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. 

Can Understand?

During the late eighteenth century, when Napoleon's army suffered a terrible famine whilst waging war in their Russian campaign, the emperor offered a reward to anyone who can present a method to keep food in a good state for a longer period of time, convinced that "hosts win better fed."

This is when a French chef, Nicolas Appert, discovered entirely empirically, that he could preserve food for several years simply by heating it for a period of time in sealed containers. Appert placed vegetables and soups in glass containers sealed with cork and wax which once boiled became preserved. Thus, in 1810, Nicolas won the emperor’s reward of 12 000 francs and was awarded the prize of "Benefactor of Humanity." Nicolas Appert published the first modern preserved cook book titled: L'Art de conserver les substances animales et végétales (The Art of Preserving Animal and Vegetable Substances) In honour of Appert, the preservation of food is also referred to as "appertización" and was thus the birth of the industrial conservation and preservation of food technology invented.

                                                 

Above is Nicolas Appert's Glass Canning Jar

The news of "appertización" only arrived in Spain in 1840 with the shipwreck of a French sailing vessel off Cape Finisterre... and in less than a year the first fish cannery in Spain was built. By 1900 the frying of foods preserved by steaming is replaced, which significantly lowered the manufacturing process, popularized worldwide the "system of Spanish cooking," which marked the access of all social classes to affordable and quality foods.

At the time of the discovery by Appert, glass containers were used, but later in 1810 Englishman Peter Durand, began using tin cans instead of glass which drastically reduced the effect of light and thus preventing deterioration of the vitamin content. The tin can allowed for a greater nutritional value of preservation which was widely made use by the British Navy & Army and reached the Americas in 1822. 

Then followed numerous improvements with the packaging technology mainly the development of printed cases and stacking cans that facilitated distribution and sales. In the 1940's, during the course of World War II, given the scarcity of tin, the aluminium industry began manufacturing cans for packaging. This constitutes a technological revolution in the canning industry. The reduced weight aluminium cans ensures a greater reduction in oxidation and sulfurization which in turn is not transmitted into the preserved product as easily. Aluminium also allows great versatility of shapes and sizes with a glossy attractive and neat finish to facilitate its handling. Aluminium is an abundant metal in the earth's crust, whose manufacturing process consumes little power and is also infinitely recyclable. 

Although tin is resistant to corrosion, certain foods with a high level of acidity can cause dissolution of element tin into the preserved product. Thus the canning industry began layering the inside of cans with an epoxy coating to prevent the contents from coming into contact with the tin. Modern day cans contain Bisphenol-A (BPA) in their lining which is a harmful toxic chemical compound found in plastic. 

The story of preservation and canning is an interesting one which without would have influenced the fishing industry to a great extent.

David’s Sustainability VS Goliath’s Economies of Scale

These days, the press across the various mediums highlight the importance of sustainability and fishing for the future. Through this and other public awareness programs broadcast by organisations such as Green Peace, WWF and ISSF, the general public is being awakened to an interesting and complex industry that is - commercial tuna fishing. Whilst the likes of first world country consumers are already well aware and preferential to more sustainable practices, there is an ever lagging effect filtering down to the 3^rd world nations. In the UK for example, the various retailers shelves are well stocked with various produce sourced from sustainable fishing methods. However, here we don't see this and this is due to consumer awareness and price. Here it’s purely about economies of scale and price for food security and ultimately survival. We don’t have the luxury of affording pole and line caught tuna in Checkers and Pick n Pay just yet. The fact of the matter is that we are already mumbling about the Saldanha brand (a product range that was developed and initially imported on behalf of Saldanha by ourselves) costing around R18 per can for the flavor variants and R15 for the oil and brine variations. The simple matter is the South African Rand hardly ever fares well for imports such as canned tuna, which price will fluctuate like the proverbial tide in parallel with the exchange rate. We’re talking U.S. Dollars to South African Rands here which until recently slumped lowest since the year 2008. This is the main factor combined with the price of raw materials in Thailand. Bangkok sets the skipjack price which recently is at an all time low. However the rand weakening didn’t allow the importers to take advantage of the low skipjack price which is being traded around $1300/mt CFR Bangkok (cost and freight delivered to Bangkok main port). As a result the can on your shelf has been able to withstand this variable but only to a certain degree. Depending on when the retailers will place their orders for more stock, we can expect the price of canned to possibly increase should they look to preserve their margins as the skipjack price is bound to recover to higher levels.

Now let’s discuss pole and line…I’m not sure who would prefer to pay an estimated R25-R30/can of pole and line caught skipjack tuna…the general public apart from Woolworths wealthy can afford this and such… its easier for the more well off patrons to ease their conscious by insisting on sustainability from a pole and line caught degree and sleep well at night. There is sort of a price barrier in third world countries for sustainable fishing practices being canned for these nation’s shelves. The poor rely upon the canned tuna as a relatively cheap accessible source of healthy protein. In South Africa its more blikkie chilli vis that's been sold than canned tuna. In fact last week retailers in Argentina started securing cans of tuna with anti theft alarms as theft of canned tuna is literally out of control like their ailing economy. Imagine an anti theft clothing alarm tag usually reserved for garments now stuck to your can of No Name Brand shredded tuna? It’s literally happening around the world as we speak. Now there are cheaper variations (shredded tuna) finding a their way to the bottom of the shelves but at a more reasonable price? The fact of the matter is that the retailers have developed a cheaper product derived from the by product of tuna loin production. These shreds or flakes are then canned with vegetable broth/ additives which proteins bind the pieces together during the heat generated by the retorting process. (If I understand this correctly) So we end up with a far inferior end product but at more affordable prices.

This graph below was taken from the 2013 4th European Tuna Conference which was held in Brussels and illustrates the volumes imported by the EU and USA of canned tuna. This should give you an idea on the shear volumes that is produced globally for these two markets.

This is where the Goliaths of the fishing industry find their way into the market and respective arguments. Without the purse seining fleet operating, we wouldn't be able to catch enough of this resource to meet the global demand for an affordable canned protein. With a shelf life between 1-2 years, depending on the brand, which doesn't need refrigeration. In Africa canned chicken, tuna and other products are on the rise as this continents largest imports due to the lack of infrastructure and refrigeration. The problem with purse seining is the environmental impact it has on the species which it is targeting as well as the by catch. With the use of FAD's more by catch, sharks, sea turtles other marine life is being directly impacted. I will go into this in a future blog entry.

However, it is the most affordable method to catch large volumes and thus their economies of scale far out weighs that of the pole and line method. As a profitable company, purse seining makes perfect sense. However, one hook one fish such as poling is the most scientifically sustainable method for wild caught tuna. How to find a balance is the predicament we find ourselves in today. Whilst the operational expenses per metric ton of purse seining is drastically less than that of pole and line with their respective carbon foot prints in favor of purse seining?

The Regional Fisheries Management Organisations (RFMO’s) control the tuna in each respective ocean and due to public awareness and pressure brought upon by scientific data, they have had to make drastic measures. Such measures would include but not limited to a  100% closure of some waters within the Pacific, FAD free zones, FAD closure seasons, fleet capacity  and TAC limitations, to name a few. But the industrial wheels of economy and trade keep turning and such we find for instance with regards to the cap on fleet capacity, the larger purse seining companies scrapping their smaller vessels for more ultra modern vessels which hold in excess of 2,200 tons and can maneuver at 18 knots. One would think that they are defeating the purpose by reducing the fleet when all that is being done is the effective fishing efforts being increased exponentially. We are seeing more 2,000 ton plus vessels being built in Spanish shipyards such as the vessel "Gijon" which was launched a short while back. This behemoth will be commissioned for the Mexican tuna fishery with a further 2 more being built. We have now seen some canneries insisting that by the end of 2014, they will only purchase from fishing vessels with fish holds of less than 350 tons. But is this enough?

 Whilst the likes of my company comply with Earth Island Institute and Friend Of The Sea annual audits to ensure sustainability and tractability, it is a mere spoke in the smallest cog that is the industry of tuna fishing. (MSC would have cost too much) Following the international trends, the local retailers have made pledges to only stock MSC certified pole and line caught tuna on their shelves by the end 2015. Where will this be sourced from? One of the only MSC certified skip jack fisheries globally is that of the Parties to the Naru Agreement. They have nicely created a monopoly by forming the marketing company Pacifical to exclusively sell all their MSC certified tuna. And this is a purse seine fishery as well!!! Seems we can't bake our fish cake and eat it just yet. The retailers such as Woolworths are making large strides to encourage sustainability and one should read up on their website about their corporate responsibility in doing so here: Fishing For The Future - Canned Tuna

Unfortunately its not possible to export our local albacore catches in 40ft containers to a cannery half way around the globe in order to be canned then shipped back. (wouldn't like to calculate that carbon foot print) This simply isn't viable, so what about canning it locally? We did just that and in 2011 we concluded an assessment by international experts and found that labor would become this projects biggest headache, partly due to the labor unions and their effect on suitable labor costs. The subsequent cost of production would have been to expensive and it was decided to scrap this project all together. Until then we will have to place our sustainable support on to the retailers and may they continue to make progress for their 2015 deadline.

Take a look at TUNA IN SOUTH AFRICA AND WHAT YOU CAN DO