U.S. importers and seafood companies that deal in refrigerated red swimming crab out of China have already been feeling the pinch from a shortage last fall, and when it comes to prices and volume this summer, it’s about to get worse.
“I think there’s going to be a severe shortage of supply,” said Andy Walton, co-owner of Crystal Harbor Seafood in St. Petersburg, Fla. “I think the prices are going to go sky-high.”
Most of the world’s red swimming crab supply comes out of China, and the months of September, October and November typically mark the peak of the species fishing season there, with the season coming to an unofficial end later this month.
But in October of 2012, reports show a drop of nearly 50 percent in refrigerated Chinese red swimming crab exports compared to expectations. Alex Malaguti, VP of marketing at Newport International, said one major cause was the weather — in July and August of 2012, tropical storm Saola and Typhoon Haikui hit the coast of China within weeks of each other. Not only did the storms devastate ports and shipping fleets, but it also caused the crab population to migrate.
“Catches are off by over 50 percent, as compared to 2011,” Malaguti said. “It has been named the worst season of the last 18 years.”
Walton, who has been dealing with the Chinese for the past 22 years, agreed that a big part of it was a genuine shortage of red swimming crab, and worse, the lack of volume was so discouraging to red crab fishermen in China that many of them simply stopped trying, unable to afford to fish.
“All of a sudden, it’s like somebody slammed the door,” Walton said.
But that’s only part of the story. While it’s natural for a product shortage to cause a rise in prices, some dealers, like Brendan Sweeny, VP of operations at Handy International, based in Salisbury, Md., think the Chinese jacked up the prices too much, and that also contributed to the drop in exports.
“I guess the packers in China pushed the prices up higher than the market could take,” he said.
Jim Rodgers, VP of sales and purchasing for Trans-Global Products in Tampa, Fla., agreed.
“I believe the Chinese producers are gambling,” Rodgers said.
Gambling, Rodgers said, because importers like him are caught between their customers, who won’t want to buy less, or at higher prices, and the Chinese suppliers who are demanding exactly that.
“If you’re out of product, you’re basically telling (your customers) to call your competition,” he said.
So importers like him are buying the crab anyway, but at much higher prices per pound. Trouble is, he said, he can’t get away with increasing the price to his customers, who will simply shop elsewhere.
“If you have to sell it at a loss, I’d wish I didn’t have any,” he said.
Lito Austria, general manager of RGE Agridev Group, is feeling the pain, too. Like Rodgers, Walton, and other dealers, he stocked up in anticipation of a shortage, but given the prices he paid, he’s now wishing he hadn’t.
“Business is bad for us,” he said.
Despite the dropping supply, Austria said, demand has been low in the U.S., in part because the American economy is still sagging, and buyers are passing on “luxury” items like red crab.
“Demand is not picking up, even over the holidays,” he said.
Malaguti said the one bright spot for the industry this year may come in the period between early March, just after the celebration of Chinese New Year, and May. Traditionally called the “mini-season,” it represents a second attempt to fish the waters, and since so little has been pulled out so far, Malaguti said, the hope is that a better-than-expected mini-season will at least blunt the impact of the shortage and price hikes later this summer.
“It will not be a fixer-upper,” he said. “It’s not going to fix the problem.”
Another problem is the volume of blue swimming crab going up. Indonesia, Austria said, has been producing way above normal volume, and as a result, blue crab is selling at below-average prices right now. Too many of his customers, he said, are turning to the cheaper alternative, so he, like Rodgers, is now stuck with expensive product he can’t move.
But the glut of blue crab won’t last, according to Walton. The peak period for it in Indonesia and other producer countries in the South Pacific is coming to an end, which means volume — and prices — of blue swimming crab will soon return to normal.
That, he said, will push demand for red swimming crab, even at higher prices, and then dealers will really see how little red swimming crab China has been able to produce. Walton said Crystal Harbor bought up crab last fall in anticipation of the impending shortage — at a price of USD 12 to 13 (EUR 8.99 to 9.74) per pound — but he thinks he’ll barely have enough to supply his customers through July, and by then, most red crab importers will be in the same predicament, scrambling to pick up the scraps at sky-high prices that Walton thinks could go as high as USD 14 (EUR 10.48) per pound.
“It’s going to be what importer is going to pay the most for what little’s going to be left,” he said.
