WHAT MAKES PLANNING TUNA SO HARD ?

Opinion Page

WHAT MAKES PLANNING TUNA SO HARD ?
(By Mr. Henk Brus)

Making your financial and commercial planning for the coming year is probably a difficult job for any manager in the tuna business. The year 2002 is making it again difficult to plan your business numbers. When you rub your crystal ball, it keeps looking very hazy. There are so many insecure factors to consider. I'll name a few, before you throw the dice.....

Will Ecuador get a reduced 8% duty tariff to the USA ?
The Andean Agreement (APTA) of the USA with the Andean nations Ecuador and Colombia is still much under discussion today. As it looks now the Ecuadorians could get possibly a 8% duty rate, now that their chances of duty free access seem to have gone up in smoke. If they get their 8% and when they are obligated to source the raw material for these orders from USA fleet and Andean fishing vessels, then this will also have a dramatic effect on the fishing side. This could mean that several USA vessels would return from Samoa in the Western Pacific to the Eastern Pacific Ocean to supply the Ecuadorian canneries. Exports of canned tuna from Ecuador and Colombia to the USA will then certainly increase. So who would be the right suppliers ? What will then be the impact of the exports of canned tuna and frozen tuna loins to Europe ?

Will Thailand and Philippines get a reduced duty tariff to the EU during 2002 ?
The EU agreed with Thailand and Philippines at the recent WTO meeting in Qatar that they would try to settle the 24% duty on tuna dispute by April 2002, or otherwise let the WTO arbitration body make a judgement about this matter. Thailand and Philippines are threatening to block to vote against the passing of the WTO waiver that would enable the EU to execute its Andean Agreement, which includes a duty free tariff for Ecuador and Colombia. If Thailand and Philippines vote against it, they might block the Andean Agreement taking its effect, bringing the EU in a very embarrassing position. So perhaps early next year EU officials will give in to the Asian nations, and promise them a lower import tariff, likely connected to a quota. They will open the door again for weakened Thai canning industry, but at the same time pose a threat to the earnings of the ACP, Andean and Spanish tuna canning industry. Is it actually going to happen ?? I'll throw a coin !

El Nino, will it be a heavy one ? and what will be it's impact on fishing ?
Christmas time is coming and so El Nino is expected to show up again around the coastal regions of Peru. El Nino is the scapegoat for all reduced fishing in the Eastern Pacific, and will likely be held responsible for the very low skipjack catches off the coast of Ecuador. If El Nino would get fiercer next year, the EPO catches skipjack catches will likely fall even further, pushing the tuna more in western direction, out of the reach of the smaller size purse seiners. But scientists are saying that " the little fella" is not expected to stir up the climate too much in the next year, almost all models predict "neutral" conditions for the coming 5-6 months. So, in the end, it tells you nothing !

Will the economic downturn effect demand ?
Are fresh tuna sales and canned tuna sales going to suffer from less confidence with the consumers? Fresh tuna is considered a luxury product and much consumed in out-of-house eating. With the economy sliding, consumers might even spend less in the coming year on luxury food and less on fresh tuna steaks. In Japan there is already a clear decline of expensive Bluefin sales, and a shift to less expensive species.
Canned tuna remains low priced, certainly if you compare it to the luxury catfood people feed their pets. So it seems unlikely that they buy less canned tuna. While cutting down their budgets, consumers might even feed canned tuna to their cats !

Where are Diesel Prices going ?
Now that the Russians have finally agreed to reduce their oil output, will the prices of oil actually start to go up ? That might be bad news for the boat owners. However market analysts have good news. They project that in 2002 oil could average to $6 a barrel lower in 2002, compared to this year. This would make a barrel of Texas crude oil $ 20. With OPEC controlling only 60% of the oil supply, and with demand shrinking due to less economic activity, non-OPEC producers are likely to sell at lower prices to secure an outlet for their oil industry.

Will Tuna Prices fluctuate again so extremely ?
After the very low prices of 2000 ,and the increased stability in the market in 2001, will 2002 also be a more stable year, or will the WTPO loose its control on the tuna catches and prices ? If the WTPO is capable of keeping its grip on the purse seiner owners, then we could likely expect a stable market in the range of USd 700 and USd 900. In order to maintain this level it is crucial that the Taiwanese boat owners remain fully committed to the WTPO. Last months low priced skipjack sales from the Indian Ocean show that it would be a great benefit to the WTPO if the Spanish ANABAC tuna boat owners also join the WTPO. Another important test in 2002 will also be if Ecuadorian boat owners will also continue to stick to WTPO agreements when their skipjack catches become plentiful again.

Will the Mexican-USA Dolphin Issue be resolved ?
Do dolphins really experience stress levels when they are caught (and later released from the net) in association with yellowfin tuna, that are such that you can talk of lethal harm ? This is the big unanswered question toll this day, which keeps Mexico out of the USA canned tuna market. It is expected that within 2002 USA scientists will have finished their research, and will finally come up with a scientific answer. When the dolphin stress blockade would be ended, the Mexico with approx. 4% duty only, could be become an important supplier to the US market. Trucks could run directly from low labor cost Mexican canneries directly to the US retailers warehouse ! But will it really happen ?

Which of my customers will merge, into an even bigger buying group ?
The nightmare of most canned tuna distributors is when one of your major customer is taken over by a major retail group , with whom they are less strongly positioned. It is happening all over Europe and the USA, every year we see less canned tuna buyers. The few canned tuna importers which are still there, have become either even bigger, or sometimes rapidly smaller. But all of them face a shrinking customer base, and increased dependency on a very small group of huge customers. Large supermarkets or Food Service groups tend to buy more direct, or they just use the importer to cover their risks. During most mergers retailers choose for brand rationalization. This means some important domestic brands see either their shelf listings lost, or are faced with even higher slotting fees to maintain their position. There still seems to be no end to this trend of mergers, so hold on and pray !

The final and most important question is obviously, are we going to make any money on tuna this year ? A question increasingly difficult to answer for many of us in the tuna business. But somehow we all seem to be addicted to this unpredictable and crazy business. So what choices do we have as tuna junkies ??

You can react on this opinion article at our Tuna Discussion Forum.

When you want to share your own opinion or view on a tuna related subject on Atuna, we welcome you, pls contact us !

Read other opinions