While a sense of cautious optimism exists among ag investors and stakeholders wait on the wings for those hammered by equities markets to dispose of attractive assets, one segment of the asset class has found itself more exposed than most to covid-19.
From the outset, fishing and aquaculture has suffered alongside industries that provide food services that depend on footfall, primarily bars and restaurants.
Australia’s rock lobster industry, which exports 95 percent of its catch to China, was one of the first to suffer. Shipments to China had all but ceased by the time of a February 11 Rabobank update.
As restaurants and bars in the People’s Republic closed their doors, and others in Asia, Europe and the US followed suit, the global seafood industry has, in places, been brought to its knees.
“You’ve had the complete collapse of the crab market, a lot of which is based on exports,” Barrie Deas, chief executive of the UK’s National Federation of Fishermen’s Organisations told Agri Investor. “Shellfish markets have collapsed because of exports and partly because the restaurant and hospitality trade provide a lot of their demand. You just have fleets that are tied up.”
The sense that the global seafood industry faces a level of damage that will take years to recover from is perhaps best demonstrated by the state-level interventions taken in the last two weeks that have sought to prop up domestic businesses.
The European Union moved to include fishing and aquaculture in its temporary framework for state aid measures, which were published March 19. These allow member states to support businesses in the industry until December with up to €120,000 in aid.
In the US, the $300 million earmarked for fishing and aquaculture within the $2 trillion stimulus package approved on March 27 may always have featured in its early plans. Yet the impact felt by the country’s seafood sector moved 84 executives belonging to firms from across the supply chain to sign an open letter, dated March 24, to the White House, requesting state aid.
“More than two-thirds (68 percent) of the $102.2 billion that consumers paid for US fishery products in 2017 was spent at food service establishments,” the letter read. “As a result, in many fisheries, the sudden near shutdown of restaurants and other storefronts has caused demand to evaporate overnight.
“Failure to act boldly now to preserve our country’s domestic seafood infrastructure will impose far greater costs on our economy and cause permanent damage to our nation’s ability to harvest, farm, process, and distribute seafood products.”
Across the 48th parallel, state-backed agricultural lending body Farm Credit Canada received a CAD$5 billion ($3.5 billion; €3.2 billion) enhancement to its capital base on March 23, which Canadian seafood businesses can draw from.
For those still able to trade, it’s a case of trying to find a way to survive the pandemic.
“Our strategy for now, at least in the coming weeks, is to try to service our customers, especially in the supermarket and retail space,” an executive at an aquaculture company owned by an asset manager told Agri Investor.
The source said the company has switched its fish to a “cost-conscious” feed formulation. The executive added that the crisis has reinforced the need to invest in processing and freezing capabilities, which have lower warehousing costs than keeping fish in the sea and feeding them.
Not that this is guaranteed to protect a seafood business during a pandemic.
Samherji, one of Iceland’s largest seafood and aquaculture companies, is a vertically integrated business that operates a fleet of fishing vessels, has processing and packaging facilities, and aquaculture operations. However, this hasn’t been enough to prevent its exports from falling to “as much as 25 per cent of what they were” before the pandemic began.
If there are any silver linings for the seafood sector, it is that share prices for the likes of Thai Union, the world’s largest canned tuna producer, have made some gains following a slump in early March.
For the majority of companies in the seafood sector, their fate will continue to be inextricably linked to the easing of lockdown restrictions.
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