Coronavirus scare shaking seafood markets worldwide
Smart analytics tools are proving to be a key strategy for Seafood Companies trying to cope with the challenge of Coronavirus.
There is no doubt that companies world-wide, and especially seafood companies, are being negatively impacted by the outbreak of the Coronavirus. China, ground zero for the virus, is a massive market as well as a major processing hub in an extended and complex seafood supply chain. In Alaska, for example, seafood exports to China account for nearly $1 billion and although this includes products ultimately destined for the Chinese market, a large percentage is sent to China for reprocessing and shipment back to the U.S. and other countries. Currently, shipping and airline transport to China and elsewhere has come to a near standstill. “The cancellation of flights in and out of China has been so extensive that freight forwarders have had a very hard time finding any space at all on planes for their shipments,” according to the The New York Times.
Major impacts on shipping, tourism, and travel, all important to the seafood sector, are compounding the issue with supply and demand disruptions
As transport and demand slows, and costs and supply rises, one of the biggest overall threats of this disruption is the uncontrolled growth of inventories. If seafood is unable to ship, cold storage becomes similarly clogged. This in turn sends prices downward even further. Producers can be caught off guard with too high a production price for market demand, buyers who relied on historical data for their projections suddenly find unpredictability, and everyone finds they have too much product on hand, causing further price depression. Seafood companies forced to carry inventory that either was purchased at too high a price and can’t be sold, or that is being carried at too high a financial cost can find themselves, at least for the short-term, in a real bind.
Price setting risk heightens with the uncertain climate
For so many fisheries with short seasons in the spring but with year round selling seasons (Canadian snow crab and lobster, US West Coast shrimp, and Alaska salmon among them), this uncertainty will collide head-on with the beginning of the always risky seasonal price negotiations and dock prices.
“The price setting at the dock is based on packers’ and distributors’ expectations of price for the entire year, the supply and availability of what is landed, and the costs and business expectations of the harvesters,” John Sackton wrote in his Winding Glass blog. “Regardless of what price is paid in May or June, packers are looking at what price they expect to get four, five or six months into the future. In normal years, this is fraught with risk. This year, the risk is off the charts, because we simply don’t know how severe, economically or socially, the disruption from this disease may get.”
Effective forecasting and up to the minute price analysis key to managing the crisis
It is important to note that low or fluctuating prices alone aren’t necessarily critical tipping points for any business, so long as it can cover short term operating costs. This is true for harvesters, as well as processors. In this environment, it is crucial to have effective forecasting and price analysis and benchmarking tools. Products such as Maritech’s new Salmon Report, which provides customers with an automatically updated and unique overview of salmon prices, trends and supply, gathered from all open data sources around the world, are more vital than ever.
To ride out this crisis, Seafood companies of all sizes must have effective, up to the minute analysis and data, linked to their own stock and production levels and sales forecasts. Maritech, who has been partnering with seafood companies for over 40 years to ensure seafood-tailored technology tools are fine-tuned to the needs of their customers, has been working hard to get ahead of these issues. Every crisis has its winners and losers. Having the advantage of a digital technology partner to help stay abreast of the best possible information and practices, changing almost hourly, is one critical way to get through this erratic period.
Written by Andrea Riser, Technical Writer – Maritech