GLOBAL CATCH REDUCTION, WILL THEY STICK TO IT ??

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GLOBAL CATCH REDUCTION, WILL THEY STICK TO IT ??
By Henk Brus (Jan. 23, 01)

With the upcoming assessment meeting of the WTPO, the World Tuna Purseseiner Organization on January 29th in Manila, and the tuna market price rising to a level just below USd 600 CF BKK, the focus of most tuna professionals around the world will be on what tuna boatowners will find conclude together next week.

One of the main reasons for the current raise in skipjack prices has been the reduced fishing effort, combined with a slight increase in demand from especially the European markets. Also the fact that fishing companies and traders have been working hard to put prices up, has contributed to the increased trading activity during the last two weeks. Even some speculative buying in order to drive the price up, might have taken place.Although few buyers have been accepting levels close to USd 600, the majority of tuna buyers is getting increasingly critical about what is next ?

Since tuna is a global specie there has not been any hard data sofar to support the fact that actually catches have reduced, some argue that price rises have been largely the psychological effect of the unity and decisiveness shown at the last boat owners meeting in Manila.

At the 2nd WTPO meeting last November 2000 it was already difficult for boatowners to agree on reduction , and then raw materials were at the USd 380 CF BKK level, and fear of further decline was eminent. Next week tuna boatowners will be meeting in a mood where prices have risen in almost two months by about 50% ! Some buyers fear that this is an artificial rise in prices, and that it has all gone up all too fast. They are even reluctant to take long positions based at a level of around USd 500 because they feel many boat owners will start fishing again full blast within the coming month, and will ignore previously made agreements easily when they see the prospect of making some money again.

The big danger is that if fisherman go back fishing they will all be looking to turning their fish into dollars soonest. It is a fact that several tuna fishing companies are in bad shape financially, and badly in need of cash to pay the loans to their bankers. Therefore the drive to go back fishing will be strong. In the past reduction agreements in other fishing markets proved to be feasible when markets were at historical low in terms of price. They also proved hardly of any value the moment they produced some results in either some improvement in stocks or prices.

Fisherman do not exactly have a reputation of seeing the benefits of conserving their resources in order to provide a long term source of income to themselves. In Europe tightly enforced catch quota's, oversupplied markets, subsidies to sell your boat, and very low prices did not keep fisherman from sailing and fishing for species which were already heavily over-exploited. So why would these tuna fisherman be any different from the rest ? Will they be able to come to self-regulation through firm agreements on continued reduction, and enforce them ( something many governments have failed in).

Let's refresh our memory: If we look back to the trend in the past year we see that extremely low prices around the USd 400 level were quoted during Oct/ Nov 1999, so everybody was most happy when prices recovered by Mid January 2000 to the level of USd 700. Optimism prevailed that the problems were finally over, the battered purse seiner fleet tried to compensate for the losses in the previous year and started to catch full blast. Not long after by the first week of March 2000 the decline set in and by the start of April 2000 we were looking at $550, and May showed us $400 and the market kept declining.

The big difference compared to the situation last year is that we are not at the $700 mark, and also the US market is even much more over supplied this year then it was at that time. This means that major buying interest from the States will only kick in by March 2001. In Bangkok the unshipped stocks of finished canned product with some packers is still considerable. And although demand has been increasing over the last 2-3 weeks, it is doubtful if this trend will continue during the next month. Taking this in account it is quite easy to project that if fisherman this year show the same predatory behavior as last year, and they will be equally successful in catching large amounts of skipjack tuna, prices will likely be back at the $ 400 level before we know it.

Canned tuna buyers have taken a bad toll for being too optimistic last year, and most of them have just been facing the financial consequences in their end year results. They are not likely to believe promises of catch reductions too easily unless they really see some serious signs. Any signs that tuna boat owners will start catching again at full capacity will likely have the same effect as last year, but even faster and even more damaging this time. However if reductions are sustained, we might see the continued revival of an almost dead market !

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