The Winding Glass

Best article you've ever written: Bloom is off the rose for China's seafood export revolution

Three different people emailed today saying the editorial on the FDA's country-wide detention of Chinese shrimp, catfish, and basa was "the best article you've ever written."

I am posting the whole editorial here to make it available to wider audience. Comments always welcome.

[Editorial] Bloom is off the rose for China's seafood export revolution

SEAFOOD.COM NEWS by John Sackton - June 29, 2007- [Editorial Comment] - No one in the seafood industry who has been paying attention was surprised by yesterday's FDA action issuing a country-wide import alert and detention for Chinese shrimp, basa, catfish, and some minor products.

The National Fisheries Institute and the Global Aquaculture Alliance, and several major importers who do business in China all said this move would strengthen the seafood industry, and that the testing and provision of healthful seafood products was critically important to the industry, and they praised the FDA's action.

Behind the scenes, however, its chaos. Several national retailers are reported to be scrambling to reduce the Chinese origin seafood products in their stores. One problem is that a huge percentage of private label products, such as breaded shrimp, are now products of China, and switching an entire private label line takes months.

Urner Barry's foreign trade data reports that in April and May, approximately 425 containers of Chinese shrimp entered the U.S. China supplies a significant and growing percentage of U.S. shrimp. Through April, NMFS data show China supplied 13.05% (21,141 metric tons) making China the third largest shrimp supplier behind Thailand (31.48%) and Ecuador (13.96%).

Current hold times on Chinese seafood products are often as long as 8 weeks at West Coast ports, and 4 weeks at East Coast ports. These are the average length of time it takes to get containers cleared and released by the FDA – whether they do sampling or not. Often the FDA will hold containers while they decide whether sampling is needed.

So far, according to the FDA, they have been sampling about 5% of all Chinese seafood imports. The change to a country-wide import alert is going to put huge financial and logistical pressure on the industry.

Many shipments from China now on the water will take much longer to get cleared, even with all the proper testing and documentation. And some industry concerns have been expressed about the storage space, ability of FDA and private laboratories to due timely sampling, and of course, the financial considerations that come into play when shipments are delayed and not cleared as expected.

Overall, the industry is looking at huge disruptions, which hopefully will be managed in a way not really felt by customers. But there are bound to be repercussions.

In some ways all parts of the industry- from processors who ship product to China, to importers who bring in both wild and farmed product, and to their customers which include all the major retail chains and the foodservice industry in the U.S. – are to blame for the increased costs, confusion, and economic pain that is going to result from these widespread detentions.

We as an industry have made our bed in China. And there are some fantastically clean and successful processing plants that have been built there. But in pursuit of lower costs, the move to China has always had a down side. Costs were lower, but so was transparency.

In many ways China remains a closed society, where the normal transparency that prevents many business abuses in the West is not in place. So for example, in the recent melamine scare, when the FDA sent inspectors to China they were unable to talk directly to the factory involved.

The concept was mentioned by an industry source: the idea that the lack of transparency in China could come back to haunt us.

For two years or more, many in the seafood industry have been screaming about the issue of Economic integrity – also largely the result of cost cutting and rule breaking in China. How do you tell a processor who is willing to cheat on net weight, to label a product additive free and than add chemicals, or to mislabel a species altogether that that's okay, he just can't use illegal chemicals in aquaculture.

The fact is you can't. A business culture of lawbreaking doesn't pick and choose which laws to follow, and which to ignore. This type of culture ignores any law that hurts profits, or that gives a lawbreaker a competitive advantage.

Unfortunately, too many in the industry embraced this point of view, and took the position that if the customer wanted it, it was okay. So if the customer demanded $1.50 cod when the real market price was $2.95, we gave it to them. If the customer demanded cheaper shrimp, we gave it to them – by short weights, by soaking, and now it seems by some other methods as well.

In this sense the food safety crackdown on China could in fact be good for the entire U.S. seafood industry. It is a wake up call that shortcuts have their price, and that in producing a food product, there is a bottom line of safety, wholesomeness, and value that cannot be crossed. Too many in our industry knew they were crossing the line, but felt helpless to do anything about it.

Now the FDA has stepped in and done us all a favor.

As one importer who deals with China said, he is glad to see testing. He fully expects to see his companies get off the automatic detention list, he has tests in place in China as well as the U.S., and wants to give his customers guarantees that their products are contaminant free and wholesome. For him, the FDA halting the substandard shipments is a blessing, because it allows him to differentiate himself.

So it will be with other Chinese companies. Six months from now, there will be a list of Chinese companies, published by the FDA as exceptions to the country wide alert, that are certified as being free from selling contaminated products, and who have procedures in place in China to prevent contamination from entering their supply chain.

But the cost of this is horrendous. Many consumers will simply stop buying fish from China. Many others will stop buying the types of fish mentioned—such as catfish—out of fear that something is wrong.

The companies who have private labels, and the distributors who have felt the need to push for the switch to Chinese seafood products may reevaluate the true cost of these actions.

In the end, this is country-wide detention is a blow for seafood integrity, and the industry is right to get behind it. Yet, at the same time, we should never have allowed things to get to this point.

--John Sackton

Conflicted over how to report Alaskan Fisheries Corruption

I have to admit that I am conflicted about how to report on the federal probes into Alaskan fishery corruption involving Ben Stevens, and possibly Ted Stevens. The issue came up today because I decided to publish a link to one of the affadavits that got the investigation into Ben Stevens started, which just became available on line. (link here).

As an outsider, I don't pretend to know the ins and outs of Alaskan fish politics. Sometimes things appear over the top -- as some of the charges leveled against the major processors by people who seem to have a continual ax to grind. These charges just don't square with my experience of how these businesses really work, so I tend to discount them.

The charges against Stevens involve some Alaskan fishing organizations, and there has been a long history of intense lobbying both in Juneau and Washington over fish policies. Often the first activity of a group seeking a change in their status within the industry is to hire lawyers and lobbysts. Lobbying in itself is not the problem. But some of these lobbysts may have crossed the line into bribery and corruption. If that's the case, let the chps fall where they may.

But in the meantime, it is difficult to report these issues and keep out the names of fishing industry leaders who are mentioned, but not accused. My judgement is that the reputation of these people can stand for itself--and that the reports on the investigations will ultimately show what happened and why -- but in the meantime, I would simply remind our readers not to believe everything that is said in an affadavit-- the purpose of a trial is to establish whether these charges are smoke and sour grapes, or whether there is legitimate malfeasance. But until everything comes out, we are going to continue to report on this story as it develops, knowing that some names of friends and colleagues may appear. But it is important to know that the reports don't reflect our judgement on what has happened, unless we clearly say so.

The corruption investigation of Ben and Ted Stevens is a minefield for the seafood industry, and I can only hope that the issue is resolved quickly and conclusively, and that it does not obscure the tremendous strides made by the Alaskan industry in the past 25 years.

Eco-labeling kerfluffle

I had to laugh this week when my colleagues at Intrafish breathlessly reported on the mudslinging between Rick Muir and a group of Russians over MSC certification of the Russian pollock fishery.

Name calling between two sets of producers is nothing new. The Genuine Alaska Pollock Producers (GAPP) headed by Rick Muir and ably represented by Pat Shannahan, have worked for years to establish the reputation of Alaska pollock in the European market, and now that many of the buyers are demanding a certified product, they certainly have reason to feel justified that their $500,000 investment in MSC labeling is paying off.

But the major users have another view: they know they need more certified product, and so people who have been associated with top users in Europe (like Jim Canon who used to advise McDonalds, but now runs the Sustainable Seafood Partnership) went to Russia with the WWF to fund and organize an MSC certification of the pollock fishery.

We wrote about this in April. Russian Far East pollock fishery takes first steps towards MSC certification, hires Tavel

In our veiw, since the MSC process is now being driven by suppliers, it was natural for the major European users to want to expand supply.

Alaska TAC's are expected to be down somewhat in 2008. There is enough pressure on whitefish supplies already.

Anyway, so about ten days ago, I get an email from a Russian group provoking a fight with GAPP- saying Rick Muir says that their pollock is double frozen and soaked --and that it should not be certified.

However, the russians rightly point out that they are not asking to certify the entire fishery -- only the boats that are controlled and part of their association. The MSC has endorsed this practice because they need to go with which ever group will pay for certification, and if it is only part of a fishery, they will certify those few producers. This is the case with Pacific cod. It is also now the case with Domstein, which is applying for longline haddock certification, in Norway, only for its own boats.

The issue is not the name calling; nor the flap in Norway whether to go with the MSC or not. It is a bigger issue. Suppliers have bought into the MSC. The MSC certifies good fisheries management. Fisheries management is carried out by governments. Therefore, ultimately, governments have to provide the resources (science, observers, stock assessments, and enforcement) that makes any certified fishery possible.

So if governments have to provide all the resources that make the MSC possible, why shouldn't they simply take over the certification. Eventually they will. The MSC is a stop gap body that responded to an immediate need -- leveraging consumer concern into a label commodity that buyers decided that they had to have. But the MSC is privately supported by foundations and income from its label. So it cannot turn away customers. The MSC can no more turn away a certification customer from Russia than American Seafoods could turn away a customer in Japan simply because a competitor does not want them to sell to them. If you start letting your customers dictate who you sell to, you are in trouble whether you are a fish company or the MSC.

All fisheries will eventually be certified, or they will not be significant in commerce. Eventually governments will take over this function. And Russian fisheries recognize this. That is the story; not the kerfluffle about whether the pot can call the kettle black.

Big fight over herring in New England is about ....What?

We have a couple of stories today on the Herring Alliance and its critics, and the campaign to push for stronger NMFS management of North Atlantic herring stocks.

At issue initially is the question of where the TAC should be set. Herring is one of the few volume fisheries left in the Northeast, with a TAC last year at around 60,000 tons. This year, the TAC has been lowered to 50,000 tons, and for 2008 and 2009, NMFS is proposing 45,000 tons.

But the issue is not simply about tonnage. The parties are fighting over the following:

--whether large pair trawls should be allowed for herring.

--whether the 380 foot American Freedom (a processing vessel) should be allowed to operate in New England waters

--whether herring are a key forage species for cod, needed for lobster bait, and for sport fish.

--whether inshore Maine areas should be protected from large outside vessels

--whether area management should be implemented.

The coalition, funded by Pew, is arguing for sound science and observers. But much of their public comments are aimed to scare people about industrial fishing. The issue should not be whether boats like the 380 ft American Freedom should operate, but whether there is a scientific basis for restricting herring quotas in ways that favor localized distribution, and that allow for the herring's role as the base of the food chain for many other species.

Unfortunately, the industry is reponding in the old manner: the TAC should be bigger, the problems are exaggerated. This is going to lead to a showdown that they cannot win.

NMFS has been steadily expanding the range of user groups it consults on fisheries, and if a significant proportion of those users get up in arms about herring management, the agency will respond.

The industry would do far better by immediately embracing a couple of practical measures: 100% observer coverage, for example, and instantaneous catch and by catch reporting.

The inshore quota this year was 5000 tons. The industry went over by 3700 tons-- in a last push to scoop up herring before the June 1st closure. This kind of action supports the Pew claims that current management is failing.

New England has been cursed as the "middle east" of fisheries management, where there has been no peace for 30 years. The herring fight is likely to continue that poor record.

In Alaska, the basis of much of the strong managment has been an industry willing to put up money for science, to pay for observers, to respond to issues, and in general act as a partner interested in solving legitimate scientific issues, knowing that to fight all the time was a recipe for more and more restrictions, but to uphold scientific principles was a recipe for industry longevity.

Seafood Industry Now Operates under a Cloud of New Constraints

I was struck today by two stories: Beaver st. talking about the cost of additional testing required for Chinese seafood, and the unnecessary destruction of perfectly good product; and the story of the blacklisted vessel Seed Leaf now in Dutch Harbor, loading a "secret" cargo.

The seafood industry is suddenly being faced with a new level of concern -- from avoiding black listed transport vessels to not buying fish caught in an illegal manner to testing for antibiotics at levels below which even federal labs say is okay.

Why is all this happening. One reason is the MSC. At least ten years ago, groups and individuals that wanted to force reforms on the industry on fishing practices, gear, overfishing, and environmental issues surrounding aquaculture, made a strategic decision to target major customers who were more vulnerable to consumer pressure than seafood companies themselves.

They have been very successful. Starting in Europe where consumers had been sensitized over the mad cow scandal, and spreading to the U.S. where companies like Wal-Mart saw this as a new way to establish consumer trust in their brands, the major users have embraced this concept.

The result is that a seafood company now has to be a gate keeper of responsible practices not simply in the sale and manufacture of seafood, but in the transport, the sourcing, the fishery management, the growth processes and levels of use of antibiotics etc etc. AS Beaver St. said, all this testing and inspection adds costs that ultimately get passed on to the consumer.

Unfortunately, this push for social integrity has coincided with a period of rapid escalating adulteration and cheating on seafood products themselves. At the same time that companies rush to assure the public that they are responsible on shipping, on antibiotics, on fishery management, they are also selling short weight, soaked product.

I bought some 16-20 EZ peel shrimp from Trader Joe's the other night, and they had been soaked so much that they were literally bursting out of their shells. Unsoaked EZ peel is simply a cut down the back of the shrimp splitting the shell and deveining if necessary. Soaked EZ peel is something like one of those lobster preparations, where the meat is served outside of the shell. Sure enough, when I cooked these shrimp a massive foam and soapy boil off ensued.

What is important here: spending money on not shipping on a blacklisted cargo carrier, or spending money on a quality product. Unfortunately, the consumer is being pushed to think of everything but the intrinsic nature of the seafood they are buying.

We can only hope they don't change their focus.

More evidence of pressure on seafood prices

Two quick pieces of additional evidence for the weak U.S. currency driving up seafood prices. In a story today on scallops, we report that strong European demand is sucking up more volume, leading to a 8% reduction in shipments to the U.S., while U.S. landings and prices continue to remain strong. Here the weak dollar is shifting demand to Europe, and contributing to higher scallop prices in America.

Secondly, snow crab. The U.S. dollar has been weakening so rapidly against Canadian currency that virtually the entire rise in price of snow crab sections over the past 8 weeks can be attributed to the stronger Canadian dollar. U.S. currency is so weak that Canadian exporters cannot afford to sell without raising their prices, as the current round of price increases is not, as of yet, being driven by stronger consumer demand.

Weak dollar means high seafood prices for foreseeable future

I was struck this morning by our story about record prices for skipjack in Bangkok. It is not just that small 4 lb skipjack tuna is at $1250 per ton -- its that the European tuna market is now nearly twice as big as the U.S., having grown 40% over the past 10 years, while the U.S. market grew 8%.

Vietnam will sell over $1 billion of pangasius species this year, most to Europe. Alaska -- which for decades has been oriented towards Japan, is suddenly looking to Europe as its main foreign market for whitefish and salmon.

Add to this a currency swing of the Euro from $.80 to $1.30 over the past five years, and we have the makings of a period when the U.S., like Japan, is simply priced out of many seafood markets.

I think the dollar weakness, combined with the competitive demand in other areas, means that high seafood prices are here to stay for a while. Prices are up on lobster, whitefish, tuna, catfish, tilapia -- i.e. almost everything except shrimp.

There are many opportunities in an era of high prices. For one thing, producers of qualtiy products can get rewarded. But there are pitfalls as well. The tidal wave of pumping, soaking, cheating, short weights are all efforts by some to maintain or enhance margins in an era of high prices. They use adulteration to bring down the value of the product, to make it affordable.

With China, adding melamine to wheat gluten has threatened the food exports of the entire country. But people in glass houses shouldn't throw stones. We have plenty of responsibility for our own adulteration practices-- and the fact that prices are so high means that when caught, the customer anger is greater.

In many ways, we are returning to the bad old days when people would wash 10 day old fillets with chlorine to try and get a couple of more days of shelf life, and then throw the product in the freezer. Only now our schemes are more sophisticated. This is not healthy behaivor when it is necessary to convince your customer of the higher value of your product, in order to even buy it in the face of European demand.

Food Miles in the UK: Let them eat dirt

"Food Miles" is the latest issue that has a legitimate core concern, but that will be detrimental to the seafood industry if it is approached in an uncritical and hysterical manner.

The soil association in the UK is starting a public comment period to last several months over whether they should de-certify organic food that is flown by air.

The issue for seafood is that this trend, like eco-labeling, could be taken up by retailers, and made a mandatory part of purchasing requirements. Eco-labeling did not really begin to influence producers behavior until it was embraced by Wal-Mart and major UK retailers as a supply requirement. Now, fisheries which are not certified, or which are not on a path to being certified, risk being relegated to second tier status.

Can the same thing happen with food miles? Yes, if it is looked at in isolation. Seafood is a very large airfreight commodity -- in fact there is no way to get a live lobster to Europe, or a fresh dover sole to the U.S., except thru air freight.

The issue can be broken down as follows: food transport; and environmental responsibility.

First: food transport. The UK has been transporting food and other products since they first took tobacco from Virginia, and tea from China and India. The idea that the British should somehow not transport food commodities is ridiculous. It is a policy that essentially says "lets eat dirt". Food transport is a very beneficial trade when it can take products from growing regions (bannas, coffee, tea, and seafood), and bring them to consuming regions.

So when a major public arbiter of tastes like the soil association suggests that food transport is somehow wrong they first must be forced to recognize that it is a complicated issue. The Soil association certainly does, but we have seen too often in terms of food scares, how small concerns are magnified to the consumer to the point that they become hysterical about avoidance. We don't want to do that with food transport.

The second issue is environmental quality. We do need to look at carbon impacts, and make judgments about where to reduce carbon, and what is the true price of various commodities. It could be that seafood should be more expensive, because the total energy cost for production and transport is higher. But this is a discussion that should be had in the context of all foods -- coffee, bannas, seafood and ice cream -- not just seafood.

The danger, because we are such a high profile commodity and we are based partly on public resources, is that we will be hit with buyer requirements for food miles that are simply not applied to other foods -- just as happened in the U.S. Country of Origin Labeling laws (COOL) which are mandatory for seafood, but voluntary for everyone else.

So, we need to frame this issue for what it is: a question of resource use, not a question of whether a particular seafood is good or bad for the consumer concerned about global warming.