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SHELLFISH PANEL 2

VALUE

CRAB MEAT, OYSTERS, CLAMS,

MANGROVE CRAB

January 20, 2016

Miami, FL

THE VALUE SHELLFISH PANEL

Kelly HillANALYST

Andrew KaelinSOFT SHELL CRAB

Tim ParsonsCLAMS AND

OYSTERS

Danny CohenCLAMS

Steve VilmitOYSTERS

John KeelerCRAB MEAT

1

John Sackton

Analyst

BLUE SWIMMING

CRAB MEAT

2

Crab Meat

• Total supplies of US swimming crab meat increased in 2015, due to a surge in imports from Indonesia.

• Prices for Blue Swimming crab meat have adjusted to back to 2013 range, although red Chinese crab prices were still elevated through September 2015.

3

Market Drivers

• Early in 2015 markets saw historically high prices and supply, supported by steady demand

• The market collapsed mid-year

– a large surge in supply (from Indonesia) due to increased IUU crab

– coincided with the sudden strengthening of the dollar against the Indonesian rupee by 12% within in 9 weeks in June, July, August

• Importers were left holding high priced inventories

• Wholesaler buying patterns changed to “just-in-time”

• Producers created new brands and dumped these into the market at even lower prices to keep on going production

• Restaurants continued to buy and feature crab on menus –enjoying higher margins

US Imports – Swimming Crab Meat

Source: US Census data via Urner Barry

0

10000000

20000000

30000000

40000000

50000000

60000000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Nov

PO

UN

DS

Total Swimming Crabmeat Imports

5

Crab meat Imports By Country

0

10000000

20000000

30000000

40000000

50000000

60000000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Nov

Total Crab Meat US Imports by Country

OTHERS

VENEZUELA

INDIA

MEXICO

VIETNAM

THAILAND

PHILIPPINES

CHINA (MAINLAND)

INDONESIA

6

Monthly Crab Meat Imports

7

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Po

un

ds

Monthly Imports of Crab Meat from Major Countries

2013 2014 2015Mostly Indonesia

Crabmeat Price Ladder

$6.00

$11.00

$16.00

$21.00

$26.00

Mar 07 Sept 07 Mar 08 Sept 08 Mar 09 Sept 09 Mar 10 Sept 10 Mar 11 Sept 11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15

UB CRAB MEAT, CHINESE, PAST, 16 OZ. JUMBO LUMP UB CRAB MEAT, THAI/INDO, PAST, 16 OZ. JUMBO LUMP

UB CRAB MEAT, VENEZUELA, FRESH 16 OZ. JUMBO LUMP

8

Source: Urner Barry Comtell

Crab Meat 2016

• Expect supply and demand to balance out and prices to hold within single digit % variance from 2015 levels

• Traditional distribution partnerships will be tested by additional brands, which lack of steady supply chain per SKU

• No further impact from dollar fluctuation expected, as seen in 2015

9

OYSTERS

10

Oysters – Wild to Farm Raised

• “Oysters” represent the spectrum of “ocean

ranching” to aquaculture

• Three main technologies:

– Wild Harvest on lease bottom by “planting” prepared

cultch to catch wild spawns (“spat”)

– Planned “wild” harvest of hatchery spawned “spat on

shell” with broadcast on bottom grow-out

– Fully “farm raised” and cultchless” oysters from

hatchery “single seed” juvenile through controlled

grow-out with “bag and rack” or floating “cages”

11

Oysters – Two Main Markets (1)

• Shucked / Gallon Oysters:

– Primarily “wild” oysters harvested NJ, MD, VA, Gulf of

Mexico

– MD, VA, and WA expanding “spat on shell” to

supplement natural spawn and to increase shucked

oyster supply – expect shucked supply to grow over

time as technology is adopted

12

Oysters – Two Main Markets (2)

• Live Half Shell/“White Tablecloth” Oysters:– Mostly farm raised singles from Pacific NW, NJ, MD,

and VA

– Number of farms increasing with technology being adopted

– Number of hatcheries increasing

– Grown in “bags” or “cages” farmers periodically wash and tumble to increase “cup” and shape producing more consistency in “half shell oysters” often identified by brand or region

– Increased supply of “local” oysters has stimulated rebirth of the “oyster bar” in most of US urban markets

– Supply and demand are both predicted to grow for some time as new oyster bars open

13

Oysters Technologies

• Wild harvest – “hand tonging or “dredging” for shucking

• Spat bags for setting hatchery larvae on shells for broadcast grow-out and dredge harvest to shuck

• Hatchery seed “bag and rack” farm raised for “half shell trade” for oyster bars and white table cloth

14

Oysters – Wild Harvest Data

15

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

2010 2011 2012 2013 2014

Po

un

ds

Commercial Harvest – Eastern Fisheries

Oysters – Farm Raised

• No good national data yet

• State of MA 2014 data for proxy

• 2014 Avg $.57 / oyster to grower

• 2014 Avg $.80 / oyster distributor to restaurant

• Prices stronger in 2015 due to 2015 cold winter mortality

16

West Coast Oysters

• Renewed focus on replenishing wild shell stock

• Industry leaders have launched reseeding programs

17

2016 Oyster Outlook

• Continued growth in the use of oysters in restaurants

• With many more farms coming online this may not translate to increased profits for the farms

18

CLAMS

19

Surf Clam Landings 2014 vs 2015

Source: China Offices Of US Companies

• Surf clam catch stable

• Catch per unit of effort

low in Mid-Atlantic and

Nantucket shoals

• Harvest moving to

Georges Bank

• Good recruitment showing

up – market size in 1 to 2

years in Mid-Atlantic and

Nantucket

20

2015 Surf Clam Landings Report

Ocean Clams (Quahog) 2014 vs 2015

Source: China Offices Of US Companies

• Quahog catch CPUE low

but stable

• Bad weather in 2015

reduced harvests

• Industry sponsoring

recruitment scientific

surveys with SCEFMIS in

conjunction with NOAAA

and academia

21

2015 Ocean Quahog Landings Report

Surf and Quahog

Science and Sustainability

• Industry Participants initiated MSC certification in 2015

- Atlantic Capes Fisheries, Inc.

- Bumble Bee

- LaMonica Fine Foods

- Sea Watch International

- Surfside Products

• Industry sponsoring a series of research projects with SCEFMIS, NOAA, and academia to increase yield and monitor habitat impact

• Industry is working with NMFS and NEFMC to manage impacts on the environment and to continue access to Nantucket Shoals and Georges Banks

22

Surf Clam and Quahog

Chopped Clam Meat / Fried and Breaded Strips

• Raise in hourly minimum wage affecting costs for clam plants with large number of low wage earners – e.g. shuckers, squeezers, and packers

• Yield per bushel has dropped about 9% … researchers are not certain but global warming may be affecting yield per bushel

• Finished goods prices have not risen (as % increase) compared to other seafood items

• Low prices are reducing investments in harvest capacity

• Industry has little or no inventory of clam meats going into winter

• New investment would be needed to increase supply.

23

East Coast Hard Shell Clams

• Fall 2014/winter 2015 experienced harsh winter

weather resulting in higher mortality and slower

growth

• Going into 2015, market sizes were smaller than

previously, creating price pressures

• Increase of wild harvesting offset decrease in

farmed

• 2016 uncertain

24

UNDER THE RADAR NEW SPECIES:SOFT SHELL MANGROVE CRAB

Scylla serrata

25

Commercial Green Mangrove Crab

• Captured by small producers

- Fattened, shed and processed in soft shell form

- Undeveloped mangrove area’s important to production

• Largest production in Myanmar, embargos lifted at end of 2013

- New production in Indonesia, Bangladesh, and Thailand

• Processing support important to ensure soft shell quality

- Once crab is shed, has certain window to arrive in plant

- Ozone process ensures quality

• New production requiring new nontraditional markets

- Traditional Asian market

- USA mid-Atlantic blue swimming crab area

- New markets developing in US Hispanic, and Food Service

26

Soft Shell Crab Production

27

Small Scale Producers

28

Farm Production

29

Crab After Shedding Shell

30

Reception & Sorting

31

Ozone Treatment and Cleaning

32

Wrapping, Boxing and Freezing

33

Production by Country (MT)

34

Market Entry Price Declining

35

Trends in Crab Imports and Prices in the US Market

Mangrove Crab Menu Placement

Processed exactly the same as blue swimming crab

• Soft shell crab – high quality when frozen

• Processed forms: pre-cooked, pre-packaged, ready to

eat

3636

Mangrove Soft Shell Crab - 2016

• Production of this type of Soft Shell Crab increasing

• Market shift expected into new markets

• Volume and lower market entry level price

expected to increase demand

• New culinary uses expected, especially uses as

appetizers and as a compliment to other seafood

3737

THANK YOU!