Coronavirus, added supply pushing Atlantic cod prices downward
Atlantic cod has been a stable, steady commodity for the global seafood market in the past decade. And it will continue to serve that role in the coming years, according to a panel of cod experts assembled for a 1 October webinar, “Opportunities and Challenges in the Atlantic Cod Marketplace,” organized by Sea Data Center in cooperation with Maritech Solutions and SeafoodSource, and hosted by Sea Data Center Managing Director Anna Björk Theodorsdottir.
Global groundfish catches have been stable over the past three years, averaging 7 million metric tons (MT) each year. Of that, around 1.1 million MT has been cod, according to Finn Arne Egeness, a senior whitefish analyst at Helsinki, Finland-based Nordea Bank.
Atlantic cod represents 16 percent of the world’s total groundfish supply, or around 1,142,000 MT in 2020. That’s slightly higher than in 2019, when the quota was 1,138,000 MT, and the year before, when it was 1,217,000 MT. For 2021, Egeness said Nordea expects an 11 percent increase in the total Atlantic cod catch to 1,270,000 MT. The cause for the increase is that “the stock is in very good condition,” Egeness said. Although there has been decreasing supply since record-high quotas of 2013-2014, catches have been above average since 2011, Egeness said.
Of the three main producers – Norway (29 percent in 2020), Russia (28 percent), and Iceland (25 percent) – Nordea predicts Norway, Russia, and others will have more cod available next year, while Iceland will see a small decrease in supply in 2021.
“We will know more after the Joint Norwegian-Russian Fisheries Commission meeting in late October,” Egeness said.
In 2022, Nordea predicts an 8 percent drop in Atlantic cod catches, bringing the total supply back near 2020 levels and “quite close to the level we have seen the last few years,” Egeness said.
“We believe the Atlantic cod stock is well-managed and forms the basis for profitable fisheries, and we believe that market and product development together with decreasing supply can explain the positive price development in prices since 2013 and 2014,” he said. “As a result of increased supply and the market challenges caused by the pandemic, we expect prices to drop next year go back to what we call ‘normal’ level, or at least pre-corona[virus] levels from 2022 or at least 2023.”
The coronavirus has created a dichotomy for cod markets in Europe, according to Norebo Senior Seafood Trade Manager Kristjan Hjaltason. As in North America, while the foodservice sector upheaval due to lockdowns, the retail sector has boomed. This has resulted in frozen fillets selling briskly in supermarkets, but sales dropping for fresh fillets, even at retail, where many fish counters were closed as supermarkets instituted changes due to COVID-19. Ambient seafoods sold at retail experienced a strong boost as consumers sought out items that could be stored for long periods of time in their homes.
While European foodservice has returned to 80 to 90 percent of its pre-coronavirus sales volumes, an expected fall wave of COVID-19 is putting that revival in jeopardy, and numerous new lockdowns and closure periods have been announced in both Europe and North America, Hjaltason said. He said a return to normal might not occur until the fall of 2021.
“This means work for all of us,” he said.
Still, Hjaltason issued a note of confidence that the markets would even out.
“On the demand side, I expect retail sales will be strong in 2021, making up for most of the lost sales in foodservice, with normality coming in the second half of 2021,” he said.
Fortunately for those in the cod business, the fish, which can be salted, frozen, filleted, and also provides additional value in secondary markets for roe, liver, milt, stomach, guts, swim bladder, heads, backbone, and skin, few species have such a variety of products to offer, Hjaltason said.
“The value of cod is more than just the value of meat,” he said.
Still, the challenge facing distributors is a daunting one, Hjaltason said, as 50 to 70 percent of seafood consumed in Europe is sold at retail, versus the U.S., where approximately two-thirds of seafood is sold via foodservice channels. Additionally, the impending unknowns of Brexit – scheduled to take place in three months – are throwing further complication into the market.
“There is a lot of uncertainty about what consequences it will have for seafood sales to the U.K., an important market for cod. [Or] for export of cod from the U.K., and for harvesters operating in the U.K. and in U.K. waters,” Hjaltason said.
Speaking next, Maritech Director of Analytics Oddvar Husby, discussed the development of cod prices and the future price outlook for cod. According to Husby, the price of cod is more supply driven than demand driven. And recently, prices for cod products, including fresh fillets and frozen fillets/blocks have increased globally, though the pandemic has in the past six months hurt fresh sales prices.
Husby said his data proves that cod functions as a commodity, and that the fact that there’s an integrated market for cod in Europe, and that there’s an overall price pattern for all cod products, means it is possible to extrapolate data for one product from one market into the same product in another market. For example, the landing price of cod in Norway can be extrapolated to provide prices for all major cod products sold throughout Europe, Husby said.
Using that model, even with the complicating factor of COVID-19, Husby said cod prices will likely decline further before they rebound again. According to a Maritech/Sea Data Center analysis provided to webinar attendees, prices of frozen headed and gutted cod decreased as supply increased from 2007 to 2013, but increased as supply declined from 2014 to 2019.
“With the difficulties in the foodservice sectors this year and the expected increased in supply in 2021, [we] expect a downward pressure on prices next year,” Sea Data Center wrote in its analysis.
Image courtesy of Sea Data Center