AQUACULTURE OUTLOOK October 4, 1999 October 1999, ERS-LDP-AQS-10 Approved by the World Agricultural Outlook Board --------------------------------------------------------------------------- AQUACULTURE OUTLOOK, 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 # SUB-LDP-AQS-4040, $24/year. ERS-NASS accepts MasterCard and Visa. --------------------------------------------------------------------------- Competition Facing U.S. Aquaculture in 2000 and Beyond Numerous forces are expected to influence the growth of the U.S. aquaculture industry over the next several years. These forces will be in the areas of competition within the seafood market, competition from other protein sources, and changing consumption patterns in many of the world's economies. In the domestic market, aquacultural producers were confronted with a basically flat U.S. per capita seafood consumption over the last decade. This means that the only growth in total U.S. consumption has come from the 1 to 2 million person population increase that the United States experiences each year. Unless this changes, the only way consumption of a specific commodity (for example catfish) will increase is by taking market share from other fish species. This situation would favor already established aquaculture species that have a level of production to justify research into various areas of the production process and to explore promotional efforts to broaden product awareness and acceptance among consumers and the food service industry. This concentration in the seafood diet to a small number of species can already be seen in the current levels of consumption for the major seafood species. According to 1998 data from the National Marine Fisheries Service, per capita consumption of shrimp, salmon, tuna, and catfish made up approximately 50 to 60 percent of total seafood consumption. This share may increase as a greater percentage of total food consumption is eaten away from home, and food service firms may choose to carry only a limited number of seafood species on their menus. Domestic aquaculture producers will also be faced with strong competition from other protein sources, especially pork and poultry. Both of these industries are expected to expand production in the coming years, and most of this larger production will be aimed at domestic users. Pork and poultry producers are expected to try to expand consumption of their products through strong promotional effort and the development of new products for both the at home and the food service markets. Recovery of Asian Economies Benefits Seafood and Aquaculture Many of the Asian countries that experienced economic difficulties over the last several years are either large producers or purchasers of seafood and aquaculture products. Japan has been the world's largest purchaser of seafood. As Japan recovers, it is expected to expand its imports of seafood from a number of countries. The chief beneficiary in the United States is likely to be the wild harvest salmon industry, but higher imports will also impact the farmed mollusk industry. Korea's economic expansion will also positively impact the U.S. mollusk industry and some other speciality items. As the Japanese and Korean currencies strengthen against the U.S. dollar, their markets will become more attractive to U.S. exporters and also to aquaculture producers in other Asian countries. Thailand and Indonesia are large producers of farm-raised shrimp, tilapia, and other species and will benefit from improved economic conditions in Asia, especially Japan. As the U.S. market becomes somewhat less attractive, U.S. producers may find less competition from imports, which could allow for them to expand production. Catfish Sales Expected Higher in 1999 Sales of catfish by growers to processors are expected to be between 585 million and 595 million pounds in 1999, 3 to 5 percent above a year earlier. Over the first 8 months of 1999, sales totaled 397 million pounds, 3.7 percent higher than a year earlier. Based on the size of grower inventories reported at the beginning of July, grower sales are expected to show modest growth through the remainder of 1999 and into 2000. Farm prices for catfish are expected to remain in the low to mid 70 cents per pound range through the remainder of the year, and the annual average for 1999 is likely to be close to that of 1998. Falling prices for both corn and soybeans over the last several years have resulted in declining feed costs for most catfish farmers. This has been especially beneficial as overall farm prices for catfish have been relatively stable. In the last 2 years, the combination of lower feed costs and stable prices have improved the economic position of most catfish growers and supported an expansion in pond acreage and grower inventories. However, the latest forecast indicates that grain prices may be bottoming out in 1999 and are expected to increase slightly in 2000, although they will still be low on a historical basis. The farm price of corn in 2000 is now expected to be about even with 1999's forecasted average of $1.95 a bushel. The price for 48 percent protein soybean meal is forecast to average around $139 a ton in 1999 and increase to $148 a ton in 2000. This is still a far cry from the $267 per ton average of 1997. Catfish Production Forecasted Up in 2000 Catfish growers indicated that their stocks of broodfish, foodsize fish, stockers, and fingerlings were all higher than in 1998. The July 1 National Agricultural Statistics Service (NASS) survey reports fish holdings by growers in the four largest producing States, Mississippi, Alabama, Arkansas, and Louisiana. This is the second year in a row that foodsize fish and fingerling holdings have increased. After declining in 1998, stocker inventories rose significantly, but were only slightly higher than in July 1996. The four largest catfish producing States account for over 90 percent of total production. As of July 1, 1999, the number of foodsize fish in inventory was estimated at 302 million, 16 percent more than a year earlier. The increases in inventory for small and large foodsize fish more than offset a decline in the medium foodsize fish inventory. The number of small foodsize fish jumped 21 percent and the number of large foodsize fish was up 5 percent. For small foodsize fish, higher numbers in Alabama and Mississippi accounted for most of the gain. For large foodsize fish, increases in Alabama and Arkansas pushed the total higher. The inventory of foodsize fish at the beginning of July constitutes the supply of fish going to processing plants in the third quarter and into the fourth quarter of 1999. The increase in the supply of foodsize fish available means that plants are likely to process large numbers of fish in second-half 1999. This large supply is expected to cause some softening in the farm price for catfish. In 1998, farm prices fell in the second half of the year as supplies increased. Over the last 4 months of 1999, prices are expected to stay somewhat higher than they were in the previous year. The strength in economy is expected to support sales to the food service sector. Additionally, catfish processing plants have reported considerably lower inventories so far in 1999 than for the previous year. The July 1, 1999, report of grower inventories showed that the number of stockers jumped 24 percent from the previous year and that the number of fingerlings were up 8 percent. Normally the stockers and fingerlings held in inventory as of July 1 represent the fish that will be available for processing by the end of 1999 and for most of the first half of 2000. These increases combined with the almost 300 million foodsize fish already in growers inventories indicate that there are not likely to be any shortages of fish through the remainder of 1999 and into the first half of 2000. This, of course, could be upset if weather conditions prevent harvest for a prolonged period of time or if there is a larger than normal off flavor problem. Even with the report showing larger grower inventories, the number of fingerlings and stockers that will be available for harvesting is uncertain. The mortality rate for small catfish is much higher than for other livestock species. An example of this is that as of July 1, 1999, growers reported that they had almost 300 million foodsize fish in inventory, that is fish that had already achieved market size. In addition, there were 776 million stockers and 1.8 billion fingerlings in inventory. However, in 1999, growers are expected to sell approximately 590 million pounds of fish to processors. If these fish averaged 1 to 1.25 pounds each, then processors would be receiving between 470 million and 590 million fish. So, with a combined inventory of 2.5 billion stockers and fingerlings, any change in the overall survival rate can dramatically alter the supply picture for 2000, even with continued increases in demand. Little Change Expected in 2000 Farm Prices In 2000, the average farm price for catfish is expected to show little change from 1999's forecasted 74 cents per pound. Barring any long term harvesting disruptions, prices are expected to average in the low to mid 70 cents a pound range through the first half of 2000. Overall increases in farm production are expected to be balanced by rising demand for finished retail product. On the positive side, the food service industry, the major purchaser of catfish products, continues to experience strong sales as a robust economy with low unemployment boosts business. Relatively stable prices for most inputs, besides live catfish, and growing volumes will help processors maintain margins even in the face of what are expected to be stable wholesale prices. As they have for the last year, catfish processors are expected to be faced with strong competition from the pork and poultry industries over the last part of 1999 and through at least the first half of 2000. While the forecasts are for continued imports of large quantities of seafood, much of it is relatively high-priced products that compete only marginally with catfish products. Over the first 8 months of 1999, farm sales to processors totaled 397 million pounds, with an average price of 74.6 cents a pound. This implies gross sales of $296 million for catfish growers, up 2 percent from a year ago. Over the last 4 months of 1999, farm prices for catfish are expected to be somewhat stronger than in the same period in 1998 and average 1 to 2 cents a pound more. For 1999, grower sales of catfish to processing plants are expected to generate between $420 million and $430 million. Acreage Continues Upward Favorable conditions for catfish growers over the past year have led to continued growth of pond acreage. In the July report, growers indicated they expected that 172,200 acres of ponds would be in use between July 1 and December 31, up 5 percent from the second half of 1998. Although acreage increased in each of the four chief producing States, Mississippi accounted for most of the increase as its area rose by 5,000 acres. The total acreage use breakout is 138,700 acres for foodsize fish production, 24,600 acres for fingerling production, and 5,530 for broodfish production. During the second half of 1999, growers reported they expected 9,700 acres of catfish ponds will either be undergoing renovation or will be under construction. Processor Revenues Increase Over the first 8 months of 1999, catfish processors sold 198 million pounds of product, up 3 percent from a year earlier. For all of 1999, processor sales are forecast at around 290 million pounds or a gain of 3 percent from the previous year. From January through August, prices for catfish products have averaged $2.34 a pound, 1 percent above the same period in 1998. This is the second year that the average catfish price has shown some growth after falling in both 1996 and 1997. Much of the increase in the average price is due to stronger sales increases for filleted products than for whole fish or other products. With both increased sales volume and average prices, gross processor revenues from catfish products over the first 8 months of 1999 reached $464 million, 4 percent above the same period in 1998. Processor revenues are expected to reach between $680 million and $690 million in 1999. If this level is achieved, then gross revenues for catfish processors would have increased by $270 million, or 66 percent, in the 1990's. During the first two-thirds of 1999, processor sales have been strong in most categories. Sales at the beginning of 1999 were running at or below the previous year, but have strengthened over the last several months, so that total sales through August are now 3 percent higher than in the same period in 1998. Overall sales of fresh and frozen catfish have been higher than the previous year, but sales of some product types have fallen. As in many recent years, sales of filleted products have been the major growth area for catfish processors. Fresh filleted sales were up 9 percent, and frozen filleted sales rose by 3 percent. Together, filleted sales account for 61 percent of all catfish product sales. The faster growth in filleted sales has also meant a steady upward creep in the average price, as filleted products are normally the most expensive product. Trout Report Changed Through 1998, NASS surveyed the domestic trout industry once a year. The reporting period for these surveys was from September 1 of the previous year through August 31 of the current year. On August 19, NASS announced that the trout survey originally to be released on September 29, 1999, would not be released until February 3, 2000. This change in the release date allows the reporting period to be changed to a calendar year basis, January 1 - December 31. This serves two purposes. First, the new trout report will have the same reporting period as the Aquaculture Census. Second, the annual reporting period will match the reporting period of the annual Catfish Production Survey. These two reports will now have the same release date. The switch to the calendar year is expected to reduce the reporting burden on trout growers. The 2000 report will also increase the number of reporting States to 18 with the addition of Arkansas, Maine, and Minnesota. U.S. Tilapia Use Moves Higher Both domestic production and imports of tilapia are continuing to expand. The latest estimates for the domestic industry show production at approximately 18 million pounds, liveweight, in 1998. These estimates are from a survey of growers by the American Tilapia Association. Unlike many other aquaculture species, domestic tilapia production is widely dispersed in the United States. The north central region is now one of our largest producers of tilapia. All north central region production comes from indoor recirculating systems utilizing heated water. One production disadvantage in the north central region is the high cost of shipping live fish to the prime markets on the east and west coasts. Tilapia production should continue to expand in 1999 and 2000 as a number of new production sites in the southern and north central regions come on-line. The long-term growth prospects for domestic tilapia production are somewhat constrained however, if domestic growers are limited to supplying the live market. The larger long term market is expected to be for processed products, but U.S. growers must be able to lower production costs so that they can compete effectively with imported products. Imports of tilapia are larger than domestic production. For comparison, U.S. imports of tilapia, on a liveweight basis, reached 94 million pounds in 1998. This was a 15-percent increase from the previous year, and imports have continued to rise in the first half of 1999. U.S. tilapia imports in the first 6 months of 1999 were 26 percent higher than the previous year. Frozen whole tilapia continues to dominate imports. Total imports were 37.6 million pounds, with whole fish at 27.8 million, fresh fillets at 5.6 million, and frozen fillets at 4.3 million. Imports of tilapia were higher in all categories. Shipments from Taiwan have always dominated frozen whole imports, but over the last couple of years, Taiwan has also begun to export fresh and frozen fillets. In the first half of 1999, Taiwan was the largest source of frozen tilapia fillets, ahead of Indonesia. Taiwan is still a relatively small supplier of fresh fillets, but if it can duplicate its success in the frozen fillet market where it has almost doubled shipments to the United States in each of the last 4 years, it will be a strong competitor to the Central American countries now supplying the majority of fresh fillets. The value of tilapia imports jumped 40 percent to $35.4 million in the first half of 1999. The average price for frozen whole tilapia and frozen fillets both increased, and prices for frozen whole fish increased 7 cents to $.55 a pound. This is a turnaround from the previous 2 years, which saw tilapia prices fall in all three market categories. With tilapia imports fairly steady throughout the year, imports for 1999 are expected to reach 75 million to 80 million pounds on a product weight basis and 115 million to 120 million pounds on a live weight basis. Prices may decline slightly in the second half of 1999, but the overall value of imported products is expected to reach between $70 million and $75 million. Given the current strong domestic economic conditions, tilapia imports are expected to remain well above their year earlier levels in the second half of 1999 and into 2000. However, the pace of imports might slow somewhat if the U.S. dollar weakens against Asian currencies, making imports of fisheries products more expensive. With U.S. pork and chicken production also rising, tilapia will face strong competition from these products. U.S. Salmon Imports Higher, But Canadian and Chilean Shipments Down U.S. imports of Atlantic salmon in first-half 1999 reached 117.5 million pounds and $311 million, up 13 and 25 percent from first-half 1998. All three Atlantic salmon import categories (fresh whole fish, frozen whole fish, and fresh and frozen fillets) showed increases in both quantity and value, but the largest growth was in the fresh and frozen fillets categories. Imports of filleted products in the first half of 1999 were 56 million pounds, about the same as imports of fresh whole fish. Shipments of filleted products have risen very quickly over the last several years. For example, imports of filleted products totaled 56 million pounds in first-half 1999, but were only 16 million pounds in the first half of 1996. The value of filleted products totaled $161 million in the first half of 1999, passing those of fresh whole fish and accounting for 52 percent of all Atlantic salmon imports. The biggest development in the Atlantic salmon market so far in 1999 is that the import growth has not come from either Canada or Chile. These two countries are the dominant suppliers of Atlantic salmon products to the United States and have accounted for almost all the growth in imports over the last several years. In the first half of 1999, the growth in imports has come from European growers, notably those in Norway and the United Kingdom. Higher imports from these sources more than offset small declines in shipments from Canada and Chile. The decrease in imports from Canada was puzzling, as the current weakness of the Canadian dollar versus the U.S. dollar would be expected to make the U.S. market very attractive. If the normal seasonal pattern for salmon imports holds true in 1999, shipments are expected to reach between 230 million and 240 million pounds and to be between $600 million and $620 million in value. With the growth of the worldwide farmed salmon industry, salmon has changed from a seasonal product to a regular component of grocery store retail sales and a popular seafood item at a wide variety of restaurants. The condition of the U.S. economy will be a major factor in the future growth of the worldwide farmed salmon industry. A strong U.S. dollar is expected to make imports from most countries relatively less expensive. Imports are expected to continue to be strong in the second half of 1999 and into 2000. Shipments from Canada and Chile are expected to be close to or slightly above year-earlier levels. While imports of Atlantic salmon have been increasing, the United States' wild harvest of Pacific salmon in Alaska has been falling, and exports of U.S. salmon products have declined. For 1998, the latest data available, the U.S. wild harvest of salmon was estimated at 644 million pounds. This is an increase from 1997, but it is the second lowest wild harvest in the 1990's and well below the record harvest of over 1 billion pounds in 1995. Even though the quantity of harvest increased in 1998, the value declined by 5 percent to $258 million. This is the third decline in a row and the lowest value for a salmon harvest, even on a nominal basis, since 1978. The primary cause of the lower harvest and the resulting falling value is the lower level of sockeye catch. The sockeye catch has normally been one of the largest, and the price of sockeye is second only to king salmon. Sockeye salmon has also been the primary salmon exported, chiefly to Japan. The decline in the sockeye harvest had three impacts. First, the falling harvest greatly lowered the total value of the U.S. salmon harvest. Second, because of its relatively high price, the total value of the salmon harvest was also lower. Third, sockeye was probably the salmon species that would have competed most directly with farmed Atlantic salmon, so a partial void in the market was available to be filled by farmed products. Although Canada and Chile are still the largest suppliers of farmed Atlantic salmon to the United States, the increase in imports from European countries is expected to continue through the end of 1999. A number of factors will influence the Atlantic salmon market in the second half of 1999. First is the impact of the anti-dumping duties on Chilean producers' shipments to the United States. Second is the competitiveness of Canadian salmon prices due to the weakness of the Canadian dollar versus the U.S. dollar. Canada also enjoys an advantage over most producers in transportation costs. Third is the impact on the Alaskan wild harvest salmon fishery and the worldwide farmed salmon industry of a recovery in Japan's economy, which is expected to increase salmon demand in that country. Shrimp Imports Decline Over first-half 1999, U.S. shrimp imports were 299 million pounds, down 2 percent from the same period in 1998. After rising strongly in 1998, prices in the first half of 1999 fell, driving down the value of imports by 13 percent to $1.2 billion. Most of the decline was due to fewer imports from Western Hemisphere countries, primarily Mexico and Ecuador. The presence of El Nino plays havoc with the farmed shrimp industry, as it lessens the up welling of cold water on the west coast of South America and reduces the availability of gravid (egg bearing) female shrimp that are used to supply shrimp hatcheries. The drop in exports from Mexico and Ecuador was partially offset by larger imports from a number of Asian countries. Even with all the turmoil that has rocked Indonesia, its exports of shrimp to the United States continues to grow. In the first half of 1999, the quantity of shrimp imported from Indonesia was up 22 percent to 16.4 million pounds. The value of shrimp imports from Indonesia did not increase as much (3 percent) and was $81.3 million. Imports of shrimp in 1999 are expected to fall short of the record set in 1998, but with domestic demand expected to be strong through the remainder of 1999 and into 2000, shrimp imports should continue at a high level. For 1999, import quantities are estimated at 675 million to 685 million pounds, with a value between $2.75 billion and $2.90 billion. Shrimp imports normally are strong at the end of each year, but in 1999 the imports of relatively high-priced food items such as large shrimp or smoked salmon may be especially strong due to the combination of celebrating the end of a strong year economically and the beginning of the millennium. The changes in the quantities imported and the prices for the various shrimp products were somewhat uneven. On the quantity side, imports of frozen, fresh, and prepared products were all lower, but the decline on a percentage basis was much stronger for fresh shrimp. This is likely a result of lower production in the Western Hemisphere countries that normally are chief suppliers to the United States. The lower supplies from major importers were combined with the fact that the U.S. wild harvest of shrimp was only 278 million pounds in 1998. This is the lowest wild harvest since 1983, brought on primarily by a large drop in shrimp landings in the Pacific Northwest. The landings there were only about 15 million pounds compared with a more normal harvest of 40 million to 45 million pounds. These factors pushed average prices for fresh imported shrimp in the first half of 1999 to $4.90 a pound, an increase of about 90 cents per pound from the previous year. Quantities declined much less for frozen and prepared shrimp, with Asian suppliers being more prominent in these markets. However, prices fell heavily as the average price for frozen shrimp was $4.05 a pound, down almost 45 cents a pound from a year earlier. Prices for prepared shrimp also declined heavily, down over a dollar to $4.11 per pound. What makes the declines in quantities and prices puzzling is that normally with the domestic economy so strong, imports of items like shrimp increase. Shrimp is very popular in the United States and is our most commonly consumed seafood product. In 1998, per capita shrimp consumption was a record 2.8 pounds on an edible meat weight basis, about 19 percent of the total per capita U.S. seafood consumption. Crawfish Imports and Exports Down Over the first 7 months of 1999, U.S. crawfish imports totaled 1.3 million pounds, down 18 percent from the same period in 1998. The value of these imports was down 26 percent to $1.9 million. While China remains the dominant supplier, the tariff now in place on imports of frozen crawfish meat from China has lowered shipments in 1999 and is expected to continue to depress shipments in 2000. U.S. exports of crawfish were reported at only 809,000 pounds for January through July 1999, a drop of 55 percent from the same period in 1998 and only a fraction of what had been exported in earlier years. Exports have fallen dramatically over the last several years as domestic farmers and wild harvesters have faced strong competition from other countries. The value of exports was only $1.9 million, down from $2.7 million in first-half 1998 and $10.1 million in first-half 1997. Clam and Oyster Exports Down, Mussel Exports Rise Over the first 6 months of 1999, U.S. shipments of oysters, mussels, and clams totaled 4.2 million pounds, down 3 percent from first-half 1998. While the quantities of oysters and mussels exports rose slightly, the levels for the first half of 1999 were still lower than they had been in earlier years. The U.S. dollar has been strong against most major currencies in first-half 1999. That, along with the problems in a number of Asian economies, has tended to depress exports of U.S. mollusk products. However, the export forecast for the remainder of 1999 and into 2000 seems to be better as there are signs of economic improvements in both Korea and Japan. The situation in Japan is critical, as it is the world's largest seafood importer. Imports Rise for Mussels, Clams, and Oysters Flat or declining domestic landings, along with growing foreign production and a strong U.S. currency all combined to keep U.S. mollusk imports expanding. Over the first half of 1999, imports for clams, mussels, and oysters all rose. After being relatively flat earlier in the 1990's, imports of oysters and clams have risen in the last 2 years. Mussels continue to be the fastest growing U.S. mollusk import, spurred by stable or declining domestic production and increasing use in restaurants. During the 1990's, U.S. landings of mussels have been trending downward in most areas. One exception has been Washington State, where most of the mussel production comes from aquaculture. These mussels command a market price that is several times that of wild mussels because they tend to be larger and have more meat per shell. For example, according to data from the National Marine Fisheries Service, Washington State mussel landings in 1997 accounted for only 16 percent of total U.S. landings by weight, but accounted for 91 percent of the total by value. In the first half of 1999, mussel imports totaled 19.1 million pounds, up 16 percent from 1998. In 1995, mussel imports in the first half of the year were only 7.8 million pounds, so 1999 imports represent a 147-percent increase. Even with the large import growth, the average unit price has remained relatively stable, with the import value in the first half of 1999 up 22 percent compared with the previous year. Canada and New Zealand continue to be the dominant suppliers. In both cases, a large percentage of their mussel production comes from aquaculture. With the Canadian dollar currently weak against the U.S. dollar and restaurant sales strong, mussel imports are expected to expand in second-half 1999 and into 2000. Ornamental Fish Exports Rise With the beginnings of a recovery for many of the Asian economies, U.S. ornamental fish exports ($6.4 million) rose by 11 percent in the first half of 1999 compared with the previous year. Exports to Hong Kong rebounded strongly (up over 400 percent) after almost being nonexistent in the first half of 1998. Exports to Japan were down, but only by 2 percent, and if their economy continues to strengthen, the decline in exports is expected to bottom out in the second half of 1999. Exports to Japan had fallen over 50 percent between 1997 and 1998. Exports were also aided by an increase in shipments to the European Union, particularly the United Kingdom and Belgium, that more than offset falling exports to Canada and Mexico. Canada is currently the largest market for U.S. ornamental fish. Shipments to Canada in 1999 were down 5 percent from the previous year to $2.2 million. With the price of U.S. ornamental fish being made higher by the relative weakness of the Canadian dollar versus the U.S. dollar, a continued slide in exports is expected in the second half of 1999. It is hoped that this can be offset by some growth in sales to Asia and other markets. The value of imports of ornamental fish was $20.5 million in the first half of 1999, down 14 percent from a year earlier. Shipments to the United States were down from virtually every major exporting country. Imports have declined in the last several years, and it is unclear whether the market is not as strong as it was before or if domestic producers are now growing varieties that they previously imported. The release of the Census of Aquaculture in 2000 is expected to provide a benchmark as to the size of the domestic ornamental fish industry. The Census of Aquaculture is then expected to be partially updated with biannual data from surveys done by the Florida Department of Agriculture. Principal contributor: Dave Harvey 202-694-5177 END_OF_FILE