Pacific Seafood’s Dan Obradovich discusses US crab market crisis
Dan Obradovich is the director of business development and the Dungeness crab category manager for Clackamas, Oregon, U.S.A. based Pacific Seafood. In an interview with SeafoodSource, Obradovich discussed how the cancelation of the bulk of Alaska’s crab-fishing season and recent poor results of domoic acid testing delaying the start of the Dungeness crab-fishing season in Oregon have affected the market.
SeafoodSource: How would you describe the status of the US crab market? Have you ever seen anything like the current situation?
Obradovich: We've seen a complete reversal of product coming into the market and an undoing of demand for crab. The economy was doing really well this time a year ago and coming into the holidays, people were spending money and buying a lot of crab, so the demand for king snow and Dungeness crab was literally off the charts as well along with a lot of other shellfish on the upper end on the scale of cost. Demand seemed pretty insatiable, especially running into the holidays, which is always one of the biggest consumption periods for crab. Then, a lot of the COVID money that was available to people was cut off at the end of ‘21, the invasion of Ukraine happened in February 2022, oil prices shot up, and the economy came grinding to a halt. And it just felt like the anchor went out of the boat and demand slowed to a crawl. Now we can't import any product from Russia and they're such a huge producer of king and snow crab, so those products are going to other markets now. Then we've seen the decline of king crab fishery in Alaska, and now we’ve been hit with this big decrease in the snow crab fishery, so a huge amount of product is not going to be coming into the market. And yet, it hasn't really had too much of an impact on the market itself because demand is so slack. It’s a really weird situation to see from ‘21 to ‘22 how much it's changed.
SeafoodSource: How is it possible that demand is so low coming off such a hot market?
Obradovich: For a lot of different aspects. COVID changed things. We used to sell a lot of crab into buffet lines, but people don't want that kind of exposure anymore. We've seen travel activity stop and start during COVID. But I think that the biggest thing is inflation has really created a psychological change in people's purchasing patterns. Crab is probably looked at like a luxury item and people are telling themselves right now they’ve got to watch their pocketbooks. Even though there’s a certain amount of people with enough income that price probably doesn't really matter, they are still hearing every day on TV how bad inflation is and they don’t want to be the ones spending lots of money on what’s perceived as a luxury item. Obviously, we're not seeing inflation quite as bad as the European market, with their dependence on Russian oil. But I believe that inflation is having a big psychological impact on what their what Americans are spending their money on. Will it straighten out? Yeah, people spend money during the holidays. They have traditions and they're going to pretty much stick to their traditions during that time period. And then we'll probably see demand taper off again. But it has been a real supply and demand curve. It’s a head-scratcher when we look at the amount of product we know is not coming into the market, and yet the markets keep decreasing.
SeafoodSource: Is Pacific currently selling any snow crab, or are you primarily selling Dungeness crab?
Obradovich: We buy snow crab from other snow crab processors. We also sell Dungeness crab to snow crab processors too. But our plant locations aren't really where the main fisheries are, though our Alaska plants do buy crab, but eastern Canadian is where all the snow crab is coming from, along with Greenland, Norway, and some of the other fisheries that don't have trade restrictions. We're more involved in the Dungeness crab fishery than we are in snow crab. Alaska does have a bairdi fishery that's rebounding a little bit and but it's not going to be productive yet. The total allowable catch is insignificant compared to what snow crab has been, but it will be an alternative and I have several customers that say it’s one of their favorite crab choices. But our cornerstone is Dungeness crab, which we harvest that from Kodiak down through Canada, and in the lower Oregon, Washington, California all the way to San Francisco. Oregon, Washington, and California account for 80 to 85 percent of the fishery, while the remaining 15-20 percent comes from Canada and Alaska. It’s the biggest revenue-generating fishery on the U.S. West Coast, so it's important to our company, it's important to our fleet, and it's really important to the customers. It’s truly a regional specialty during the fresh season. We supply it around the country in all frozen product forms through balance of the year and live shipments during the season.
SeafoodSource: How's the Dungeness season going?
Obradovich: It typically would start in November in the San Francisco area, but there's a lot of whales down there right now and there were some entanglements in the first part of 2022, so there's a high risk that if there was another entanglement during this calendar year that the fishery would be shut down, and that could continue through 2023. So it's a huge economic risk. I don't see anything happening in California until the whales get out of the Bay Area. And I mean, we're seeing them all the way up to Oregon border right now. And the crab themselves maybe molted a little late, they're just doing some testing now – certain areas the crab look pretty good, but there's other areas where they've got probably another four to six weeks, so it looks like we're going to be fishing at Christmas or later. We have to get to 23 percent meat-fill in Washington and northern Oregon and 24 percent south of that, and we're still a ways away from that, as the crab gain about 0.5 to 1 percent a week in meat-fill. [In regard to domoic acid testing], we've had pretty clean shellfish monitoring results here in Oregon, but recently we've had a little bit of domoic acid show up in razor clams and mussels in the last month or so. Hopefully it's mild and doesn't impact the crab, but it’s something that we always have to watch. Between the meat-fill and the domoic acid and the whales and the weather, those four things are really the triggers that lead the season get going.
SeafoodSource: So, for your customers, are they looking at Dungeness as a direct replacement for snow crab? And what is the current pricing situation?
Obradovich: The two species kind of follow each other – one goes up, the other one comes up. A lot of people are looking at value as opposed to being locked into a species, so we haven't really had to pitch it like that. The average size of the Dungeness crab at seven to 10 ounces is little bit larger than the average snow crab, which is five to eight ounces, and I think it's easier to extract the meat out of the Dungeness in bigger chunks.
Right now, the price for both snow and Dungeness crab is 50 percent of what it was last year. When you take a peek at the supply side, it doesn't really make sense, but the demand is just not there. There was a period where you could still import products out of Russia up until the second half of June and so there was some product that came in there. But the snow crab fishery in Canada produced a lot of crab into a market where everybody was kind of sitting on a lot of high-priced inventory from 2021, because they anticipated the same kind of activity they had in 2022. And then it just came to came to a halt. Once we work through that bubble of inventory then I feel like things will get back to normalcy. It's going to take a little while, but definitely that that adjustment in price was painful for a lot of people. The prices are going to have to adjust. But I don’t see the market getting back to where it was a year ago, just because I don't see that kind of demand happening.
SeafoodSource: Are you concerned that there's not going to be sufficient volumes of Dungeness crab coming in before the holidays in order to meet demand? Or do you have enough in storage right now to cover what you think demand is going to be?
Obradovich: Probably not in every product form. We do have some product forms in the freezer. They're probably not as retail-ready as fresh crab, but last year was the first year we started fishing in December. We had whole crabs for Christmas and everybody sold a lot of product, but it probably won't be that way the season. Now it feels like a lot of the industry is getting used to a January start, because Dungeness fishing has been delayed so many years in a row. Speaking to the fishermen, they said last year there was pretty good recruitment into fishery. There's been some things have come out from some studies this summer that indicate there might have been a die-off of Dungeness crab due to low oxygen levels, but we really don't know the impact of that because there's just not the research dollars spent to study the fishery. This year, I'm thinking that we're going to a better-than-average season. I'm optimistic.
SeafoodSource: What are you predicting next for the global crab market? Given your experience, how would you describe what the market is like now versus previous years?
Obradovich: I remember there were some huge years on snow crab in the ‘70s and ‘80s and then there was years where it was really not so good. I think that people started becoming more concerned about sustainability in the mid-80s. And that took a decade to get to different rationalizations of fisheries and things like that. And I believe that there's more science now than we've ever had before. Overall, I think the oceans are in fairly healthy condition and I expect that that somehow we're going to figure out what happened to the snow crab and things are going to rebound. It's going to take a few years. But as far as a new normal, I'm not too sure. I think there's still a lot of unknowns as far as what climate change and water temperatures due to these animals. Are they at a point where maybe they migrated further north and we haven’t found them? Or maybe they’re suffering from the effects of the water changing temperature? A couple of years ago, we had that blob that increased the water temperature and that kind of resolved itself. It’ll take a while to figure out what’s going on in Alaska, I'm sure, but I’m hopeful because, like I said, I'm an optimistic kind of guy. We’ve been through things like this before and gotten through them.
Photo courtesy of Dan Obradovich/Pacific Seafood