The South African Pilchard Demand

 Since the start of the South African pilchard season which commenced upon receipt of their respective right holder permits from DAFF earlier this year, the season started off slowly with intermittent periods of good catches. With the pilchards (Sardinops Sagax) having little or no presence around the Cape Of Good Hope, the vessels have been in search of the shoals around Mossel Bay and further up the coast with some success.

 With the development of the Mauritius Free Port Development (MFRP), fishing companies have diverted their vessels in favor of the duty / tax free advantage afforded to them by the Mauritian Government instead of docking and discharging in Cape Town with the South African political environment. Adjacent to the seaport of Port Louis, Mauritius's largest port, has developed the largest logistics center in the Indian Ocean. Which offers world-class, cost-effective supply chain solutions through a comprehensive range of equipment and facilities which comply with the highest standards in the industry: EU, HACCP, ISO. Some of the facilities and services on offer are: freight forwarding, customs clearance, transport/ haulage, office rental, dry and cold warehousing, cold storage, container services, dry docking and a seafood hub. The main attraction for vessel owners would be the following:

Zero percent corporate tax,

Preferential markets access (subject to meeting rules of origin requirements)

Exemption from customs duties on all goods imported into the Free Port zones

Free repatriation of profits

Access to offshore banking facilities

Reduced port handling charges for all goods destined for re-export

Hundred per cent foreign ownership

Fifty per cent of re-export value to the local market

 It really makes complete sense for a vessel owner to rather call on Port Luis for discharging and resupply. This is why this destination has seen the majority of the South Africa pilchard bait sales with the likes of MSC shipping the bulk of the volume. The local pilchard bait has been traded around $1350/ mt FOB Cape Town, however some volumes has been sold at $1400/ mt FOB same origin. These prices are looking to drop inline with the competition from Moroccan bait suppliers. Albeit the Moroccan pilchard is a different specie, the South African and Canadian pilchard is in highest demand due to the quality and fat content. However, the vessel owners are now looking to bait their hooks with Canadian herring as a substitute based upon the reports and interest received from the Fijian long liners success. The herring was being  sold around $1120/ mt CFR Port Luis for the 55/65 jumble pack, a few weeks back. The South African bait suppliers have changed their packaging to the 10kg boxes as per some customers request. This is a more efficient way of packing although the presentation and quality is slightly inferior. The 5kg box which has been preferred by some customers increased the suppliers packaging costs and labor time. The local South African tuna pole vessels prefer the 5kg box due to the interleaved finger packing presentation of the pilchards and is less bulky for easier storage on board.

Below on top is the typical 5kg pilchard box:

Above is the 10kg pilchard box: (You will see the difference in presentation of the packed baits)

With the international sardine bait price expected to decrease, the vessels are looking to catch their quotas as soon as possible making full advantage of the bait prices, weather permitting of course. 

Navy Warship Fires on Cape Fishing Boat

Fishing just got a little more interesting for the vessel owners and crews at sea...

Navy warship fires on Cape fishing boat

South African Albacore Price Trend

Over the past few years, the South African albacore catches have been erratic and irregular which is to be expected as this specie is a highly migratory fish with demand at an all time high. 

Basic economics will explain that the price for a commodity is ultimately regulated by that of supply and demand. So we have supply, which is how many tons of tuna we catch, and demand, which is how much tuna people want. Put the two together, and you have  the basic rationale of supply and demand. The albacore price is best illustrated by the demand curve. In economics, the demand curve is the graph depicting the relationship between the price of a certain commodity and the amount of it that consumers are willing and able to purchase at that given price. Essentially, the lower the volume of albacore caught, the higher the price the canneries are willing to pay.

Various factors will effect either the demand and or supply simultaneously. Factors such as; rate of catches/ landings, exchange rate fluctuations, global catches, competition and time to name a few.

The South African albacore supply is mainly caught by pole and line vessels and thus the below graph illustrates the pole and line price accordingly for frozen whole round form. The local supply of frozen albacore has another yet very important factor determining the volumes as a portion of the fleet of vessels are outfitted towards fresh quality catches by slurring on-board. This fresh albacore which is exported in whole round form via air freight to mostly Spain and other countries within the EU, fetches a slightly higher return than the frozen price. This ranges between R2 to R6 per kg above the frozen albacore price.

The price today for albacore has reached the R30 per kg mark with the current trend for it to continue its upward increase. However, as explained in economics, the ceiling price will not be to far off which will prove to difficult and the determining factor which will set the highest price possible for the past 2 decades. The most crucial factor here is that of the frozen cooked albacore loin price. With whole round tuna, the importers in the EU have zero duties to pay above and beyond the sale price. However, with cooked loins, there are duties between 22-24% depending. With the price for albacore being this high, soon the canneries will overlook the import costs of loins to ensure continued supply. This will shift their preference to cooked loins until the whole round albacore price stabilizes at a lower more affordable price level and also guaranteeing a steady volume of supply.

For the interim, the local vessel owners will enjoy the current respite that the high prices offer although the diesel price is set to increase substantially next month and catches still remain slow. The high returns will negate the low catch rates until a shift in the global market occurs. Currently there are issues in Indonesia with red flagging of tuna exports from this country supposedly due to IUU practices which will starve the market just long enough for the price to remain high. The New Zealand albacore season has started or has it? Its been poor like ours but the size grading of their catches have been around the 3 kg whole round range. For a smaller fish you receive smaller yields, which in turn effects the profitability therefore receiving a lower price. 

Statistically Speaking, 2014 Was Well Below The Gunwale

With the South African tuna season starting off rather slower than anticipated, historically a different picture has been portrayed with this season having only a combined landing of below 200 tons as opposed to previous years average of around 1400 tons for November/ December period. (I do suspect on good authority that this figure is in fact incorrect.)

Bad weather has left the majority of the SA Pole and Line fleet docked in port whilst some of the smaller more economical vessels have chosen to brave the short weather periods with a mixed bag of results. With strong South Easterly winds fetching large South West swells, the opportunities have been restricted to only a 2 to 3 fish-able days before the North Wester picks up sending all vessels in search of their home or nearest port for refuge. This morning the hake long liner Christo Rei snapped her bow lines on the North Mole, Hout Bay in some serious South Easterly gusts, hence why my vessels were discharging today what little catches they had.

The majority of the albacore that has been landed was concentrated in smaller shoals with no sign as of yet of the larger biomass of albacore having been witnessed on the decks. Below is the graph from the Department of Agriculture, Forestry & Fisheries - Research & Development Branch which indicates the albacore tuna catching frequencies on a monthly/ annual basis for a comparative understanding:

So far the 2014/1025 season hasn't had much to show for itself, but this can change within a fortnight as has been experienced in the past. With the smaller volumes keeping the demand up, the albacore price is expected to remain relatively high provided the Rand doesn't strengthen further against the Euro and whilst the New Zealand pole and line season doesn't start. We can expect the decent raw material price to remain at its current level ensuring a welcomed return to the vessels.

The local yellow fin market has been able to consume the quantities landed of the smaller yellow fin (under 30kgs & over 50kgs) due to the irregular weather gaps allowing for the market to rebound in time of the next landings. This will remain so until the rest of the fleet start landing fresh yellow fin. The larger yellow fin (50kgs+) has found some good returns in the American market which does not have a size stipulation unlike the European Union's concerns over mercury.

With this week's maritime forecast being a blow out...the vessels will most likely look to depart on Saturday only. With a select few vessels having had some good landings, the majority of the fleet and exporters remain understandably apprehensive and somewhat nervous. 

The State Of Your Tuna Fishery

The International Sustainable Seafood Foundation (ISSF) recently published online a downloadable technical report outlining the current health of our 23 commercial global tuna stocks titled: The Status of the Stocks. The report provides a comprehensive summary of the recent scientific stock assessments as well as the current management measures implemented by the respective Regional Fisheries Management Organisations (RFMO's). The methodology behind the rationale of this report revolves around these three key main factors: Abundance, Exploitation/Management (fishing mortality) and Environmental Impact (bycatch).  

In 2012 the global total catch of the 23 commercial tuna stocks was 4.6 million tons with skipjack tuna accounting for a total catch of 56% of this volume. Whilst the total yellow fin and albacore are 28% and 6% only. Whilst these are large volumes, it is proposed that globally 52% of the tuna stocks are in a healthy level of abundance, 39% are overfished and 9% are at an intermediate level. In terms of exploitation, 43.5% of the stocks are experiencing a low fishing mortality rate, 17.4% are experiencing overfishing, and 39.1% have a high fishing mortality that is being managed adequately.

When viewed from the point of view of total catch, 86% of the catch comes from healthy stocks. This is due to the fact that skipjack stocks contribute more than one half of the global catch of tunas, and they are all in a healthy situation due to their high fecundity rate. In contrast, most bluefin stocks and 2 out of 6 albacore stocks are overfished, but combined they make a relatively small fraction of the total catch.

A foreign vessel offloads its catch of tuna:

There are three main albacore tuna stocks in the Atlantic Ocean ICCAT area namely: North Atlantic, South Atlantic and the Mediterranean. Albacore catches in the South Atlantic increased 2% in 2012 (24,600 tons) from the previous year. Long linging accounts for 67% of this and 26% for Pole and Line. In 2012, the Total Allowable Catch (TAC) was set to 24 600 tons with a Maximum Sustainable Yield (MSY) at 25 200 tons. Due to the respective scientific advice and recommendations, the TAC for 2013 was reduced to 24 000 tons by the RFMO ICCAT. The Pole & Line review notes the lack of information regarding the impact the live bait vessels inflict upon the small pelagics and therefore could possibly be upgraded in the future with adequate data collection.

Currently South Africa has a quota allocation of 4 400 tons only. Previously South Africa and Namibia had a sharing scheme but last year's ICCAT meeting it was generally voted to be split thereby Namibia's quota will be set at 3 600 tons. With the recent figures circulating around the Department of Agriculture, Forestry & Fisheries (DAFF), South Africa should reach and succeed our quota before the end of this year. This has major implications and repercussions with the most noticeable being a reduction in our quota by the volume of what was over caught for the 2016 season. (the quota will remain 4 400 tons for the 2015 season)

South Africa who has the second largest albacore quota (Chinese Taipei has been allocated 9 400 tons) will have to approach the other South Atlantic fishing nations and request additional quota from them should we exceed our limit. 

Blessing Our Fleet's Heritage

With this year's Blessing Of The Fleet taking place on during the weekend of the 40th week being so close to the public holiday Heritage Day and Heritage Month, one cant help but embrace this theme for this is exactly what this festival embraces. The Blessing of the Fleet festival once again took place at the V&A Waterfront with a great attendance of both the Portuguese and other fishermen's families over the course of a hot weekend. With last season's catches having improved substantially, it is no wonder this year had an even better participation. The tuna pole fleet this past season have mostly all managed to catch decent volumes albeit nothing of the years gone by, but nonetheless a few more smiles have been seen along the quays. Who knows, maybe this year will be even better than the last? Here's hoping.

The only real major issues this off season was that of the slipways and their lack of availability. With Cape Town syncro lift having been closed for maintenance and with Hout Bay's main slip being broken, there weren't too many options available for the vessel owners. This has created an unwanted amount of tension and back log. Furthermore, there were some strike action on the Hout Bay slip, although this was denied by DAFF. This same slipway has been out of commission for a few months now. Not sure how long you need to repair a slip but then I think of all those jokes about "how many people does it take to screw in a light bulb?" Perhaps this is a clear indication that it is time for the slipway in Hout Bay should be privatized?

Secondly, SAMSA have been more vigilant this season and have been checking and enforcing the qualifications of each vessel's crew. We had to send our officers on the fire fighting, first aid courses again which is a good thing. I suspect this is due to the fact that SAMSA is currently reviewing our industry's safe manning requirements and have thus issued you with 2 certificates, namely; Safe Manning Document and now also the Advisory Safe Manning Document which outlines what you will be required to crew with the respective competence in the near future. This is all in accordance with SAMSA's initiative to align the current South African manning compliment with that of the International Maritime Organisation's recommendations. This is to ensure that we conform with the international standard especially for those vessels operating with the high seas command.

So as is this time of the year that all the vessels are receiving their preparations and diligent attention  in respect of the surveys that they will undergo to be shipshape for the up and coming pending season. The harbor is abuzz with contractors working under the ever so vigilant eye of the owners and skippers. We have seen the fleet undergo a large amount of maintenance and plank work in preparation for this years arrival of the tuna.

Staying with the heritage theme... I came across a very informative and interesting website called Trawler Heritage. The author of this site who has dedicated this effort to his late dad, has insightful information and comments regarding the fishing vessels both past and present that operate along our coast. His comments regarding each vessel which he has an extensive collection of photos published on this site, are pretty accurate. He has even noticed the color schemes changing on some of the vessels this year. If you are a vessel owner then I suggest that you take a look on his website as he probably has your vessel's history logged. He has gone into great details and effort to keep his pictures and information current and has subsequently received an international ward. Kudos to him and all who have provided assistance. The website provides a great source of information regarding our fishing heritage, harbor infrastructure and general industry news. A good read for those interested and it seems to be updated regularly.

Pictured above in Hout Bay, is three of the former S.A. Sea Products vessels now in the tuna pole sector moored alongside each other namely from left to right; "Hangberg," "Sneeuberg" & "Constantiaberg," while a fourth sister vessel the "Barbara W" which moored directly in front of them has now sunk. At present all four vessels have different owners, and were used as crayfish boats in days gone by. This picture and caption are from their website for your information. (www.trawlerheritage.co.za)

With this year's blessings having been bestowed, all that remains is for the patient arrival of the tuna. Good luck to all and may this season be better than the last.

The B-BBEE Net Tightens Around Fishing Sector:

Many folk who actually paid attention or managed to stay compos mentis took away different understandings and perceived visions regarding President Jacob Zuma’s State of the Nation Address delivered to Parliament on June 17^th. I’m referring in particular to the following extract below written for and on his behalf:

“We will sharpen the implementation of the amended Broad-based Economic Empowerment Act and the Employment Equity Act, in order to transform the ownership, management and control of the economy. We will promote more employee and community share ownership schemes and boost the participation of black entrepreneurs in the re-industrialisation of the economy.”

The various government departments have already begun to include B-BBEE compliance as a requirement for licensing procedures and incentive schemes alike. This is nothing new to the fishing right holders and vessel owners who have been forced to comply for some years already. The clause that has me perturbed in particular is in the interpretation of Notice 27 and Notice 28 of 2014 published in the Government Gazette of 21 January 2014, pertaining to the import and export of specified agricultural foodstuffs and flowers, the Department of Agriculture, Forestry and Fisheries has included a valid B-BBEE certificate as one of the application requirements for being issued with a new export and import permit… My fish export company has recently renewed 2 of our export permits and this was not a requirement, yet. It will also need to be established if this will be the department’s intention to implement this and also whether they will be requiring the minimum B-BBEE compliance or if they will (as they have done in the past) enforce a higher level of compliance? This ultimately means that the export and marketing companies will now have to become B-BBEE compliant or lose their export/import permits. It’s almost becoming easier and more viable for me to buy tuna in Namibia and export it from my Cape Town office!

To make matters worse is the fact that as per the Liquor Amendment Regulations 2013 published in the Government Gazette of December 3^rd, 2013 the Department of Trade and Industry is now requiring liquor license applicants to submit a valid B-BBEE compliance certificate in order to renew their permits. I’m not sure how many restaurants and bars will be forth willing to comply? It looks like I might have to move my office to Lüderitz. Prost! 

The State of the Pole and Line Tuna Industry

My first blog entry refers to the current situation facing the South African and Namibian tuna pole and line vessel owners. The tuna trading company that I work for provides financial assistance on an annual basis. 2013 has seen a record high of applicants seeking assistance to cover the financial costs associated with the repairs and maintenance of their respective vessels. Each vessel needs to undergo a bottom (hull) and top survey. Only upon passing both surveys will the vessel then be granted a seaworthy status by the South African Maritime Safety Association (SAMSA).

A photo before the surveying and maintenance of the MFV Otterdam on the slip

A photo showing the MFV Otterdam surveyed and ready to come off the slip

The past 3 years we have seen a steady decrease in the total tonnages being landed by each vessel despite the majority of the fleet now having sonar fitted. The past 3 years of poor fishing has compounded the financial troubles of the vessel owners and will soon have no other options but to sell their vessels or apply to the Department Of Agriculture, Forestry and Fisheries (DAFF) to fish in another sector, such as Hake long line.

The fishing method of poling for tuna is extremely labor intensive with vessels accommodating a crew capacity of upwards of 20 fisherman. Poling for tuna is proven to be the most sustainable method for wild caught tuna but this comes at a price. As the vessels are catching free schooling tuna, the diesel consumption per liter of diesel is higher than most other fishing methods when converted down to a per kilogram ration percentage. In South Africa we will pole mid ships on the leeward side of the vessel with the crew protected from the elements by a shelter deck spanning the length of the windward side of the vessel which is predominantly the starboard side of the vessel. In the Maldives for example, the poling vessels catch around an open stern area of the vessel and this is possible due to the calmer seas in which they operate.

There are various factors pertaining to the steady decrease but one can only speculate without the necessary scientific data to back up these speculations.

Firstly, we need to understand that our tuna caught in South African and Namibian 200 nautical mile (nm) Exclusive Economic Zone (EEZ) is a migratory animal and wonders the Atlantic Ocean with disregard for political borders and is seasonal. The pole and line vessels usually catch tuna in South Africa between October to May and the winter months for the long line vessels.

Climate change as documented by the effects of El Nino has created a shift in our currents and prevailing winds. Last year the SE wind only blew for a fraction of what is considered "normal" and somewhat lack luster at that. We rely upon this wind to blow the warmer Mozambique current around Agulhas upon where large eddy’s of warmer water, some spanning many a tens of nautical miles in diameter around our coast, where it is helped along by the colder Benguela current up towards Namibia. We are finding the surface temperatures of the Atlantic around our coast changing which has the added result of higher concentrations of chloroform. The tuna like specific conditions and if these are not met, they will simply move on to “greener pastures.” We are finding these suitable conditions less and further in between.

The below satellite image shows the warmer water (red) approaching Cape Aghulas from where it will begin to wrap around our coast up towards the Namibian border. Currently the 15-16* Celsius water is ideal for the tuna longliners. The tuna pole vessels will look to target the schooling albacore and yellowfin found in the warmer temperature band.

Courtesy of Buoyweather.com

South Africa’s EZZ stretches some 200 nm parallel to our cost except for the Namibian border which is deviated in the Namibian’s favor and this I shall touch on in a later blog, as this subject will be hotly contested in the future. Beyond the 200 nm EEZ, the international waters are fair game to foreign fishing fleets such as the vessels that discharge in Cape Town Harbor. The entire fishing effort within the Southern Atlantic needs to be taken into account as a factor here as these vessels are able to operate beyond our borders and target the tuna with long lining and other fishing methods such as purse seining.

Seismic testing that is being conducted in South African and Namibian waters is speculated as playing a major role in the absence of the tuna this past season. But once again we lack the scientific data specifically pertaining to tuna and this remains to be recognized as a direct factor. I shall touch more on this subject at a later date as this is a topic all unto itself.

With the past couple of years having been felt as the worst in recorded history for this industry, we can only wait and see what the future will hold for the South African and Namibian tuna fishermen. With fingers crossed and abated breath we all patiently await the arrival of the first albacore and yellowfin tunas.