A recent industry report from Wells Fargo has taken a decidedly neutral stance on the overall outlook for the U.S. seafood industry over the remainder of 2023, referencing positive news for certain species like snow crab but continuing woes for other market sectors to back up its mixed prediction.
The report, “Wells Fargo Agri-Food Institute’s Industry Update - Q2 2023,” listed overall food prices and demand as major factors influencing Wells Fargo’s mixed outlook.
Food inflation is likely to continue growing at a slower rate in 2023 compared to last year but remains above historical averages, Wells Fargo Agri-Food Institute Sector Manager for Seafood and Specialty Crops David Branch noted.
The U.S. Bureau of Labor Statistics Consumer Price Index (CPI) also highlighted that in June of this year, overall food prices were 5.7 percent higher year over year.
Even though seafood prices have dropped a tad year over year, and are likely to increase at a slower rate than the overall food category for the rest of the year, new Circana data shows a pattern of slowing seafood sales and value across the entire retail sector for the first quarter of 2023, the Wells Fargo report found.
Out of the top 10 most popular seafood items sold at retail, seven had lower sales by both value and volume over the time frame studied.
In response, retailers are opting to keep their margins high and accept lower sales volume, which is resulting in an inventory backup for many items, Branch noted. Plus, overall sales volume has slowed.
“My outlook is mixed based on current recent market trends for key products. While wholesale prices on average have declined from all-time highs achieved in late 2021 and early 2022, retail prices (as measured by Urner Barry/Circana/IRI retail sales data) have remained relatively flat over this same period,” Branch said. “As we saw in the pandemic aftermath, consumers will find alternatives to seafood rather than absorb continued price increases.”
Specifically, the report painted a particularly bleak short-term picture for the shrimp industry, a prediction reflected in another recent study from Rabobank.
The 136.3 million pounds of total U.S. shrimp imports for June 2023 were 20 percent below last year’s June volume and reflected the 12th straight month of year-over-year declines, Branch told SeafoodSource.
“For the first six months of 2023, total [shrimp] imports are down 17.9 percent from the prior year. Despite the record or near-record low prices on imported shrimp, demand is on par with pre-pandemic levels but well below expectations,” Branch said.
The U.S. shrimp market has experienced a 17 percent decline in prices over the past 15 months, according to the Urner Barry White Shrimp Index, driven primarily by year-over-year increases in the volume of imported shrimp. In 2020, imported volumes were up 6.8 percent, and they rose 19.8 percent in 2021, contributing to a global supply glut that has yet to abate.
Since more than 85 percent of all shrimp consumed in the U.S. are imported, and U.S. consumption has never increased 20 percent year over year, “this significant volume of imported shrimp had to go somewhere, and the logical assumption is that inventory in cold storage continued to grow,” Branch said.
Generally, consistently low prices coupled with ample supply boosts retail and foodservice demand, but “that has not been the case” this year, Branch said.
“This issue currently has importers and wholesalers nationwide stumped,” he said.
Importers are waiting to see if consumers eventually take notice of price trends or if other factors might influence retail trends, Branch said. With demand projected to remain steady, though, expectations are that global producers will seek to adjust production in an effort to elicit higher pricing.
Meanwhile, one seafood species with a more positive outlook in the near term is snow crab.
“While total snow crab import volume was down year over year for 2022, it appears to have reversed based on the first six months of 2023; Import volume is actually up 24.5 percent compared with 2022’s first six months,” Branch said.
Wholesale snow crab prices have plummeted 62.5 percent from their January 2021 highs, and average snow crab retail prices have dropped 49.5 percent over the same period, according to Branch.
“This has been one of the primary drivers of the retail sales trend improvement,” Branch said. “Since July 2022, monthly retail sales volume [of snow crab] has improved significantly over previous trends and [is] up 222 percent for 2023’s first six months compared with the prior period.”
Photo courtesy of Wells Fargo
