You may not notice the impact of a weak dollar on a day to day basis, but long term, it will mean that foreign producers gain greater control over the U.S. seafood market.
I was struck by the analysis of Mr. Ng Joo Siang, whom I met once in St. Petersburg, Russia, as he discussed Pacific Andes Results. Pacific Andes started out as a company that supplied overseas fish to China, and they became exporters as well of processed fish out of China. They used to be known for their fleet of trampers which regularly handled much of the at sea transfer of H&G pollock from Russian trawlers.
The company also expanded into value added products, acquiring National Fish and Seafood in the U.S., for example.
But now, Mr. Ng is in a race for fish. He is buying up vessels in Peru that have fishing rights, and searching elsewhere for the same thing. He clearly sees that the amount of wild caught fish is basically stable, and that overall its value is increasing; so those who control the supply by controlling vessels and licenses are the ones who will make the most money.
We have also seen this phenomenon in Japan. At the time of the Maruha Nichiro merger, the need for Japanese companies to strengthen their overseas sourcing and sales was well recognized. Yesterday we wrote about Glitnir opening a M&A office in Japan—again to finance the drive by Japanese companies to purchase access to supply overseas.
The same trend has been evident in Europe, as Icelandic companies by up companies in the Far East, and many others partner with Russian producers. It is also evident with the consolidation taking place in the Chilean salmon sector.
In fact, wherever there are groups of fish producers, there are major seafood companies waiting in the wings to buy up access.
U.S. companies risk losing in this global competition in several ways. First, even though our seafood market is dominated (80% +) by imports, our seafood policies are set by parochial local interests – and with entrenched industries on all coasts, congress is whipsawed as various groups fight for local issues – whether it is domestic shrimp using imports as a wedge issue, or West Coast fishermen supporting salmon restoration, or New England in a perpetual fight over fisheries management regulations—the effect is to obscure the big picture.
The big picture is that the seafood industry is globalizing, and our market is going to be lunch.
The companies that will supply the U.S. with seafood are big, integrated, very heavily invested in quality control and their supply chain, and they have secured sources of supply. This describes some of the Asian companies in our discussion of their financial strengths we reprinted from Forbes. It also describes some of the major European salmon producers. What it doesn’t describe are U.S. companies.
Only in pollock have U.S. companies approached the level required for success in international competition, and that strength is paying off with record prices and probably profits for the entire pollock sector.
The U.S. will grow more dependent on overseas global supply chains for our seafood; our industry will make less and less money from the supply end, and more from the distribution and marketing side of the business.
The problem is that in the end, success in the fish business comes down to control of supply. With less and less of the global seafood supply under the control of American companies, the long term future is that we will be price takers; paying what the world market demands to keep up our appetite for Seafood. That means if the dollar slides, we pay more.
Too bad the fish people in Washington are so oblivious to this. One of the most destructive aspects of the shrimp tariffs was the incentive it gave to transfer control of imports from U.S. companies to overseas companies. This has now largely happened in many areas – like catfish and with some shrimp. For example – much of the Thai shrimp which is a staple of the U.S. market is marketed and sold here by Thai owned or connected firms.
We need both parts of this industry – strong suppliers with control over resources, and strong marketers who have loyal customers. Too bad much of our government's recent actions appear to be weakening both.