GLOBEFISH - COVID-19 Special Feature

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GLOBEFISH

COVID-19 Special Feature The COVID-19 pandemic, unprecedented in modern times, continues to cause major disruption in societies around the world and inflict severe damage on the global economy. Governments have introduced an array of measures intended to slow the spread of the virus, including physical distancing directives, limitations on business opening hours and travel restrictions. The seafood sectoris dealing with a bleak demand outlook as well as an array of supply challenges.

covered by this newsletter please refer to the FAO publication How is COVID-19 Affecting the Fisheries and Aquaculture Food Systems, available here or through the QR code:

While prices for frozen and processed fish products have been less impacted than fresh and chilled, they may be more vulnerable in the mid-term, as in the future they will have to face tough competition from other goods, both domestically and on the international market.

All graphs in this newsletter are based on responses to the first GLOBEFISH COVID-19 Fisheries Market Analysis questionnaire. This questionnaire was published in April 2020, and circulated within networks of fish producers, vendors and distributors.

As exports have been restricted by decreased demand and logistical issues, supply chains have shortened. Challenges remain for businesses trying to redirect supplies, and many domestic markets are not large enough to absorb this influx.

The GLOBEFISH team would like to extend their heartfelt thanks to all 150 participants in the first GLOBEFISH COVID-19 Fisheries Market Analysis questionnaire, whose insightful responses were fundamental in building the analysis contained in this newsletter. These inputs will also be used to inform future publications, especially related to the impact of COVID-19 on the fisheries and aquaculture industry.

Major outlets for fish such as the hospitality sector have ceased operations. Others, such as wholesale, are struggling under decreased demand. Retail has been widely touted as an alternative avenue for excess supply, but few are able to adequately match the conditions required.

The data and information herein presented is compiled by FAO staff at the time of its production, “as is” and “as available,” and every effort is made to ensure timeliness, accuracy and completeness. FAO assumes no responsibility for errors and omissions in the data provided. Users are, however, kindly asked to report any errors or deficiencies in this product to FAO GLOBEFISH (globefish@fao.org).

Production has suffered numerous setbacks as a result of falling demand, compounded by difficulties purchasing inputs, reaching markets and ensuring safe working conditions.

Government support and future regulation will have a key role to play in ensuring the future of the industry. For policy recommendations on topics 1

GLOBEFISH C O V I D - 1 9 S p e c i a l F e a t u r e Prices Prices have generally fallen, often dramatically. This has serious implications for businesses already contending with higher operating costs. The markets situation varies and outlook is closely tied to product form and intended market.

Perceived Change inChange Price in Price

Current Prices Prices are far below expectations, prompting a down turn in the market as supplies withdraw in step with falling demand.

50% 40%

Fresh and chilled products have been immediately affected by the reduced demand.

30%

Frozen and processed products have been less affected, but remain vulnerable to oversupply.

20% 10%

Prices are expected to take awhile to stabilise and increase, as demand must overcome supply and stores.

0% Large decrease

Slight decrease

No change

Fresh or chilled

Export and Domestic Markets

Slight increase

Large increase

Frozen or processed

Perceived Change in Exports

Market contraction and logistical difficulties have caused a shortening of supply chains.

80%

Supply may exceed domestic demand, especially in export oriented markets. Fishing restrictions have been imposed in several countries, often in the interests of maintaining prices.

60%

40%

Export oriented fisheries are most likely to find that they have excess capacity when compared to existing demand.

20%

0% Large decrease

2

Slight decrease

No change

Slight increase

Large increase

GLOBEFISH C O V I D - 1 9 S p e c i a l F e a t u r e Prices; Current Prices

Prices; Export and Domestic Markets

44 percent of responses reported a large decrease

68 percent of respondents reported a large decrease

The majority of prices have seen large changes, as demand and supply have fluctuated in response to markets. For many products, there is more supply available than may be profitably put on the market, exerting strong downward pressure on prices.

20 percent reported a slight decrease The pandemic and subsequent disruption to demand and transport have reduced the desirability and possibility of supplying export markets. This in turn has led to a sudden shortening of supply chains that extends beyond the fisheries and aquaculture sector to all commodities.

Many producers, processors and suppliers are unwilling to sell in these unfavourable market conditions, choosing instead to delay harvests, store fish or process for preservation; this is likely to continue until demand resumes, the timescale of which remains uncertain.

Until international demand and trade resume, domestic prices for fish and fish products will likely be closely linked to the orientation of domestic production. Currently production which was intended for export is often being redirected for domestic consumption, leading to acute overcapacity is some countries and specific fisheries.

Fresh and chilled products were the most vulnerable to the immediate changes in the market, seeing decreases in prices across the board. Producers of fresh or chilled products are usually not able to change their production, with vessels and supply chains adapted for supplying those markets. Delaying harvesting may be an option for aquaculture, but comes with many additional costs for farmers, and may not prevent produce having to be sold at a loss in the future.

Domestic demand is not always great enough to absorb redirected exports, and the domestic market may also differ in terms of price, which producers would have built their previous expectations on, and preferences.

There have been numerous examples of fishers associations voluntarily reducing catches, generally in the interests of ensuring returns and to avoid flooding markets.

While prices have slipped, frozen or processed products have been less immediately impacted by the pandemic. However, storage is limited and not always desirable for suppliers. In addition, while this may provide a temporary outlet for excess production it cannot be used indefinitely.

In the medium term trade is likely to keep prices as demand and trade resume, as stores which have built up during the initial stages of the pandemic are put on the market. This is likely to be especially pronounced for formats that are easily stored and transported.

Oversupply and large stores have likely considerable large glut in the market in the midterm. This implies that any eventual increases in prices as businesses reopen would be largely offset by supply and by stored products being put on the market. It is worth considering that frozen and processed products, despite being less affected currently, would likely be more vulnerable to future competition from stored products.

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GLOBEFISH C O V I D - 1 9 S p e c i a l F e a t u r e Demand The pandemic and accompanying global and national responses have had an unprecedented effect on market demand for fish, causing a sudden drop across the sector. There is still great uncertainty as to the future direction of the market, and much effort is being made to match existing demand with available supply.

Hospitality

Perceived Change in Demand

The sudden closure of restaurants, hotels and catering has had a dramatic affect on overall demand for fish, and poses challenges for producers, processors and suppliers to find alternative markets.

100% 80% 60%

Wholesale Vital markets for fish have shut, either due to a lack of demand or supply, or due to government regulations.

40% 20%

Retail 0%

While retail has been less restricted than other outlets for fish, demand has still decreased and suppliers face challenges meeting requirements.

Large decrease

Slight decrease

Hospitality

Demand; Hospitality

No change

Slight increase

Wholesale

Large increase Retail

The plummet in demand has been particularly marked in areas reliant on tourism, with a particular impact on premium varieties, sizes and formats. The nature of sales to the hospitality industry imposes difficulties to find alternative channels.

90 percent of respondents reported a large decrease As people’s movement has been restricted the world over, the clientele of the hospitality industry has dwindled. This, combined with government enforced lockdowns has led to restaurants, hotels and catering services closing, with growing uncertainty as to what the industry will look like in the future.

As some countries begin to reopen from lockdown, demand may return, especially for outlets such as restaurants and catering, although they are unlikely to return to previous levels in the short term.

Hospitality has long been an important outlet for fish, both for the large volumes consumed and as a market for larger fish and valuable species.

In areas that have developed tourism, sales to the hospitality industry provided a way for fishers to share some of the benefits from the lucrative market.

A return of demand for hospitality will be reliant primarily on the willingness of customers to return to restaurants, hotels, resorts, etc., which in turn also hinges on government regulations and the provision of associated services such as passenger flights.

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GLOBEFISH C O V I D - 1 9 S p e c i a l F e a t u r e Demand; Wholesale

Demand; Retail

62 percent of respondents reported a large decrease - 21 percent reported a slight decrease

62 percent of respondents reported a decrease in demand As retail has been largely unaffected by restrictions of movement and government-imposed closures, demand has been less immediately affected than other outlets. In addition, overall retail sales of food have risen significantly, although the benefit for fisheries is not guaranteed.

Wholesale acts as an important market place for the supply of fish and fish products, and as such its fortunes are directly dependent on the realities faced by other sectors, both domestically and internationally. The overall reduction of sales has caused demand to tumble for many wholesale markets.

The increase in overall sales from retail (i.e. all products) will not necessarily be directly transmitted to fisheries, and available demand is not always for product forms that producers and processors are readily able to supply. Many have observed a strong initial tendency amongst consumers to stock up on products that will last longer (see page 3 for more information), potentially outstripping supply of these products.

While fishing activity has been reduced by the pandemic (see page 7 for more analysis), there is still a glut in most markets. Because of this, the challenges faced by wholesale markets are not so much as a result of a lack of inputs, but rather stem from distribution of products to final consumers and reduced prices for many products.

Within wholesale markets, the greatest changes have been for high value unprocessed fish, which now finds itself with a severely reduced market and limited means for storage.

While national contexts vary, retail sales through outlets such as fishmongers or retail establishments with a fish counter are generally limited, with the majority reaching the end consumer in pre-processed retail packages.

As a result of reduced demand in all markets and government closures in some countries, wholesale markets are not able to function with the same capacity, affecting the sale of all forms of fish and leading wholesalers to compete with other participants in the value chain, such as producers, for remaining demand through other outlets, such as home delivery and retail.

Producers and processors now face enormous challenges if they wish to tap into that demand.

For established suppliers there may be issues meeting additional demand, complicated by sourcing scarcer packaging, reduced processing capacity in certain sectors and logistical issues.

For those who do not typically supply retail, there are additional difficulties in establishing relevant supply chains, making building relationships key.

Given the central importance of wholesale markets for fish and fish products, it is likely they will begin to recover as countries emerge from lockdown, albeit at reduced scale, largely due to possible changes in production and an as yet uncertain outlook for the hospitality industry.

It is most likely that retail will be normalised to previous levels the fastest, as they are closest to consumers. Additionally, food service remain indispensable, and so as yet have been less negatively affected by most restrictions.

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GLOBEFISH C O V I D - 1 9 S p e c i a l F e a t u r e Supply

Perceived Impact on Businesses

Fishing, harvesting and processing Oversupply in the market and large build-up of stored products have serious implications for future profitability.

60%

Capture fisheries have reported problems crewing vessels and landing catches, as well as shifting targeting away from high-value stocks.

40%

Aquaculture operations have reported problems purchasing inputs and have unplanned levels of stocking, the latter of which creates costs and prevents seeding the next harvest.

20%

0%

Demand for processed products has been less directly affected, but logistical issues and worker safety are key concerns for processors.

Stopped trading

Temporarily closed Many

Some

Permanently closed None

Perceived Impact on Distribution Logistics Border closures and other disruptions to transport present challenges.

Global calls of commercial vessels into main ports are down 10% on last year, with a particularly pronounced drop for large vessels.

The reduction in passenger flights has negative implications for fish trade, as fish often travels as cargo on these flights.

Harder to sell products

6

Harder to buy inputs

No change

GLOBEFISH C O V I D - 1 9 S p e c i a l F e a t u r e Supply; Fishing, processing

harvesting

and

Supply; Logistics 61 percent of respondents said it was harder to sell their products

40 percent of respondents reported many businesses as being temporarily closed, while almost 90 percent reported at least some businesses having closed temporarily

31 percent had found it harder to buy inputs Border closures, disruptions and constricting markets have all contributed to transport faltering in the first months of 2020.

Falling demand remains a key issue for fish producers and processors, with lower revenues and higher operational costs setting in.

While food transport has been designated as an essential service in many countries, goods are not moving as easily as they were before. This leaves a stumbling block for getting the right products to the right market.

Worker safety, including access to necessary protection and enactment of public health guidelines, remain key priorities for all sectors.

The operations of capture fisheries have been hampered by falling demand, difficulties crewing vessels, offloading catches, and sourcing inputs, thus leading to greater reduction in supply for wild caught fish.

Respondents to the GLOBEFISH survey reported a rise in the cost across all forms of freight. While prices have fallen shipments have too, as there is generally less demand in destination markets.

This has led to less flexibility in terms of routes, time slots and appropriate storage facilities.

Production from aquaculture has generally been less directly affected, although difficulties faced obtaining key inputs such as feed and liquid oxygen, largely due to logistical problems, pose challenges. Unplanned high levels of stocks in ponds has created issues related to feeding costs and obstructs seeding of the next generation of fish.

There has been a stark reduction in total sea freight, putting great pressure on the shipping industry. Shipping companies have reported an increase in sales to ship breakers. The capacity of the sea freight industry will be difficult to recover.

The commercial flights that fish often rely on to reach markets have all but stopped. Cargo fights have been reduced, but the greatest impact has been on the number of passenger planes.

For products that previously enjoyed the swifter transport and cold chains of air transport this option is now limited.

Some capture fisheries have been more regularly targeting lower value species, as profits from premium products, such as those which would otherwise have gone to hospitality, have fallen.

This flexibility is not available for aquaculture practices, who having reared the fish must find a way to sell them.

There have been evident disruptions to land freight, particularly international transport. While domestic land freight does not have to contend with the border closures and queues that have accompanied the pandemic, there was generally acknowledgement among respondents that appropriate cold chain transport was more expensive and harder to come by.

While prices and demand for processed and preserved products has been less immediately affected by the pandemic (for more analysis see page 3) there are still key issues, such as sourcing inputs, including fish and packaging and ensuring worker safety.

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GLOBEFISH C O V I D - 1 9 S p e c i a l F e a t u r e Government response As the pandemic has progressed, government responses have turned from quarantine and immediate containment of the virus to recovery and resumption of the economy, with businesses now starting to reopen in many parts of the world. The unique nature of fisheries and aquaculture will require appropriately formulated government responses that support its needs in order to ensure a successful recovery of the sector.

Government Support Offered to Respondents

Government support With many businesses struggling to stay afloat, differing support systems will have a strong impact on recovery.

Financial and capacity support should both be prioritised and implemented as soon as possible, in the interests of preserving businesses and livelihoods.

COVID-19 has forced many businesses to close temporarily; every effort should be made to ensure they do not close permanently.

None

Support, other than financial

Financial support

Perceptions of Changes in Regulation

Industry regulation As the initial reaction to the pandemic passes and the world looks to the future, new and pre-existing government legislation will have a direct impact on the fisheries and aquaculture industry.

Worker safety must be ensured, raising several difficult issues such as the feasibility of physical distancing at work.

Trade restrictions must be avoided, but there are difficulties in logistical centres such as ports and terminals.

More restrictive

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Less restrictive