FAO Price Index Workshop, Procida, Italy 4.10.11 Frank Asche, Kristin Lien and Sigbjorn Tveteras UN Food and Agricultural Organization (FAO), University of Stavanger (UiS), Pontifica Universidad Católca del Perú and the Norwegian Seafood Export Council (NSEC) The fact that the fish price index can be disaggregated along several dimensions makes it is possible to pursue many relevant research issues In the following we present some of the opportunities that exist for research using the FPI Research Issues based on FPI 1. Are global seafood markets integrated? 2. Economic Growth and Seafood Prices 3. Feed Cost and Price of Aquaculture Fish 4. Fuel Cost and Price of Capture Fish 1. Integrated global seafood markets – myth or reality? The global whitefish market appears to be integrated, although imperfectly For example, Alaska Pollock prices seem to diverge from other white fish species, at least during periods Whitefish prices 180 160 140 120 100 80 60 40 20 0 AFRICA ASIA EUROPE NORTH AMERICA OCEANIA SOUTH AMERICA Price: whitefish, whole frozen 200 180 160 140 Africa 120 Asia 100 Europe 80 North America 60 Oceania 40 South America 20 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 0 Price: whitefish, whole frozen 160 140 120 Africa 100 Asia 80 Europe North America 60 Oceania 40 South America 20 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0 Price: whitefish, fillet frozen 200 180 160 140 120 100 Africa Asia Europe 80 North America 60 Oceania 40 South America 20 0 Price: whitefish, fillet frozen Fall in Alaska Pollock prices? 200 180 160 140 120 100 Africa Asia Europe 80 North America 60 Oceania 40 South America 20 0 • Origin North America • Markets EU, Japan and USA 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 • Whitefish, fillet frozen 120000 100000 80000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 9 8 EU 7 USA Price 6 5 4 3 2 1 0 Volume North America - EU North America - USA 60000 40000 20000 0 • Origin North America • Markets EU, Japan and USA 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 • Whitefish, fillet frozen 120000 100000 80000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 9 8 EU 7 USA Price 6 5 4 3 2 1 0 Volume North America - EU North America - USA 60000 40000 20000 0 Price: whitefish, fillet frozen 180 160 140 120 100 80 Africa Asia Europe 60 40 20 0 South America 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 USD per kilo Price: whitefish, surimi 6 5 4 3 Asia North America South America 2 1 0 Pelagic fish prices are characterized by high volatility. Some of these markets appears to follow common trends, but can periodically experience strong deviations Pelagic fish (excl. Tuna) prices 450 400 350 300 250 200 150 100 50 0 AFRICA ASIA EUROPE NORTH AMERICA OCEANIA SOUTH AMERICA Pelagic fish (excl. Tuna) prices, smoothed 200 180 160 140 AFRICA 120 ASIA 100 EUROPE 80 NORTH AMERICA 60 OCEANIA 40 SOUTH AMERICA 20 0 140 120 100 80 origin Europe and North America 60 40 EUROPE 20 NORTH AMERICA 0 600000 500000 400000 300000 200000 100000 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Small pelagic prices, Europe-EU Europe-Japan Europe-USA NorthAmerica-EU NorthAmerica-Japan NorthAmerica-USA 140 120 80 Small pelagic prices, origin Europe and North America 60 Divergence 100 40 EUROPE 20 NORTH AMERICA 0 divergence 600000 500000 400000 300000 200000 100000 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 There signs of Europe-EU Europe-Japan Europe-USA NorthAmerica-EU NorthAmerica-Japan NorthAmerica-USA 140 120 Small pelagic prices, origin Europe and North America 60 Convergence 80 Divergence 100 40 EUROPE 20 NORTH AMERICA 0 There signs of divergence 600000 500000 400000 300000 200000 100000 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Then convergence Europe-EU Europe-Japan Europe-USA NorthAmerica-EU NorthAmerica-Japan NorthAmerica-USA 140 120 Small pelagic prices, origin Europe and North America 60 Convergence 80 Divergence 100 40 Integration EUROPE 20 NORTH AMERICA 0 There signs of divergence 600000 500000 400000 Then convergence 300000 200000 100000 integration 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 And finally, Europe-EU Europe-Japan Europe-USA NorthAmerica-EU NorthAmerica-Japan NorthAmerica-USA 3 Europe-EU Europe-Japan 2.5 NorthAmerica-EU 1.5 1 0.5 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 0 1991 disaggragate level show that the divergence originated from North American pelagic exports to Japan (light blue line) NorthAmerica-USA 1990 Prices at a more NorthAmerica-Japan 2 600000 500000 400000 exports also command a higher price in the Japanese market (dark red line) 300000 200000 100000 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 European pelagic Europe-EU Europe-Japan Europe-USA NorthAmerica-EU NorthAmerica-Japan NorthAmerica-USA The global tuna market exhibit pronounced common trends in price movements, but still not perfectly integrated Tuna prices 300 250 200 AFRICA ASIA 150 EUROPE NORTH AMERICA 100 50 0 OCEANIA SOUTH AMERICA Tuna prices, smoothed 200 180 160 140 AFRICA 120 ASIA 100 EUROPE 80 NORTH AMERICA 60 OCEANIA 40 SOUTH AMERICA 20 0 Tuna prices, smoothed 200 180 160 140 AFRICA 120 ASIA 100 EUROPE 80 NORTH AMERICA 60 OCEANIA 40 20 0 Difference in steepness of trend can most likely be related to composition of tuna species/product format SOUTH AMERICA Prices of other fish, which represents a hodgepodge of different kinds of species, are surprisingly convergent at the regional aggregate level Could it be the effect of farmed fish such as catfish, tilapia and pangasius that influence these comovements? Other fish prices 180 160 140 120 100 80 60 40 20 0 AFRICA ASIA EUROPE NORTH AMERICA OCEANIA SOUTH AMERICA Other fish prices 140 120 100 80 AFRICA ASIA EUROPE 60 40 NORTH AMERICA OCEANIA SOUTH AMERICA 20 0 Salmon prices have converged with the growth of aquaculture and has become a strongly integrated global market Salmon prices 200 ASIA EUROPE 180 NORTH AMERICA OCEANIA 160 SOUTH AMERICA 140 120 100 80 60 40 20 0 Shrimp is segmented in two types of markets: 1) aquaculture and 2) capture, where the latter group is more heterogenous However, wild shrimp prices have not been able to rise like many other fish species, which is most likely due to the growth of shrimp aquaculture Shrimp prices 180 160 140 120 100 ASIA 80 SOUTH AMERICA 60 40 20 0 Farmed shrimp prices relatively stable and integrated Shrimp prices 200 180 160 140 120 AFRICA 100 EUROPE 80 NORTH AMERICA 60 OCEANIA 40 20 0 Wild shrimp prices more volatile due to seasonality and more divergent because of heterogenous species types Shrimp prices 200 180 160 140 AFRICA 120 ASIA 100 EUROPE 80 NORTH AMERICA 60 OCEANIA 40 20 0 However, only weak if any increasing trend in wild-shrimp prices SOUTH AMERICA Shrimp prices, smoothed 160 140 120 100 80 60 40 20 0 AFRICA ASIA EUROPE NORTH AMERICA OCEANIA SOUTH AMERICA Shrimp prices, smoothed 160 140 120 100 80 60 40 20 0 AFRICA ASIA EUROPE NORTH AMERICA OCEANIA SOUTH AMERICA Only weakly increasing trends suggest scarcity is not an issue Finally we compare price development across species 200 180 160 Fish Species Price Indexes (100=2005) Data Source: NSEC 140 120 100 80 60 40 20 0 Other fish White fish Salmon Shrimp Pelagic e/tuna Tuna Summary Most markets for particular fish species groups appear to be integrated across regions although the level of integration appears to be related to 1. Heterogeneity of species within species group 2. Production technology Integration across species group is less, but there is still signs of similar long-term trends when the long run is defined to be 5-10 years intervalls 2. Economic growth and seafood prices EU, Japan and USA have similar price development for seafood… 200 180 160 140 120 100 USA EU 80 60 40 20 0 Japan …and China too, but a bit steeper 200 180 160 140 120 USA 100 80 60 40 20 0 EU Japan China …and Korea too, but even steeper 200 180 160 140 120 USA 100 EU Japan 80 60 40 20 0 China Korea …and finally Brazil with steepest price development 200 180 160 140 120 USA EU 100 Japan 80 China 60 40 20 0 Korea Brazil Why is pricing rising faster in emerging economies? The rise of the middle class in Asia seems to have two effects 1. Increase in consumption of seafood 2. Changing the composition of seafood consumption towards more high-value products This results in a higher inflation for seafood products in emerging markets 3. Feed Cost and Price of Aquaculture Fish • Prices of aquaculture feed inputs have spiked during the last years and should affect prices of farmed fish Aquaculture feed prices 350 300 Maize 250 Sorghum 200 Wheat Fishmeal 150 Soybean meal 100 Fish oil Rape oil 50 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 0 Prices of feed inputs and aquaculture products 350 300 Maize 250 Sorghum Wheat 200 Fishmeal 150 Soybean meal Fish oil 100 Rape oil 50 Aquaculture 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 0 Conclusion The increase in prices of a broad range of important inputs for aquaculture feed have led to rising prices for aquaculture products This reflects the importance of feed cost of total operational costs, and that that there are limited oppurtinities to substitute away from rising input prices 4. Fuel Cost and Price of Capture Fish One of the main cost components in capture fisheries is fuel prices. The impact fuel prices have on fish prices is not alltogether obvious Capture fish and gasoline prices 180 Other fish White fish 160 Pelagic e/tuna Tuna 140 Crude Oil 140 120 100 120 100 80 80 60 60 40 40 20 20 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 0 1990 0 Conclusions The seafood market is highly global, and is becoming increasingly so due to trade growth Market integration within species groups and across exporting regions appears to be high We have to be careful about composition effects when intepreting price trends Emerging market growth leads to increased seafood imports and changes in the import composition towards higher value products Conclusions Prices are determined globally For an increasing number of species, production cost in aquaculture determines price We don’t understand yet the influence of fuel prices on capture fish prices In fisheries where there are overcapacity increasing fuel prices can reduce the size of the fleet and thereby increase sustainability – but what about prices? FPI opens up for relevant research questions about price formation in international seafood markets