Chinese processors are testing out substituting Argentine shortfin squid, Illex argentinus, and Japanese flying squid, Todarodes pacificus, with jumbo flying squid, Dosidicus gigas, due to strong catches of the latter by Chinese vessels in the southeast Pacific.
Prices of small-sized jumbo flying squid — sizes 500 grams and below, whole round — caught mainly by Chinese vessels near Peru and Chile, have fallen by 31% in China since the beginning of the year, according to Undercurrent News‘ price dashboard, to CNY 9,700 per-metric-ton ($1,401/t), while prices of illex and todarodes are still reaching record highs and continue to rise.
The fact Chinese vessels are catching large amounts of jumbo flying squid is a blow to Peru, which has seen catch of jumbo flying squid from within its own territorial waters slump.
At the Conxemar show in Spain, Marcos Yacher, commercial manager at Peru’s Hayduk Corporacion, told Undercurrent the firm has not caught any jumbo flying squid since March.
“In 2016 catch was very bad; in 2017, also bad. This year, since March there has been no catch,” he said. Hayduk, one of Peru’s largest fishmeal producers, sells about $40 million worth of seafood products for human consumption annually, from jumbo flying squid to tuna and horse mackerel, largely for export.
According to Lian Guochen, co-founder of Huacai Technology, a Chinese firm which operates an online squid trading platform in China, Chinese vessels fishing in the southeast Pacific have already caught more than 230,000t of jumbo flying squid this year. This is up from around 70,000t caught by Chinese vessels last year, he told Undercurrent.
In a market report by Huacai — whose reports are read by thousands of Chinese market participants — dated Sept. 7, Lian wrote: “National [Chinese] output is estimated to exceed 230,000t, with vessels catching an average of 3-5t a day. In September, an estimated 7-8 reefer vessels are expected to deliver 40,000-50,000t of squid to Chinese ports, the fifth large-scale return of [jumbo flying squid] this year.”
In its latest report published Oct. 1, Lian added: “Fishing for jumbo flying squid is still good. On average vessels are catching 3-5t a day. The overall fleet size is 270-280 (Huacai estimate), and more vessels from China will arrive in operational waters, providing conditions for a continued increase in jumbo flying squid production this year.”
In an earlier report, Lian described this year’s catch as a “great harvest”.
The contrasting fortunes of Chinese vessels operating in international waters and Peruvian vessels could explain the unusual pricing dynamic for jumbo flying squid; as illustrated by Undercurrent’s price dashboard, while prices have dropped significantly for small-sized jumbo flying squid, this year prices for large-sized jumbo flying squid have soared.
This could be because large-sized jumbo flying squid tends to be caught in Peruvian waters, while smaller-sized jumbo squid are caught on the high seas by Chinese vessels, experts say.
“Prices for small-sized jumbo flying squid continue to fall,” Lian told Undercurrent Thursday. “In the past two days Peru has been catching, and production was 5t a day. But it’s not possible to make up for the lack of large-sized squid.”
Accordingly, latest prices for slices, head, and wings of large-sized jumbo flying squid are CNY 14,090/t, CNY 20,250/t, and CNY 17,500/t, respectively, up from CNY 11,414/t, CNY 15,000/t and CNY 15,579/t in the first week of 2018.
The situation has led Yantai Honghua Seafoods, a Chinese squid processor, to offer smaller jumbo flying squid as an alternative to customers who usually use illex or todarodes, species which are more popular especially in Europe and the US but more expensive. At the Seafood Expo Asia held in Hong Kong in early September, Lixia Liang, sales manager at the firm, told Undercurrent her firm has sent samples to customers to try out.
“Catch of jumbo flying squid has been better. So we’ve sent samples to customers in Singapore, also to Moscow,” she said. “It’s not really accepted by the market, but we’ll see what they think,” adding that though it looks similar to illex and todarodes after processing the taste and texture are somewhat different.
Earlier this year Japan’s Nippon Suisan Kaisha followed through by replacing todarodes with jumbo flying squid in some of its sushi products. Lian has previously told Undercurrent jumbo flying squid is “not very popular” in the US and Europe, however. “You need to adjust the taste,” he said.
Speaking on Thursday to Undercurrent, Lian reiterated this: “In Europe and the US there’s no market for this product. Our customers say it doesn’t taste good,” adding that near the equator where it’s caught because of high temperatures the squid easily spoils, too.
He said a large market for jumbo flying squid is Southeast Asia, where it is sold as squid flowers.
Finding the magic formula which makes jumbo squid more palatable could, in theory, be the goose which lays the golden egg; currently large-sized illex, 300-400g, whole round, and todarodes, 300-400g, whole round, are trading at CNY 20,550/t and CNY 16,550/t above prices of small-sized jumbo flying squid (500g and below, whole round) respectively, based on Undercurrent‘s price dashboard.
Current inventories in China of illex and todarodes are at “historically the lowest levels they’ve ever been”, Lian emphasized.
“It’s not just a problem of high prices. 80% of Chinese processors aren’t offering quotes for illex or todorades of sizes 200g and above. They don’t have enough stock.”
The catch of illex is down again this year, he said, after the relatively mediocre 2017 catch and disastrous catch of 2016. According to Agroindustria, this year Argentine vessels landed 107,779t of Argentine shortfin, mostly during the fishing season between January and June. This was above last year’s landings of 99,170t, but below Argentina’s haul of 168,729t in 2014.
However, catch on the high seas in the southwest Atlantic where Chinese and other foreign vessels fish were down by about half compared with the year prior, industry sources said in April, although exact figures are hard to come by. Lian reckons outside Argentina’s EEZ Chinese vessels caught 80,000t.
“Catch was very bad outside Argentina’s EEZ. Chinese vessels suffered very big losses,” said Lian. He said Chinese were forced to buy from Argentina this year.
Given the status of illex production, the fishing season for todarodes squid was keenly anticipated. Another large commercial species similar in taste and texture to illex and preferred by some importers in Europe and the US, it is caught around the Yellow Sea and the Sea of Japan from late June to October as it migrates northwards.
But this year’s catch has also been poor, said Lian, echoing reports from Chinese processors.
“This year’s todarodes catch was also very bad,” said Lian. “Not good, not good at all. The quantity is low,” an executive at Rongcheng Guangrun Aquatic Foods, a large Chinese squid processor, concurred at Conxemar. Liang from Yantai spoke similarly during the Hong Kong show.
Putting a figure on this year’s todarodes catch, Lian estimated production of around 100,000t, down from 350,000t last year. If Lian’s figures are correct, last year’s catch would’ve been high by historical standards based on United Nations Food and Agriculture Organization data (see graph), whereas this year would be low.
Prices for both illex and todarodes — as to be expected — continue to rise, although a price ceiling for illex of certain sizes appears to have been reached.
Juan Redini, president of Argentinean squid firm Pesquera Buenavista, told Undercurrent Argentine exporters were selling illex, whole round, 200-300g, for $3,200-3,400/t. “Of course, for us it [high prices] is very good,” said Redini. He said that all stocks have been sold.
Meanwhile, prices for todorades, whole round, 200-300g, are currently CNY 25,000/t, according to Undercurrent‘s price dashboard.
Large sizes more scarce
Industry sources point out that catch of illex and todarodes is not only poor, average sizes of squid caught are also smaller than in previous years. In China, Lian said Chinese factories recently enlisted Huacai to procure illex squid in Argentina, but the majority of squid available was below 200g.
Redini said Argentine vessels caught illex weighing on average 200-300g this year. In previous years the catch would be “more of 300-500g-sized squid”, he said. He blamed the trend on the poor catch off the coast of southern Argentina, where larger-sizes are more predominant.
Meanwhile, Lian wrote in early July sizes of todarodes squid caught were generally 80-120g, and 100-150g. By Sept. 14, there was some catch of 300g-sized squid, although most still were 200-300g. Lack of large todarodes squid only serves to drive up prices for large-sized illex, with sizes 600g and above now trading at CNY 34,250/t, more than farmgate prices of shrimp.
The executive at Rongcheng Guangrun was pessimistic: “Inventories are very low, especially for bigger sizes. Also, with the todarodes fishing season now having finished, the next season will be for illex, which is not until January or February. That’s a long time to have no catch.”
Demand still there?
High prices have, understandably, dented demand, as importers and retailers turn away from a product previously relatively cheap.
According to Jose Castrillon, manager at Huacai’s Spanish office, Spanish processors tend to prefer semi-processed so-called ‘dirty tubes’ in sizes 18-21, 20-23, 23 up and 25 up. However, he said this year demand is “uncertain”, after some Spanish processors lost contracts with retailers, he told Undercurrent at Conxermar.
“In the last two years demand was keeping stable or going up, but this year sales at some companies dropped by up to 45%. Some of them [Spanish processors] lost contracts with French companies, for instance. The price was too high, they were told. These are companies producing 3,000t of finished squid products. So demand from Spain right now is uncertain,” he said.
Another industry source told Undercurrent Castrillon’s stated level of decline in sales was “realistic”.
Castrillon said buyers are being more cautious in the market. “We offered our customers a price but nobody trusts the price right now,” he said. It will not be until the China Fisheries & Seafood Expo in Qingdao early next month before prices are settled, he reckons.
“We know the stock, but we don’t know the demand,” he said.
Lian is bullish on prices, however. “China will celebrate the New Year, Japan and South Korea must prepare for New Year’s Day, Thailand has to celebrate the New Year and Christmas,” he told Undercurrent. Meanwhile, in a recent Huacai report, Lian wrote South Korean companies have started buying up large volumes of raw material from China. “Squid prices will definitely continue to rise in the second half of the year,” he said.
‘Pre-formed’ squid rings
At the Conxemar show, volatile squid prices was a source of concern for downstream companies working with the species. One, however, has turned it into an opportunity to develop new products and revenue streams.
Congalsa, a Spanish producer of seafood snacks and tapas with annual sales of around €72m, is seeing more demand for “pre-formed” squid products; products made to look and taste like squid but which can be produced with cheaper ingredients.
Pre-formed rings tend to be made with a paste of illex squid, jumbo flying squid, Alaska pollock, water and starch. The rings are then formed through extrusion.
Juan Prieto, international sales manager, told Undercurrent the product is “more than a Spanish trend. With mini-sizes it is Europe-wide,” he said.
Germany, for instance, previously did not accept pre-formed rings, he noted. “But after three years of bad illex catch they are now starting to import strongly. Recognized brands are launching the category in the market.”
Congalsa mainly exports to horeca distributors thanks to its specialization in tapas products, he said. While customers continue to sell natural battered products, the majority of sales in the value added category (battered or breaded squid) in retail or food service are now with pre-formed products.
Other products presented by Congalsa at Conxemar were “Fishpops” made with cod, hake mini burgers, hake nuggets, breaded mussels, and mini empanadas with serrano ham and meat.
Chinese processors are testing out substituting Argentine shortfin squid, Illex argentinus, and Japanese flying squid, Todarodes pacificus, with jumbo flying squid, Dosidicus gigas, due to strong catches of the latter by Chinese vessels in the southeast Pacific […]
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