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Skipjack tuna prices ‘uncomfortably high’ and likely to get higher

Some experts say the prices could easily hit the $2,000 mark in August.

Skipjack tuna prices are unusually high for this time of year and are expected to get higher still in the coming summer months, according to tuna industry sources.

The main reason for the current levels is purely down to simple supply and demand equations: though demand isn't on a tear, lower supplies are pushing up costs, one buyer for a major UK tuna brand told IntraFish.

Fishing in the Atlantic is not very good at the moment, and fishing in Western Pacific is not great either. The take in the Indian Ocean is better, the source said, but the overall supply situation for skipjack in aggregate is down.

“It’s not brilliant,” said the buyer. “We’re spread around the world so we are coping and taking more from India than we would normally.”

The buyer placed his last quoted price at €1,400 ($1,506) per metric ton for skipjack, but said this is expected to jump up even higher in the coming months.

“We think unless fishing improves then we can see that getting to around $2,000 (€1,860) per metric ton because it always goes up in June, July and August,” he said.

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Various fisheries control measures come in to play during the summer months, which inevitably restricts fishing activities. Therefore the buyer said he “wouldn’t be surprised” if prices touch the $2,000 (€1,860) point in August.

“But this is out of sequence, it is uncomfortably high."

Fishing is being impacted by sea water temperatures driving fish deeper, while more and more fisheries management organizations are taking control -- which involves catching less.

“It’s not a demand surging situation, it definitely supply down driving the price up,” said the buyer.

Demand for skipjack is still there, but the full impact of higher prices has not really made its way onto the shelves in Europe quite yet.

“Logically, however, you would say it has to come,” said the buyer.

Bangkok prices peaked at around €1,350 ($1,452) per metric ton in 2015, then at around €1,450 ($1,560) per metric tons in 2016 and he expects it to go up to at least €1,800 ($1,936) to €1,900 ($2,044) in 2017.

“So [the price on the shelf] has got to go up with that level of raw material increase, a price of a tin of tuna is at least 50 percent of the cost of the fish in it, you can’t cope with that sort of price raise on raw material,” said the buyer.

The fallout from Brexit is still having an impact on foreign exchange rates. The currency reset itself last July and has not really done a much since then, with the dollar floating around $1.25 to the pound for the past six to seven months.

“So that’s priced in there, there will be no more price increases there at least for now,” said the buyer.

“Most people went with increase last year, that’s all pretty much done, what we’re struggling with is the tuna price shooting up – the question is do we increase prices again, and what will happen to shelf prices with the raw materials going up.”

Thai tuna giant Thai Union puts the monthly raw material price for frozen whole skipjack tuna in March at $1,500 (€1,395) per metric ton, down from $1,700 (€1,581) in both January and February, while the Parties to the Nauru Agreement (PNA) showed tuna prices at around $1,550 (€1,442) per metric ton in Bangkok at the end of March, down from a high of $1,750 (€1,628) per metric ton in February.

“Pundits predicted the price would hover at the $1,500 (€1,395) per metric ton mark for April, based on supply and demand in current conditions,” the group said.

 

Prasit Sujiravorakul, an analyst at Bualuang Securities covering Thai Union, told IntraFish given that the tuna price started to decline to $1,500 (€1,395) per metric ton in March, he believes the overall supply has started to increase somewhat.

“However, we still foresee that the fish supply in the second half of 2017 will not be as high as in 2015 because of the increased restricted fishing areas, the more MSC-certified fisheries which increases fish cost and price, higher oil prices and the weather, which tilts toward the El Nino again in the second half of 2017," he said.

Sujiravorakul said demand in the EU is slowing and therefore tuna sales volume in the EU is lower, primarily as a result of Brexit, which has negatively impacted buyers’ purchasing power.

“However demand in Japan and the US remains strong, especially exports to Japan, and I think that it is mainly related to the currencies recently," Sujiravorakul said.

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Although tuna supply is likely to increase somewhat in the third quarter of the year with the main fishing season, overall supply conditions will remain tight, said Sujiravorakul.

“We expect the price to stay in a $1,200 (€1,116) to $1,600 (€1,488) per metric ton range in the second half of the year," he said.

The WPO skipjack price, meanwhile, was $1,500 (€1,395) per metric ton in March and is expected to come off to $1,200 (€1,116) to $1,600 (€1,488) per metric ton in the second half of 2017.

Another challenge for the sector, however, is related to El Nino, which might bring lower catch and tighter supply in the latter half of the year through 2018 as the temperature of sea surface warms, said Sujiravorakul.

“The overall tuna sector outlook is improving. We feel more comfortable that the raw tuna price has started to come down which will ease the raw material cost pressure for the tuna processors and relieve the pressure of fully passing on higher costs to clients," he said.

“We expect the margin of branded tuna business to recover in the second half of the year on lower tuna costs. The tuna price of $2,000 (€1,860) per metric ton is way too high and difficult to make the clients fill up orders, which lead to the hard sell for tuna processors.”

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