Euro Snow Crab Markets in John Sackton Publisher SeafoodNews New Brunswick March 22-23, 2016

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1 Euro Snow Crab Markets in 2016 John Sackton Publisher SeafoodNews New Brunswick March 22-23, 2016

2 Background Crab, shrimp and lobster market analyst since 1997 Preseason price and market outlooks on shrimp and crab for 19 years Atlantic Canada, Alaska, and US West Coast Price arbitrator for Alaska king crab, snow crab annually since 2005 Publisher of Seafood.com News 2

3 INTRODUCTION

4 Snow Crab Issues for 2016 Snow Crab Market is Very Dry with No Inventory Alaska Production Was Cut 40%; Alaska Prices for 5-8 s now over $6.00. Canadian quotas likely down about 10% in both Newfoundland and the Gulf Pricing Pressures are Very Strong - High initial price - Cut back in Supply But Snow Crab is in a Trading Range that it will be Difficult to Abandon 4

5 Initial Newfoundland Japan Contract Set at $5.15 Packers Feared Not Having a Price at Boston might Send Wrong Signal to market Signed Contract with One Major Japanese Buyer for 750 tons at $5.15 FOB St. John s. Equivalent US price would be $5.25 Unclear at this time if this price will be widely accepted 5

6 Overall US Crab Consumption is Declining 0.70 crab

7 2015 US Market Supply Improved US Snow Crab Supply IMPORTS DOMESTIC PRODUCTION 70,000 60,000 50,000 40,000 30,000 20,000 10,

8 Metric Tons o fsnow Crab Percent of US Imports from the Barents Sea Growth of US Imports from Barents Sea Growth of US Imports From the Barents Sea Canada Russia Greenland Barents Sea Percent from Barents 60, % 50, % 16.00% 40,000 30, % 12.00% 10.00% 20, % 6.00% 10, % 2.00% % 8

9 Barents Sea Snow Crab Expanding Current Snow Crab Area Future Snow Crab Area Current Red King Crab Area 9

10 US Market For Snow Crab Improving Foodservice is Contributing to a strong snow crab market in the US Retail promotions of crab increased also in 2015, but at a slower pace. 10

11 Restaurant Conditions 11

12 Casual Dining is Improving 12

13 POUNDS Crab and Lobster Only Shellfish Items to See increase Besides Shrimp Frozen Shellfish Volume 2014 vs ,000,000 CY (EST/SEPT) 20,000,000 15,000,000 10,000,000 5,000,000 0 CRAB LOBSTER SCALLOP CLAMS MUSSEL ALL OTHER 13

14 Crab Household Penetration Frozen Shellfish Household Penetration CY 2011 CY 2012 CY 2013 CY EST(SEPT) 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% CRAB LOBSTER SCALLOP CLAMS OYSTER MUSSEL AO 14

15 Retail Promotions up 26% 15

16 Exchange Rate Very Favorable for Canadian Exporters to US 16

17 JAPAN MARKETS

18 Japanese supply decreasing Japan Snow Crab Supply Continues to Decrease FZN LIVE CRABMEAT (VIA CHINA) / /

19 YEN IS STRENGTHENING AGAINST THE DOLLAR 19

20 CALCULATIONS BEHIND JAPANESE BUYING Sales of crab were good in Japan at the end of year sales season, but at lower volumes. Their Price idea at Boston was $4.95 compared to contracts at $ last year. Settled price of $5.15 represented a very small real change in yen terms: 1256 Yen/ kg vs

21 Table of Japanese Yen Costs for Crab 21

22 Metric Tons Yen Value per Kg Japanese Imports of Crabmeat are Declining Japanese Imports of Snow Crabmeat $2, $1, $1, $1, $1, $1, $ $ $ $ $0.00 China Korea Indonesia Vietnam Thailand Average Value per Kg. 22

23 Raw Frozen Crab Japan has purchased a lot of Raw frozen crab from Canada. It is used in winter pot cuisine Like shabu Shabu. Warm Weather resulted in poor Sales, so a significant inventory Still exists. 23

24 Trade and Exports The US is the only market where snow crab volumes are increasing. Both Japan and China are importing less crab. Global Snow Crab Harvests are Declining, but more crab is being landed in the Barents Sea. 24

25 Metric Tons Disposition of Alaska Opilio Disposition of Alaska Opilio Production Section Wgt US Domestic Japan Japan (via China) 30,000 25,000 20,000 15,000 10,000 5, YTD NOV

26 Kilograms China Imports Decreasing China Imports of Snow Crab for Meat Picking Canada United States of America Russian Federation 26

27 Kilograms Monthly China Imports in 2015 vs China Imports of Snow Crab for Meat Picking Monthly Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 27

28 EXPORTS

29 Metric Tons Canadian Exports Declined Slightly in 2015, But Not to the US Canada Exports of Snow Crab United States of America China Japan Indonesia

30 Metric Tons Live Weight Global Snow Crab Harvests May Decline in Global Snow Crab Supply Global Snow Crab Supply 30

31 Alaska Snow Crab Quota Cut 40% Bairdi Crab (tanner crab) quotas increased to Million pounds, up from 15.1 millon in

32 However Russia Quotas Will Increase 32

33 Bairdi Crab Bairdi Crab is becoming more important in Alaska 2016 Quota is 19 million pounds Larger Than Snow Crab, generally a size Very Popular with Retail 33

34 PRICING

35 Snow Crab again is at the top of its recent price range 35

36 However it still represents a value

37 With no inventory, crab prices for large sizes have increased 37

38 Alaska Crab Prices have Behaved the Same Way 38

39 Also Gulf Crab 39

40 Newfoundland Price Spread 40

41 5-8 Sizes Have Moved Together 41

42 Canadian Snow Crab is Trading at a new level of $4.50 to $

43 OUTLOOK AND DISCUSSION

44 Shellfish price volatility in recent years Crabmeat +50% Lobster meat +45% Shrimp +41% Source: Urner Barry Comtell

45 Snow Crab Prices are in a new trading range Unlikely to change as 3 factors reinforce value - Excellent crab value at retail - Lack of Snow crab from Russia impacting Japan - Change to Raw Crab processing for Japan creating more demand; highly profitable for processors Cutbacks in 2016 will reduce overall supply and increase pricing 45

46 This Year Trading Range is Challenged, But Season Has not Started 2016 May be Similar to

47 Barents Sea Snow Crab Price and Volume of Barents Sea Snow Crab Shipped to US from Lithuania and Norway 1,200,000 $7.00 1,000,000 $ ,000 $5.00 $ ,000 $ ,000 $ ,000 $ $0.00 Volume Price 47

48 Barents Sea Snow Crab Shipments Increased to US in ,000,000 US imports of Snow Crab (breakdown by US Port) 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000, Russia Far East Barents Sea

49 METRIC TONS Russian Shipments of Snow Crab Russia Exports of Snow Crab to US, Japan US JAPAN 25,000 20,000 15,000 10,000 5, Nov-14 Nov-15 49

50 Snow Crab Market Drivers After high prices in 2014, prices moderated in 2015 at start of Canadian season Alaska quota is being cut in 2016, expect prices to react Japan s live crab trade with Russia has been cut off, expect to see Japan get aggressive in securing Alaskan and Canadian crab Weak Currency has not ended Japan need for crab Retail promos increased by 26% this year due to lower year over year prices Snow crab demand has historically been sensitive to price movement not as much this year 50

51 Snow Crab Market Drivers (2) Inventories showed brisk movement in 2015; inventories are depleted. Increase in Bairdi expanding snow crab market sizes are desirable (larger than Opilio) Product form preferences are shifting from cooked frozen sections to raw frozen legs (Japan for Shabu Shabu) Processing raw frozen forms is more economical for plants more capacity being added in Alaska and in Canada 51

52 Outlook for Snow Crab in 2016 Smaller Alaska quota and little inventory is having a market impact Processing capacity will continue to expand to meet demand for frozen raw crab in Canada Canadian Season Opening in April Generally Brings Lower Prices. Historically Canadian Snow Crab prices are about 25 Cents lower than Alaska, but it depends on the market Barents Sea Crab so far is not a Major Factor in US Market. If Attempt to Establish $5.15 market price is successful, crab demand will be strong 52

53 Thank You Time for Questions 53

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