Opinion Page
WHY SKIPJACK WILL BALANCE THIS TIME !
By Henk Brus (Feb. 06, 01)
A market rising at a rate of about USd 40 a week,
or about $300 in 8 weeks, can those increases be sustained ? Is a 70% rise in prices
over a period which equal to one trip to fill up a 1000 M/T purse seiner, many tuna buyers
will scratch themselves behind the ears !
Are some major players not being a little too eager in picking up these much higher
prices, and helping to drive the market up so they can finally make a profit on their
long-held inventory positions ? Will this market balance this time or will it drop back
again. Is this level really a reflection of the balance between supply and demand ?
When we analyze the same factors which brought the market down last year, it looks like exactly these same factors will now be causing it to move back up to a normal level.
| What made it go down ! | Why it is recovering ! |
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When we review what led to the skipjack crises, we can say that it was triggered by extra ordinary seasonal influences which led to maximized fishing efforts and oversupply. This disrupted historical and seasonal cycles in supply and buying behavior. In 1999 and 2000 major players in the canned tuna market in Thailand and the USA with their buyer power tried to profit through heavy speculation and market manipulation, but eventually became victims of their own strategy. Now these same companies desperately want market stability too.
There are now four global processors in the canned tuna market Trinity (EU), Star-Kist(US), Bumble Bee(US) and Thai Union(TH) that have high financial stakes in the global tuna market place. Saupiquet. Peche et Froid, Chicken-of-the-Sea and Bumble Bee have changed to owners, who have a solid financial background. For these players their major interest is to normalize this market, which is essential in trying to profit from their take-over strategies. The same goes for the major frozen tuna traders, Tri-Marine, FCF, and Itochu.
Weather circumstances have now normalized, no concrete signs of the coming of a new El Nino are there yet. There is only some slight La Nina effect projected within the Eastern Pacific over the first half of this year.
In the USA the economy is slowing down, and consumer confidence is down. Tuna is usually doing well in US and EU markets when economy is slowing down. In Europe the confidence in meat is down, in some markets we see a 25%-30% reduction in beef consumption,. Within the EU there is more awareness towards the benefits of seafood.
The creation of the WTPO clearly has brought some balance in the unequal situation between a (until recently) very unorganized industry. Larger fishing companies become fully aware of the devastating effect on their bottom-line of fishing for longer periods below cost prices. They are not likely to bring the market that way again, if so many will perish !
Just like price increases have not led to any substantial increases in consumption, the recent rapid rise in skipjack prices will also not significantly impact market demand on the consumer side. In the EU the recent decline of the dollar is even filtering out some of the price increases. So the demand is still there, there are no signs yet that interest for canned skipjack has dropped on a global basis. In contrary we have a stable to still slightly growing market.
All elements for this skipjack market to re-balance itself are there. It remains important that boatowners do not let this market get over-heated, only steady responsible price increases seem justified in this situation of recovery.
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