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Seafood and Aquaculture
Markets
Largely from Engle andQuagrainie (2006)
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Major Country Markets
Per capita consumption of seafood rangesfrom 10-40 kg/capita, depending upon region
North America has highest consumption 48
kg/cap, but due to inclusion of Greenland Highest per cap consumption in the world
found in the Maldives at 203 kg/cap
If you have a fisheries-based economy, thenyou eat fish
Problem lies with FAO classification system.
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Major Seafood Markets
Total consumption is strongly relatedto both per capita consumption andtotal population.
China wins hands down! 30 MMT
Japan is next (8 MMT), but above theU.S.
India is fourth, not because of per capconsumption (4.7 kg/yr), but because ofpopulation (close to 1 billion).
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Trade in Seafood andAquaculture
About 38% of world fish production istraded internationally
Where it's caught where it's sold
Small percentage increase per year
Production increases are small due to
increasing contribution fromaquaculture
Aquaculture is offsetting capturefisheries
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Major Finfish Species Caughtand Supplied
Largest volume = Peruvian anchovy(10-12 MMT)
fishmeal production
pollock is #2 (fish sandwiches, fishsticks, etc.)
Also used for surimi Rest are dominated by scombrids
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Aquaculture Products
Most cultured species are similar towild-caught (exception is Chinese carp)
Aquafarmers remain in competitionwith fisheries producers
Could change due to genetics
Wild-caught still dominates the marketand controls price (exception: catfish,carp)
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Advantages
Aquaculture = control over the product
Year-round supply
Wild-caught = seasonal variationrelated to weather and fishingregulations
Result is large price swings (high
voltatility) Makes it difficult for aquaculture to
compete in this type of market
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Advantages (continued)
Controlled production = consistent productionof high-quality product
Consistency in supply wrt to size, quality andother production characteristics and volume
Should lend stability to the market, especiallywith continued growth of aqua production
Ultimately, this should allow for negotiation of
higher prices Buyers should pay more for reduced financial
risk associated with supply problems
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Advantages (continued)
Market sectors dependent upon freshproduct should prefer farmed supplies
Supply chains of captured fisheriesproducts are more fixed due toseasonality of supply
Cannot respond quickly to changes inretail demand
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Freshness Counts
In contrast to fish, you seldom hearconsumers praise freshness of beef,poultry or swine products
Issue regards perishability of seafood Tremendous ability with respect to
product presentations due to
processing technology Downside: many retail grocers thaw
out frozen seafood and sell it as "fresh"
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Traceability
Easier to trace farmed product thanfisheries-caught
Complexity of market channels for
captured product obscure steps insupply chain
Should be marked, tagged and logged
separately, but often isn't due to cost COOL laws easier to comply with for
aquaculture producers
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Control of Attributes
Controlling product attributes allows farmersto target specific consumer segments
Example: fat content can be controlled by
diet and impart different tissue flavors Added value products: presentation,
breading, microwaveable products, peeled,deveined, fillets, etc.
Added value = increased profit, especially ifyou know what consumers want and can doit cheaply (1 lb of effort = 2 lb profit)
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Reliable Delivery and Safety
Reliable delivery allows for compliance withcontractual agreements
Must deliver size and grade required Big difference between aquaculture and wild-
caught seafood Aquaculture management practices help
insure safety of products: free of chemicals,pesticides, undesirable additives, GMO
issues Dioxin, mercury, status in fish used for fish
meal production
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Resistance
Growing resistance to aquacultureproducts by some activist groups
Aquaculture considered unnatural and
detrimental to the environment Example: farmed vs. wild-caught
salmon, same for catfish
Consistency of flavor, quality andcontaminant status are assured byaquaculture
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Price Issues
Costs of production can be higher for aquaculturedproducts vs. wild-caught
Costs associated with capture fisheries have beensteadily increasing
Trawlers must travel farther to find wild fish stocks =increased fuel costs, fewer fishing days
Aquaculture allows for reduction of costs viaresearch and development, not so with fisheries
Consistent production/quality afforded byaquaculture = stabilization of price
Some buyers are accustomed to waiting for naturalharvests to purchase at a lower price
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Market Competition
Prices have dropped for aquaculturedAtlantic salmon, rainbow trout, sea bass,shrimp and sea bream
As the price has dropped, their margins in
the marketplace have increased. Farmed product that competes in a large
market (e.g., shrimp) will face limited priceeffects from increased aquaculture
production If farm production is much lower than
capture for a species, increased productionwill not affect overall market price
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Market Competition
When supply of farmed fish is high, price willlargely determine market price
In this case, farmers have greater control
over the production process Salmon and catfish are examples of markets
dominated by aquaculture
With few or no substitutes, industry
expansion is difficult Farmers, themselves, must create their
markets and become its promoters
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Market Competition
Catfish represents a good example ofan aquacultured product having to bemarketed by farmers
Historically very inexpensive Farmers successfully moved their
product into new markets
Sustained price in face of increasedvolume
Problem now: imports of basa
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Market Competition
Seafood demand studies show that theseafood market is highly segmented
Farmed species appear to compete with their
wild counterparts, but not with differentspecies
In Europe, trout is a low-fat, healthysubstitute for beef
Aquaculture producers are capturing theirshare of the market, but what market is it?
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Consumption Trends
In the past, most seafood was wild-caught, what could be caught locally
Situation changed with refrigeration,advanced transportation
Most consumers prefer local species
In Europe, fish were consumed weeklyas a low-cost protein source
Now, reserved for more refined dishes
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Most people are conservative and traditional when itcomes to the seafood they eat
What is caught in hometown areas
Region Consumers
Most preferredspecies
Second-mostpreferred
Third-mostpreferred species
Pacific salmon halibut catfish
Mountain trout halibut salmon
West North Central catfish trout cod
West South Central catfish flounder trout
East North Central perch catfish whitefish
East South Central catfish flounder bass
Middle Atlantic flounder haddock salmon
South Atlantic flounder trout red snapper
Northeast haddock cod swordfish
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Consumption Trends
Preparation methods also vary byregion, culinary traditions
Northern Europe and southeast U.S.prefer fried fish, Central Europe Frenchcuisine, Southern Europe fried, grilled,simmered or dried
Fried catfish and hushpuppies! Alongthe Gulf Coast, most seafood is fried
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Consumption Trends
Consumer preferences and tastesultimately change over time
In the U.S., beef consumption hasdeclined and poultry increased
Health issues, lower-fat protein, HUFAs
Poultry increased largely due to lowerproduction costs
Pork and seafood have changed little
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Consumption Trends
Major factors impacting consumption trendsare quality and flavor preferences.
Other variables: price, size of household,
coupon value, income, geographic region,urbanization, race, seasonality
Household size is more influential thanincome
In the U.S., preference is not an income issue(except for lobster and catfish)
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Consumption Trends
Most promising target for increasing seafoodsales in restaurants is consumers with highincome, who are caucasian, well-educated,and live in families with no children
More aware of health benefits
For at-home sales: older, well-educated,higher income, non-caucasian, urban-
suburban, children
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Consumption Trends
Frequent purchasers of seafood inrestaurants were more likely to haveannual incomes above $40K.
Other factors: income, race,seasonality, few small children, andadherence to the Catholic faith.
Main factor: recognition of fish as anutritious, healthy product
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Use of Aquaculture Technology
Supply of shrimp has expandedworldwide due to aquaculture success
Currently exceeds 30% of worldwide
capture, $10 billion supply Technological breakthroughs in 1980s:
hatchery seed (SPF, GMO)
feed manufacturing (nutritional research) All has changed due to competition
over diminishing natural resources
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U.S. Situation
We import more than 60% of fish andshellfish
Fish and seafood imports into the U.S.are the largest agricultural and 2nd-largest natural resource component ofU.S. trade deficit (approx. $12 B)
$21.3 B imported in 2003 (64% increasesince 1996)
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U.S. Situation
Natural fisheries stocks are threatenedby overfishing
Many catches have leveled off or aredeclining
Fish farming now accounts for 15% ormore of U.S. fish and shellfish harvests
Clear potential for future growth
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U.S. Situation
U.S. aquaculture producers are highlyvaried, from very large corporations tosmall farms
Products: finfish (catfish, trout, salmon, striped bass,
tilapia, red drum, baitfish, ornamentals)
crustaceans (crawfish, shrimp)
shellfish (oysters, clams, mussels)
aquatic plants (seaweeds)
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U.S. Aquaculture Production
total = 391 106 MT/yr
291 106 MT
11.4 106 MT
9.1 106MT
28.2 106MT
8.6 106
MT
4.1 106 MT
Sources: Mississippi State Sea Grant, NOAA Office of Science and Technology
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Part 2. Intro to
Agribusiness System
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Objectives
What is the agribusiness system?
size and scope of agribusiness
various sectors role of marketing in the economy
various functions of marketing
role of marketing in agribusiness firms
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Agribusiness Background
Agriculture to most people means farmingand ranching, accurate until 1960
Now, agribusiness is a complex systemreaching beyond the farm
includes everything required to bring food tothe consumer
aquaculture is no different from agricultureand must achieve this level to be takenseriously
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Agribusiness Background
System includes not only those who produce(e.g., farmers, hatchery managers), but alsothose who
provide inputs (e.g., fry, chemicals, feed)
process the output (e.g., processing plants)
manufacture (e.g., shrimp microwavable
products) transport/sell the products (e.g., retail
grocery stores, seafood wholesalers, etc.)
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Agribusiness: How did itHappen?
In the late 1800s, most farms were self-sufficient
Wars caused prices of produce to increase, stimulatingmore production (rem: demand and supply?)
Labor became hard to come by, resulting in increased
mechanization
Farmers focused on producing a crop and startedpurchasing inputs (this is where aquaculture is today!)
Processing and food manufacturing then moved off the
farm Raw products converted to a form more convenient to
consumers (improved preservation)
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The Agribusiness System
Aquaculture
Input Sector
Production
Sector
Processing-Manufacturing
Sector
Agribusiness System
Note: the success of the production sector depends upon the proper
functioning of the other two!
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Size and Scope
Agribusiness is largest sector in the U.S.economy: 11% of all goods, 16% employment
Production systems occupy 1/2 of all land,
products valued at $1 trillion Apart from food, why important? Allows us to
do our thing (science, government, education;separates developed from developing
economies Interesting point: processing is the largest
sub-sector!
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The Input Subsector
Provides farmers with feed, fry, credit,equipment, fuel, chemicals, all needed foroperation (i.e., production)
Since WWII; nature of inputs has greatlychanged
As labor costs increase, you typically seea shift towards increased purchase ofinputs (decrease of 50% in farm laborsince 1960)
This typically allows increased production
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The Input Subsector
Other input change: use of energy
Due to efficiency, energy usage has not
changed much on farms, just the typeof input
Relatively few input businesses
compared to production or processing(look at feed manufacturing vs. thenumber of farms!)
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The Production Subsector
The average size of farms is increasing, bothin agri- and aqua-culture
Large corporations getting involved
Increased specialization of production is thetrend, taking advantage of new technologies
genetically improved growth/survival
specific pathogen-free stocks
This creates some stability in thataquaculture production is becoming morediversified
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The Production Subsector
Specialization also allows for increasedproduction efficiency (telltale sign: increasedproduction in face of decreased or constantlevels of input)
Another blast from the past: productioneconomics production costs increase every year due to
increase input cost
but cost of inputs is not related to commodity
prices (e.g., shrimp), related to cost of inputs toproduce inputs!
when commodity prices drop, gross farm incomefalls, but amount spent on inputs doesnt (the greatsqueeze!)
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The Production Subsector
Two sizes of farms: those who can gathereconomies of scale (typically large) andthose who cant (typically small)
Large farms can take advantage ofexpensive new technologies (e.g.,aeration, telemetry, genetically-improved
inputs) Small farms can also: How? Sell
something that commands a high price!
Th P i
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The Processing-Manufacturing Subsector
Includes all businesses that turn rawmaterials into finished (or partially-finished)products
In aquaculture, largely accomplished byprocessors/processing plants
Also includes those who package, distribute,and sell at times, places and in forms desired
by consumers (the marketing bill) Marketing bill represents 70% of total amount
spent by consumers on food!!! (they alwaysmake out great in whatever economy)
Th P i M f t i
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The Processing-ManufacturingSubsector
Firms in this sector arevery large (again,gathering economies of
scale) and veryresponsive toconsumer tastes andpreferences
Examples: ADM (grainprocessing), OmegaProtein (fish meal),Tyson Foods (feeds)
Packaging
Transportation
Before-tax profits
Fuel and power
Depreciation
Advertising
Rent
Net interest
Repairs
Other
Labor
The Marketing Bill
H th Bi C i
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How the Big CompaniesWork
It should be obvious that agriculture andaquaculture as industries dont depend onisolated subsectors: flexibility,diversification are keys to success
many large companies have divisions inother parts of the agribusiness system
they do business in other areas
Example: Cargill, Inc., one of the largestgrain traders in the world, also largestsoybean processor, flour miller, feedmanufacturers, seed producers, etc.!!!
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