"Trumping" up the seafood numbers!
SDC Market Watch – August 28, 2018
What’s going on here?
Last week we briefly discussed the Trump tariffs and the situation with China. Since the the latest developments are that the tariffs are still in place with no end in sight. In the meantime, the Trump administration has signed a new (or revised) trade agreement with Mexico after months of negotiations and discussions on what to do with the old NAFTA agreement. With trading relationships with Mexico on the mends does this then mean that the US seafood producers should be looking towards the seafood market in Mexico as a potential to lessen the China effect? Last year the exports of seafood products from the US to Mexico were excess of $260 million. The composition of the products going to Mexico and China is very different so that this not really an option as Alaska pollock is not a major specie in the trade with Mexico.
What does this mean?
As the composition of the products to Mexico is so inherently different than in the China trade then the renegotiated trade deal with Mexico does not help in addressing the China related seafood challenges. This then means that we need to analyze the impact on the market of the tariffs and try to quantify the impact. If we only take the export shares for Alaska pollock to China then the export value was about 11% of the total for this specie. As most of the export to China is in the form of frozen whole raw material for processing and China accounted for about 64% of the US exports in this category and this is not high value product for direct consumption.
Why should I care?
For you, personally:
It is clear that the US seafood exports especially in Alaska pollock were to try to bypass China with the frozen whole exports and channel these raw materials to other countries then the current options based on last year’s figures show that South Korea and the Ukraine are the two counties that are ranked behind China as the key markets for the frozen whole Alaska pollock exports. At the first glance neither of those two countries seem to be likely to be able to absorb the China volumes. This would then mean that if companies were to bypass completely then channeling the frozen whole other markets does not seem feasible. Therefore, addressing the export challenges with unchanged product composition is not feasible. This creates a dilemma that the US seafood exporters have to address and act upon.
The bigger picture:
In the long run the impact of the changed product composition for Alaska pollock would mean changes to the value chain with more emphasis on processing to serve the actors further down the line in the value chain. This would then create another type of challenges for the US exporters as processing capacity would have to be addressed. In some cases, this would mean capitalization in new processing capabilities. This could affect the nature of the competition in the industry to a certain degree.
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