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Cut in Norway cod quota ‘more negative than expected’

But prices shouldn’t see massive shifts until later in the year, and only if the commission follows the advice.

Most people were expecting to see a cut in next year’s cod quota in the Barents Sea, but no-one was quite prepared for the 20 percent slash which will inevitably see prices increase later in the year.

On Tuesday, the International Council for the Exploration of the Sea (ICES) recommended a quota of 712,000 metric tons of cod in the Barents Sea for next year, down 20 percent from the 890,000 metric tons for the current year.

The Joint Russian–Norwegian Fisheries Commission will decide whether to follow -- or ignore -- this advice in October when it officially sets the quotas.

For example, last year, ICES suggested a total allowable catch (TAC) of 805,000 metric tons for the 2017 fishing year, however, the quota was ultimately set at 890,000 metric tons for cod.

Also on Tuesday, the Icelandic Marine Research Institute (MRI) recommended a hike of 6 percent to Atlantic cod quota in Icelandic waters for the 2017-2018 season, to 257,572 metric tons, up from the 244,000 metric tons recommended a year earlier.

Speaking about the significant cut to Norway’s cod quota, Webjorn Barstad, CEO of whitefish harvester Havfisk, told IntraFish the 20 percent quota cut in cod was “more negative” than expected.

“I did expect a reduction but not by quite as much,” he said.

The main reason for the decision to reduce quotas -- the calculation method for which has recently changed -- was due to poor recruitment and a change in stock composition, said Barstad.

The new method has given somewhat different results in terms of age composition of the stocks, so that is why it is more negative than expected.

“It is not as though there is a lot less fish in the sea, but the stock composition is different,” said Barstad.

Unheeded advice

In total, in terms of volumes, there will be less fish in the market for next year if this advice is accepted by the Joint Russian–Norwegian Fisheries Commission.

“But they have been known to not follow advice due to biological reasons, for example this year was higher than the advice.”

While Barstad takes a position whereby he does not speculate on prices, “the market is the market, and prices go where the market wants them to go,” he said.

Charles Aas, an advisor at Norwegian sales association Raafisklaget, said that while the quota decision is “quite a big cut” it is difficult to say how much it will influence prices.

Nevertheless, “it will have a positive effect on the price as there will be less cod on the market and there will be more competition for the product,” he said.

When the prices will start to see this impact is unclear. In the past when there was a large change upwards in the quota, there was an immediate effect on prices and they went straight down, said Aas.

“We will not have the same thing this time but we will see the frozen price come down in the next few months,” he said.

Additionally the fresh price will take longer to be impacted as it is not currently the main season for fresh cod. It usually rises in the autumn and this year will probably see more of a lift than usual.

For frozen the market is different. “People buying big volumes in the fall want to know they have enough fish for their products, so when they buy to have a buffer the price situation is different,” said Aas.

Double the cut

Aas said he was expecting a cut to the quota for the next season, but the 20 percent is more – in fact double – what he was expecting.

“But the quota is still quite big,” said Aas. “We are going from a very high level so there is still a lot of cod to fish.”

However, there are a lot of other factors which influence the cod price as well as quotas, in particular exchange rates, size and what gear is used to catch the fish.

Prices for the moment are quite stable for both sea frozen and fresh, said Aas, and for frozen the price has been going up and up for the past year.

“I think the market is asking for more cod both in the EU and also in Asia,” he said. “The fresh price is influenced by the size of the catch, while frozen is very stable.”

Average prices for head off gutted cod from Norway at the moment are around NOK 22 (€2.30/$2.60) to NOK 23 (€2.40/$2.70) for fresh, while frozen is more like NOK 30 (€3.20/$3.60).

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According to Helgi Anton Eiriksson, CEO of Iceland Seafood International (ISI), Atlantic cod prices have been firming up in recent months, particularly frozen-at-sea (FAS) fillets.

“They were the first to move, and I think I think they have reached the top but who knows in this industry.”

In general Eiriksson said there has been good production and good demand for cod driven by the UK and the US markets, but it seems like that “has found a plateau”, most likely because the pipelines have been filled again since the Icelandic strike left them empty.

“With Iceland on strike for the first six or seven weeks of the year the pipelines emptied a bit,” said Eiriksson. “It is gradually now getting back to a more normal situation.”

Like Barstad, Sverrir Haraldsson, head of the groundfish division at fellow Icelandic fishing company Vinnslustodin (VSV), agrees the quota cut in Norway will have a bigger impact in the wider market than the modest increase in Iceland.

“I would rather expect prices to rise than anything else,” he said.

In addition, all suppliers in Iceland are in a difficult situation with the strength of the kroner against the pound, euro and other main currencies.

“It has started to be unfavorable, and for producers in Iceland the only way to compensate for that is with higher prices,” said Haraldsson.

 Jon Stefansson, head of research at Iceland-based Marko Partners, believes it will be a while before the market reacts.

...There will be pressure on prices,” he said. But this probably will not happen right away, and probably not until the end of autumn.

“For the next couple of months prices will be at similar level to what they are now. But there will be a delayed reaction in prices in the fall.”

Quotas not the main concern for UK

For Martyn Boyers, chief executive of Grimsby Fish Market in the UK, however, the main issue is not to do with quotas, but currency exchange rates brought about by the political situation.

“The main issue facing the industry at the moment is the situation with the currency. Both Iceland and Norway are outside the EU with their own currencies -- and that’s where the issue is going to be,” he told IntraFish.

According to Boyers, the question right now is not about the availability of the species, but more about the availability of cash and “being able to get the right price to sell the fish”.

“That’s going to be a challenge going forward,” he said, adding the market reaction against the price in British sterling has been quite dramatic.

“You can end up with a situation where there is more fishing in Iceland and where there is more fish but we’re not buying it because the price is too high.”

Around 65 percent of the cod sold at Grimsby market is Icelandic, so while larger quotas and more fish is a good thing, the prices are getting too high because the Icelandic suppliers want the same price in kroner.

“I think the industry is becoming more and more complicated and wrapped up in some of the political and economic issues we’ve no control over,” said Boyers.

Prices in UK have been very high for some time now, and while normally there are peaks and troughs, they have been consistently high both on haddock and cod.

As an example, cod prices on Grimsby market are around £3 (€3.40/$3.80) per kilo at the moment, while £2.40 (€2.70/$3.10) to £2.50 (€2.80/$3.20) per kilo is a more “normal” price.

“There seems to be no respite on prices. Is the industry geared up to sustain high prices? I’m not sure it is,” said Boyers.

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