output of 33 million pounds. Complete data on U.S. production was not yet available. With no great increase in new sites approval expected, any increase in production would have to come from higher yields at present production sites. The picture for domestic growers in 1998 looks much the same, little or no growth in production and an increasing volume of imports. Domestic growers faced strong competition from such countries as Chile, Canada, and the United Kingdom, plus wild salmon harvests in Alaska. Atlantic salmon imports reached 165 million pounds in 1997, up 30 percent, as shipments in all three categories (fresh or frozen whole fish and fillets) were higher. The rise in imports of fillets to 58 million pounds, up 78 percent, was a prime factor in the increase. Almost all of the increase in imports was from either the Canadian or Chilean salmon industries as they combined to supply 93 percent of all Atlantic salmon imports. With an increase of almost 26 million pounds between 1996 and 1997, fillets now account for over one-third of all Atlantic salmon imports, up from only 19 percent in 1995. Chile is the dominant supplier of imported salmon fillets, but imports of fresh whole salmon from Canada rose by 23 million pounds, and Canada was again the largest supplier of Atlantic salmon products to the United States in terms of product weight and value. Benefiting from a strong domestic economy and a lower domestic wild salmon harvest, prices for Atlantic salmon imports rose 6 percent even as the quantity was up 30 percent. Almost all of the increase in imports of Atlantic salmon products has come from farmed production. Atlantic salmon are not native to Chile, so 100 percent of their production is farm raised. Canada has some wild Atlantic salmon runs, but almost all of the commercial exports come from farm operations. Over the last several years, a slowdown in U.S. salmon exports and the rapid increase in Atlantic salmon imports has started to change the basic situation of the salmon industry in the United States. In 1997, preliminary figures show that in terms of fresh and frozen salmon products, the United States was a net salmon importer for the first time. In terms of total salmon product, the United States is still a net exporter because of the large amounts of canned salmon exported. The change from a net exporter of fresh and frozen salmon to a net importer has been the result of a number of factors. First, exports to Japan, by far our largest market, have been weak due to a combination of slowing economic growth and strong competition from Chilean and Norweign producers. Second, the strong domestic economy has helped boost restaurant sales and kept domestic wild harvest supplies in the United States instead of being exported. Restaurant sales are a very important factor in total seafood demand, but especially so for relatively expensive items such as salmon. Third, farmed operations enjoy an advantage over wild harvests in that they can assure a steady year-round supply of fresh product. Shrimp Imports a Record in 1997 After declining during the previous 2 years, total shrimp imports in 1997 were a record $2.95 billion. The increase stems from both a higher volume of imports, 648 million pounds, up 11 percent from 1996 and a 34-cent increase in the average unit price of imported shrimp, from $4.22 to $4.56 per pound. Imports of frozen shrimp (shell-on or peeled) and prepared shrimp (breaded, canned, pre-cooked, etc.) both rose substantially in 1997. While the quantity of shrimp products imported has stayed within a fairly narrow band, 582 million to 648 million pounds since 1992, there has been steady growth in imports of prepared shrimp products. Shrimp imports are still dominated by frozen shell-on or peeled products, but the value of prepared products has more than tripled between 1992 and 1997. At almost $375 million, prepared shrimp products now account for about 13 percent of the value of all shrimp imports. This trend is likely to continue in the future for a number of reasons. First, almost all seafood exporters are looking to add value to their products. Second, as production from farmed sources becomes a larger percentage of total shrimp production, the year-round production from these operations makes it profitable for companies to establish processing plants. Third, most of the major shrimp farming countries have a distinct wage rate advantage over the United States, making it more cost effective to process the shrimp there. Over the last decade, imported shrimp has become a much greater component of total U.S. shrimp supply. Data from the National Marine Fisheries Service (U.S. Dept. of Commerce) shows that domestic landing of shrimp have been steady or declining slightly while shrimp imports are rising, much of it coming from the growing farmed production. In 1988, imports of shrimp products were 2.6 times greater than domestic landings. By 1996, the ratio of imported shrimp to domestic landings had risen to 3.7. Due to a combination of economic, climatic, and technological constraints, the U.S. shrimp farming industry has remained small, with annual production of only several million pounds. In 1998, shrimp imports are expected to continue to expand as a strong U.S. economy creates increased demand and the devaluation of the currencies of many Southeast Asian countries, many of them large shrimp exporters, is expected to reduce the relative price of imported farmed shrimp products. In addition, the problems in the economies of many Southeast Asian countries is expected to reduce their domestic consumption. This, coupled with a slowing of the Japanese economy, will make many shrimp exporters more heavily target the U.S. market. Traditionally, Japan has been the world's largest market for shrimp. However, there are a number of potential downsides to the current economic problems in Asia. One, currency devaluations, may make imported supplies critical to shrimp farming too expensive, thereby causing a decline in production. However, any declines in Asian production would create opportunities for producers in such countries as Mexico and Ecuador. Second, if the economic crisis becomes too severe, it could hamper the ability of firms to conduct normal trading operations and interfere with exports. Crawfish Production Higher, Exports Up, Imports Down The Louisiana Cooperative Extension Service reported that farm-raised crawfish production rose 6 percent in 1997 to 46.9 million pounds. Even with the higher production, lower average prices caused the value of farm-raised crawfish to fall to $29.7 million, down $5.3 million from the previous year. Crawfish prices are very sensitive to changes in total production. While farmed production was up less than 2 million pounds in 1997, there was also an increase in wild harvest. The wild harvest can vary widely depending on the severity of winter weather and water conditions. Over the last 5 years, wild harvests in Louisiana have ranged from 19.5 million to 69.3 million pounds. After totaling about 2.8 million pounds in 1995 and 1996, frozen crawfish imports fell by 18 percent to 2.3 million pounds in 1997. The cause of the drop was a 123-percent tariff that has been placed on imports of crawfish from China. The tariff was placed on Chinese crawfish meat imports in response to an anti-dumping investigation. While imports declined in 1997, crawfish exports rose to 5.9 million pounds. This is about double the previous year, but it is still considerably smaller than the 8.9-million pounds exported in 1994. Almost all U.S. crawfish are shipped to Sweden for consumption during the summer months. Since crawfish is not harvested on a year around basis, it has been difficult to establish a wider market, especially as the most common product is live crawfish. Like the catfish market of 30 years ago, most crawfish is consumed where it is produced. Estimates are that 80 percent of the crawfish produced in Louisiana are consumed there. Oyster and Clam Exports Up, Mussel Exports Fall In 1997, U.S. exports of mussels, clams, and oysters were valued at $16 million, down about $0.7 million, 4 percent, from 1996. The decrease in export value came from a 46-percent drop in the value of mussel exports. The value of both oyster and clam exports rose in 1997. The value of oyster exports was up in 1997, but they are still considerably lower than in previous years. Clam exports, however, rose for the third year. For U.S. mollusk exports, the chief markets have been Canada and Asian countries. In 1998,exporters are expected to try to target more product to Canada, Mexico, and other countries to offset the anticipated decline in demand for mollusk imports in Asian countries. Oyster exports totaled $6.1 million in 1997, a 7-percent increase over the previous year, but still below shipments in 1994 and 1995. Since over 40 percent of oyster exports go to Asian countries, shipments in 1998 are likely to be lower due to the stronger dollar and declining economic conditions in many importing countries. Canada remains the largest single market, taking 43 percent of U.S. oyster exports in 1997, and exports to Canada are expected to help offset falling exports elsewhere. Mussel Imports Rise, Clam and Oyster Imports Down For mollusk imports, mussels seem to be the growing star. While the import quantities of oysters and clams has generally been declining over the last several years, imports of mussels have more than doubled. Mussel imports have gone from 11 million pounds in 1994 to 27 million pounds in 1997. No absolute data are available on what percentage of mussel exports are from aquaculture operations, but the two major exporters to the United States, Canada and New Zealand, have extensive mussel farming industries. The products from each of the countries are somewhat different. Most of the Canadian mussel imports are from their Atlantic provinces and are blue mussels which are also grown in the United States. The New Zealand products are known as the greenshell or greenlipped mussel, which is somewhat larger in size and has a different coloration. Mussel consumption has been boosted by the better preparation now common to the mussel industry, which includes debearding the mussels and making sure they contain less sand or grit. These steps along with the relatively low cost of mussels, have them much more "user friendly" to consumers and restaurants. In 1998, mussel imports should continue to rise and the higher value of the dollar should help to slow the decrease in clam and oyster imports. This is only the second year that data on scallop imports has been added to that of other aquaculture products. Much of the imported product is wild harvest scallops, but a growing percentage of scallops are being farmed in places like China, Japan, Chile, and other countries. In 1997, scallop imports reached 60 million pounds with a value of $238 million, a 3-percent increase in quantity and a 20-percent increase in value. Ornamental Fish Exports and Imports Down in 1997 In 1998, U.S. ornamental fish producers may have to look towards the domestic market for a larger percentage of their sales, as exports are expected to decline. Many of the largest markets for U.S. ornamental fish are in Japan and other Asian countries. The strength of the dollar versus the yen and other Asian currencies has increased the relative price of U.S. fish and is expected to work against any export expansion. Also, the economic downturn is expected to cut into demand as consumers in these countries reduce expenditures for non-necessities. In 1997, ornamental fish exports fell to $14.5 million, down $0.9 million or 6 percent from the previous year. This is the second consecutive year that U.S. ornamental fish exports have declined. However, ornamental fish exports are still probably the largest single export product for the U.S. aquaculture industry. Exports to Japan, the largest U.S. market, declined by 33 percent, but surprisingly shipments to Hong Kong were about even with 1996. Hong Kong's imports had fallen strongly in 1996. The general decline in shipments to Asia were partially offset by more exports to Canada, up 6 percent, and Mexico, up 39 percent. This was the second year of strong growth in shipments to Mexico after the 1995 peso devaluation. In 1998, U.S. producers will have to look towards Canada and Mexico and possibly renew increases to the European Union to help balance out expected declines in Asia. Imports of ornamental fish fell by 7 percent to $49.3 million in 1997, the second consecutive year of lower shipments. The only major countries posting increases were Thailand and Sri Lanka. However, favorable currency exchange rates are expected to help boost shipments from Asian countries in 1998 and reverse the 2-year decline in imports. Principal contributor: Dave Harvey 202-694-5177END_OF_FILE