INTENSIVE CARE: STOCKS BLOCK CIRCULATION

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INTENSIVE CARE: STOCKS BLOCK CIRCULATION By Henk Brus (Oct. 11, 00)

The amount of stock held by European importers and canners, in combination with slow demand, is mentioned by most tuna professionals as the most important reason why tuna demand from Europe is still quite limited, bids from European buyers to tuna processors are still so low, and prices are not moving up further, even now that less tuna is being landed. When we analyze the patient and diagnose a lack of circulation in the main vessels, you feel that a lot of hard effort, and perhaps some very serious dieting is needed to get the skipjack tuna business out of Intensive Care.

During the last 6 months not only the high stock levels but also the ever rising dollar has had an important influence on the demand in the Northern European countries, expect for the U.K. On the European mainland importers were not able to enjoy the benefit of the extremely low tuna prices in US$, for either large price promotions, or increased advertising campaigns. The Euro was worth US$ 0,97 in March and only US$ 0,85 in September. The movement caused a price increase of 14% for a can of tuna. This clearly shows why most European consumers have hardly seen any significant changes in the tuna price on the shelf, for the last year. In some instances prices have even been moving up the last few months, when the Euro plummeted.

A price orientated market like Germany has especially been hit strongly by the unfavorable exchange rate. Although increasingly importers have shifted their buying to Euro or FFrs transactions with tuna packers in Africa. In Hamburg canned tuna importers are still holding plenty of stock, especially for foodservice sizes, which covers the local demand for at least the next 2, possible 3 months. Canned tuna sales during the last summer season have been normal, to slightly disappointing due to bad weather.

In Spain the tuna canners are said to have a stock position of finished product and also frozen skipjack which covers their sales and demand for the next 2-3 months. Prices CF Vigo for skipjack were quoted only recently around US$ 430, with hardly any takers. coldstorage and warehouses are full, and demand is slowing down after the very important summer season. A massive promotional campaign, with all major brands advertising on TV and offering all sorts of cars, has not been able to clear the inventories of the major brands and processors. Although the market in Spain has grown close to 8% over the last 12 months, the supply and production have been far greater.

Italy , which is pre-dominantly a yellowfin market, has not been affected so strongly by the glut in skipjack prices. In France, where almost all tuna in bought in French Francs from Africa, prices for skipjack tuna on shelves have declined, and the shift from yellowfin to skipjack has continued. Although it is hard to obtain reliable information it seems that also in France there is a stock which covers demand for at least the next 2 months.

The smaller European markets, such as the Netherlands, Belgium, and The Scandinavian countries show slightly increased levels of finished product in the warehouses compared to normal. Most retailers in these markets have secured supply and price for at least till December 2000, and some even as far as April 2001 already.

The U.K market has probably benefited most from the declining prices of tuna. Due to the strength of the Pound towards the Euro and the French Franc, the English retailers saw much more of the low prices for skipjack. This created either extra profits for the supermarkets or provided space for additional promotional funds. Brandleaders John West and Princes managed to increase their promotion efforts during the summer period significantly. These initiatives have led to an increase in demand of about 10% over the last year, and has kept stocks moving. The development of new tuna recipes and special packs, has also decreased the commodity character of the product, leading to somewhat less speculation by brandleaders and retailers. Stocks in the U.K are said to be slightly more then normal, but certainly not exceeding a 2 month period. Based on the contracts that the major retailers still have with packers from ACP countries, it is expected that demand will only return in 2-3 months time.

The European market shows us, that recovery of the tuna market might still not be around the corner. High stock levels in Europe and obese levels in the USA, are causing a lack of appetite for the next 2-3 months months in these major markets. Only an important price increase could possibly spur demand. Even if we would see an increased level of activity and appetite within the next month, it is almost surely speculative buying or over-eating again. This kind of short revival will not help the weak patient recover on the longer term, and will only bring misplaced optimism. Soon we will know if two months of Intensive Care and dieting will be the solution, and create a slimmer, leaner market, or that even a longer period of high care and cutbacks are needed to revitalize this patient.

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