« August 2011 Table of Contents
Top Species: Blue crab
Winds of change have imported blue-swimming crab market feeling the pinch
By Joanne Friedrick
August 05, 2011
Blue-swimming crab importers are weathering a turbulent year, and the domestic blue-crab market is also experiencing some ups and downs.
After five years of increased supply, 2011 has seen import supplies fall about 12 percent, says Paul McCarthy, executive VP at Chicken of the Sea Frozen Foods in El Segundo, Calif. A shortage is primarily seen in Indonesia, says McCarthy, but red crab from China is also down, which plays into the current situation because it limits buyers’ options.
Yet demand for imported crab has been “very strong while supply is limited,” says Caroline Tippett, director of strategic development at Phillips Foods in Baltimore.
The past year in the blue-swimming crab market has been marked by rising prices as the volume out of Indonesia flagged, notes Carlos Faria, senior VP-supply chain, international and strategy for Miami’s Blue Star Food Products. Supplies from Indonesia dropped to 15 metric tons a day, he notes, while the prior year’s daily average was about 35 metric tons. In May, volume had started to pick up again to about 25 metric tons daily.
Weather has been a big factor, says Faria, with storms preventing crab fishermen from going out to sea, and higher temperatures forcing the crabs into deeper water. “The smaller boats don’t have the range to go out to deep water to get the crabs,” Faria explains.
Tippett says other countries have also struggled to increase output, “but with such an extreme reduction in output to the largest exporter during price-sourcing periods, we feel it is certain the pasteurized crabmeat market will continue to face supply constraints and pricing inflation through the remainder of 2011.”
Other factors impacting the imported blue-swimming crab market include flooding in Thailand that impacted processing plants and the continuation of a weak U.S. dollar. The latter, says Faria, means “more competition for product locally in Thailand.”
Prices rise and selection changes
When supplies lag, prices rise and McCarthy says prices have been slowly climbing for the past two years. Prices tend to increase the most during the summer, he says, because demand is at its highest while supply is at its lowest. August through December, he notes, are actually the highest supply periods.
In late June, prices for 16-ounce cans of crab were averaging $19.50 for jumbo lump, $14 for super lump, $11.50 for backfin, $8.80 for special and $7 for claw, says McCarthy. Still, prices haven’t returned to the historic highs of 2008, when the country was in the height of the recession. Then, says McCarthy, jumbo lump was averaging $20.25 and special was around $10.50.
In addition to the recession and high oil and fuel prices, there was a supply interruption in 2008 that impacted price, says McCarthy, coupled with a marketing program that had buoyed the popularity of crab. At that time, he says, prices rose quickly. “This time, it’s not so shocking,” he says.
In the pre-recession era, says Faria, many firms expanded operations in Southeast Asia, building processing plants.
“This category went through a gold rush period, so now there are plants we can lease,” he says. Blue Star began as a marketing company and in the past seven years it has started to become vertically integrated, controlling the quality of the production without owning the facilities.
“Because margins are reducing, a business model of building assets overseas doesn’t make the most sense,” he says.
For the past 12 years, says Faria, Blue Star has sourced blue-swimming crab from Indonesia, the Philippines, Vietnam and Thailand. The first two countries account for 53 percent and 17 percent of Blue Star’s volume, says Faria. When needed the company also taps into suppliers from India and Pakistan, he says.
As prices rise, Faria says customers have to make a decision about what they are purchasing and some trade down in SKUs and grades. “Or maybe they downgrade to another species,” he says.
Demand for jumbo lump has diminished, he says, which presents a challenge to Blue Star on managing its inventory.
While demand varies year to year on different grades, Kimberly Tilghman, VP-sales and marketing for Twin Tails Seafood Corp. in Miami, says this year there has been increased demand for the middle grades — special, lump and super lump.
“Oftentimes these increases in demand are caused by competitors lacking supply on a particular grade, which then creates an increased need for another company to fill the gap,” she explains.
But for 2011, claw meat has the smallest percentage market pricing increase of all the grades, says Tippett, showing demand for larger grades is continuing despite high prices.
In packaging, Faria says Blue Star is continuing to shift toward pouches, which it believes are friendlier to the environment and require less energy to produce. Blue Star sells about 85 percent of its product to foodservice companies, although it is working on its presence in retail by moving into supermarkets and club stores.
Chicken of the Sea is also branching out beyond its 16-ounce metal foodservice can, says McCarthy, with an 8-ounce plastic cup and a 6-ounce aluminum pouch for the retail trade. The company also produces 16-ounce cups for Costco. The company this month is launching a line of crab cakes for foodservice and retail buyers under the Chicken of the Sea brand, he adds.
Focus on sustainability
In July, the National Fisheries Institute (NFI) Crab Council, which comprises 13 companies, implemented a minimum-size policy for crabs from Indonesia and the Philippines, setting the carapace limit at 8 centimeters. Chicken of the Sea’s McCarthy notes the council has not only set guidelines for acceptable crab sizes, but is enforcing the capture and processing of males only and is directly involved in hatchery development, working with associations in the Philippines and Indonesia. Chicken of the Sea has facilities in the Philippines, Vietnam, India and Sri Lanka and recently added a new factory in East Malaysia.
“All of this work is being done to improve the sustainable resource,” says McCarthy, with the hatchery project aimed at improving survival rates.
Faria says the group is also striving to gain Marine Stewardship Council or some other sustainability certification for the crab fishery.
As a member of the council and its executive committee, Tilghman says Twin Tails “in conjunction with our other council membership, is pushing to get all of the companies importing blue-swimming crab into the United States on board as active members.” She says it’s “imperative that this effort is supported by everyone who is purchasing crab from the exporting countries and we, as a council, are calling upon the importers, distributors and end users to identify with the cause and use their buying power to support only those companies that are actively contributing to the sustainability activities of the NFI Crab Council.”
The council is funded by a self-imposed member assessment based on the weight of crab imports and from support of Allfish, which is part of the World Bank.
The domestic outlook
Within the United States, higher fuel prices and the lingering effects of the Gulf of Mexico oil spill has put a crimp in blue crab supplies so far, according to Greg Daley, manager at The Crab Depot, a retail and wholesale operation in Brooklyn Park, Md.
Daley, who purchases crabs from Texas, Louisiana and Mexico to supplement his Chesapeake Bay sources, says Maryland began the year with a strong season, but has fallen off. But Maryland is predicted to have one of its best seasons in a while, according to an April announcement from the governor’s office.
The winter dredge survey for Maryland indicated a crab population of 460 million, the second highest level since 1997 and well ahead of the record low of 249 million in 2007. Maryland’s harvest for 2010 was 89 million pounds, the highest since 1993, and this year’s harvest is expected to be in the 89-million to 94-million-pound range.
Daley says Louisiana suppliers, who once shipped 70 to 80 bushels to fill orders, have cut back to sending just eight to 10. Crab landings for Louisiana fell to 24.7 million pounds in 2010 from nearly 53 million in 2009.
“They still think there are some side effects from the oil spill,” he says, with suppliers citing oil dispersants used as negatively impacting the crab population.
Higher fuel prices are also keeping some fishermen out of the water in Maryland and elsewhere or has them crabbing less often, says Daley. Still, he says, “our demand has been strong” with crab sales evenly split between retail and wholesale customers.
At $199 in mid-June for a bushel for males (“Jimmies”), Daley says they are probably a bit underpriced, but retailers have to watch what they ask because it is a competitive area.
Contributing Editor Joanne Friedrick lives in Portland, Maine