Mixed Market Outlook for Russian Pollock Products from forthcoming "A" Season in 2011
Fishery Rules at Far-Eastern Basin for 2 years running have been allowing APO catch in SOO not only I spring, but also in autumn. However, there are no restrictions what part of quota is to be taken in spring, and what part in autumn. So, in 2011 most companies will follow the same strategy as in 2010 - will do their best to take as much volume in season A and get additional money on roe and milt.
Many Russian companies have equipped their vessels to produce APO fillet at sea. They are going to have problems getting investments back. The further - the less European retailers allow to their shelves fillet without the blue MSC label. This must be particularly expected taking into account that due to TAC increase in USA there will be no shortage of MSC-certified APO, and its price is going down. Basing on this, it's easy to forecast that many Russian companies will have to produce APO HG, or promote their fillet by price.
Sharp and unexpected increase of APO TAC in the USA mixed everybody's plans. Up to now many American fishermen have not finished contracting A-season products, and on this reason have not finished preparation of their production plans. Respectively, Russian fillet producers have not received their orders as yet.
Part of supplies to Europe could be replaced with supply to USA. In that country neither retailers nor customers are interested in MSC certificate. So, sometimes it is possible to establish a scheme when a Russian company supplies fillet to American producer and the latter, "at the Russian account", can increase supply to Europe. However, American quality regulations are tougher than the European ones, and payment terms are difficult for sellers too.
As usual, the major volume of Russian pollock will be sold as HG to China for further processing into double frozen fillet. Profitability of it is unclear too. European buyers (the major market for double frozen fillet is EU as well) have no intention to increase price. At the same time situation in China has developed not in Russian's favor. In 2010 workers from processing factories left in droves during traditional New Year leave. About 10% of workforce changed industry, and to keep the rest the factories had to increase wages 15-20%. Nobody knows for sure what is going to happen in the coming year, but all Chinese processors are sure that wages increase are inevitable, hence processing cost in 2011 will grow up. Fillet price is going to be stable, processing price goes up. It means raw material price has to decrease. Meanwhile the price of raw material is the price of the Russian HG Pollock.
However, there is a hope to "press" Europeans too. On some estimates, basa production in Vietnam will decrease in 2011. The fish deficit is to be compensated in some way.
What possible ways out for Russian fishermen could be seen?
- 1. To sell part of the APO harvest to Africa, particularly - to Nigeria. Northern blue whiting TAC 2011 has been decreased close to zero. The greater part of the catch used to go to this country. It has to be supplemented with something.
- 2. To develop domestic market. APO fillet consumption in Russia grows up every year. Though new vet regulations restricting glazing will definitely cause price increase, no prospects of fillet consumption decrease can be noticed.
- 3. To decrease costs by getting rid of intermediaries. Today Russian fishermen don't sell to Chinese processors directly, because Russian banks don't really work with Chinese LCs. All the product is sold to traders capable to receive cash using the LC as a mortgage, and transfer it to Russia quickly. Sure, it is difficult to establish direct relationships seller-buyer, but it will definitely provide extra money.
- 4. Another way to get rid of middlemen would be to start own or customer processing HG to fillet. Of course, it will also demand big administrative work and large working capital.
- 5. Taking into account existence of factors increasing price as time goes by, some fish can be put into cold storages in China. This strategy gave wonderful results in 2009, but turned out not very successful in 2010. It is still unclear what will be in 2011.
It is obvious that different companies plan to use different strategies. Most of them - several strategies at the same time. However, it would be very risky to make forecasts when there are some many forces directed oppositely. The only thing we can say - that economic prospects of APO A-season in the Sea of Okhotsk are very uncertain and will become clear not earlier than in mid-January.