SeafoodNews.com (by John Sackton)
Crabmeat prices are dropping, but many signs in that market point to continued weakness as the reaction to record high prices in the summer of 2014 continues to shape the market.
Blue swimming crabmeat is a staple foodservice item used in crab cakes and many other menu items that call for crabmeat.
A shortage of crabmeat developed as a result of overfishing and poor management in the major producing countries, leading to a sharp price rise for jumbo lump pasteurized crabmeat from Asia to $25 a lb. or more.
The overfishing is being addressed with improvement management measures in a number of countries, including minimum size levels and other controls. These measures were supported by major buyers through the NFI crab council. But like any fishery recovery, these measures take time, and did not alleviate the shortages of last year.
For the first four months of this year, imports were at record levels, as replacement costs fell. But there were still high inventories of expensive crabmeat going into Lent, and purchases at lower replacement costs have yet to balance out inventory cost with current market conditions. Anecdotally some sales this month include product purchased last November.
Importers tell Urner Barry that despite the lowering of replacement costs, orders have slowed down as well while the high inventories are worked off. The strong foodservice environment with improved traffic and some evidence of higher wages and employment will help the crabmeat market in the longer term.
But for now, the impacts of restaurants removing the product from menus or reformulating their strategies due to high prices are still in place. It takes time to up menu usage after a price shock.. so the improved wholesale situation will not lead to a rapid increase in demand.
At the same time, US importers as well as their customers are very cautious about the size of their new orders, because they have no confidence as to where the market bottom might be. As a result, high inventories and cautious ordering will continue to put downward price pressure on overseas crabmeat producers.
Angle Rubio, Urner Barry’s crabmeat market analyst, has prepared a chart showing the ratio of Urner Barry’s average wholesale price index to monthly import costs that represent replacement cost. When this ratio is out of whack, it tends to mean a correction in the ratio is imminent.
Right now the ratio of a moving average of wholesale prices to replacement cost is at its highest level since 2008-09. Rubio says this historically has been a signal for downward price correction in the crabmeat market.
This Chart does not show margin, or the difference between import costs and first wholesale prices. It shows the way in which the ratio of a moving average of those prices is changing.
John Sackton, Editor and Publisher SeafoodNews.com
Re-printed with permission from SeafoodNews.com.