28/09/20007 - Global dollar trouble sinks profits

Processors worldwide, in most countries are hit by dollar trouble to different degrees. (Photo: FIS)

WEEKEND FEATURE: Global dollar trouble sinks profits

WORLDWIDE
Friday, September 28, 2007, 23:50 (GMT + 9)


Indian exporters are unable to compete with their Asian competitors such as China, Vietnam, and even Bangladesh and Sri Lanka, according to AJ Tharakan, president of The Seafood Exporters Association of India (SEAI). The Indian products are priced out in the major markets of the United States, Japan, and the European Union (EU) due to the strong rupee.

It is difficult for exporters to lower the price paid to fishermen or aqua farmers in line with the appreciating rupee, he said, as one of many industry representatives making the same complaints worldwide.

The US dollar is, despite it losing some weight, the most important currency in international trade for all sorts of commodities and products. Since 1 January it has lost 10.9 per cent of its value against the Indian rupee. Exporters who have joined long term contracts where the prices are pegged to the dollar are in trouble if no clause in the contract protects them against such large fluctuations to the currencies.

Value of 1 USD against other currencies 2004 – 2007

Country
Currency
01.01.04
01.01.05
01.01.06
01.01.07
25.09.07

Canada
CAD
1.297
1.2
1.164
1.166
1

Chile
CLP
611.4
575
514
532.6
514.1

China
CNY
8.287
8.286
8.075
7.817
7.518

EU
EUR
0.795
0.737
0.844
0.758
0.709

India
INR
45.69
43.47
45.19
44.12
39.77

Japan
JPY
107.4
102.44
117.68
119.11
115.07

S. Korea
KRW
1193
1076
1029
940
922

Morocco
MAD
8.841
8.506
9.366
8.508
8.047

Norway
NOK
6.67
6.07
6.77
6.24
5.52

New Zealand
NZD
1.527
1.393
1.464
1.421
1.343

Russia
RUB
29.25
27.73
28.75
26.331
25.016

Thailand
THB
39.7
38.84
41.08
35.95
32.22




US dollar vs. Indian rupee

However, the Indian seafood industry is now experiencing what exporters and importers in other countries have troubled over for years. Since 1 January the US dollar lost 10.9 per cent against the Indian rupee. In comparison the US dollar lost 13 per cent against the Norwegian krone this year, and since 1 January 2004 has depreciated 29.7 per cent against the Canadian dollar and 29.4 per cent against the South Korean won.




The Thai baht is strengthening fast, and just this year the US dollar has lost 11.6 per cent against it. Since 1 January, 2004 the value of the dollar has decreased 23.2 per cent against the baht.


Change in % against the US dollar

Currency
01.01.07
01.01.04

CAD
11.6
29.7

CLP
10.3
18.9

CNY
4
10.2

EUR
6.9
12.1

INR
10.9
12.1

JPY
3.5
- 9.3

KRW
3.5
29.4

MAD
5.7
9.9

NOK
13
20.8

NZD
5.8
13.7

RUB
5.3
16.9

THB
11.6
23.2



US dollar vs. Canadian dollar

In Canada the strengthening of the Canadian dollar reduced profits, and also put many companies into the red. It is difficult to increase prices nearly 30 per cent in three years just to cover changes in exchange rates.




US dollar vs. Thai baht

The effect of the weakening dollar is varying from sector to sector. Increasing prices on fuel is not only real increases. Some of the increase is due to the depreciation of the dollar. For a Thai processor selling the products in the domestic market, and basing production on imported raw material paid in dollar, is the situation not to bad. But large exporters like CP-Group exporting large volumes of seafood and poultry are getting paid in dollars. The same is happening for a company like The Union Frozen Products Co., Ltd. (UFP)

Exporters of canned tuna to the US market have been hit hard. Not only do they have to make US buyers pay more to cover the rapidly increasing value of the Thai baht, but also the cost of transportation is also up, especially in dollar terms. All this in the end has to be paid by US consumers.

For a company like UFP the situation is not totally gloom and doom. Much of the tuna canned by the industry is sourced worldwide, and therefore often paid in dollars. As the raw material is imported, it is mainly added value done in Thailand that is affecting the product price in dollars. However, at least two thirds of the increased product price in dollars will have to be recovered by lowering production costs, decreasing profits for the processor, as well as US importers and consumers.




US dollar vs. euro -The North Africa trawler fleet

For Morocco, Mauritania, and many other African countries the income from fishing licenses issued for foreign pelagic trawlers is putting good cash in the coffers. Luckily enough, many deals have been agreed upon in euros, especially in bilateral agreements with EU or European governments. The euro has also depreciated against many currencies, but the fall in the value of the euro is less against most currencies than what it is for the dollar.

This does not change the fact that countries issuing fishing licenses against a fixed fee per tonne of fish caught are loosing big money in the development in the dollar value. An increase in the fees is possible upon renewal of licenses. But high fuel costs are making many fuel intensive fisheries less profitable than before. There is a limit for how much the vessel owners will pay to continue fishing. Prices on small pelagic fish are fluctuating. The enormous herring catches in the Northeast Atlantic is putting pressure on sardinella. Importers in many main markets for the West-African sardinella catches are also settling their contracts in dollars.




US dollar vs. Moroccan dirham

Moroccan dirham has been hit less than many other currencies. The dollar has only depreciated 9.9 per cent against the dirham this year.




US dollar vs. Chilean peso and Norwegian krone

A winner in the currency game was for some time Norway. The Chilean peso was increasing faster against the dollar than the Norwegian krone. This made Norwegian salmon cheaper than Chilean salmon i dollar terms.




But this did not last very long, especially in the last couple of months the Norwegian krone has increased in value against most currencies in the world, as has the Chilean pesos, but to a lesser degree.




The reason is the fast growing economy in Norway. To cool down the consumers’ lust the Norwegian Central Bank has pushed the interest rates up by 0.25 per cent six times, just this year. The latest increase in the interest rate was Wednesday last week.

Now the Norwegian fishing industry is protesting, as they are getting less and less competitive. They have to pay the price of heat in the Norwegian economy, a situation resulting from very lax regulations of lending towards consumers. Until Norway has solved this trouble, the increased interest rates will increase the value of the krone further. Combined with a dollar in the middle of dive most finance experts expect to continue, the Norwegian seafood industry is facing tougher international competition.

The good news in the current situation is the fact that most free currencies are appreciating against the dollar. Processors worldwide, in most countries are hit by dollar trouble to different degrees. This is also what will make the world seafood industry continue as before. The US market may contract as local consumers change to local products, which should be more competitive against imported products.

US dollar vs. Japanese yen

A similar development has been seen in the Japanese market. The yen have seen much worse trouble than the US dollar. Since 1 January 2004 the dollar has strengthened nearly 10 per cent against the Japanese yen. Since 1 January this year the development has changed, and the dollar is down 3.5 per cent against the yen, despite the strength of the Nippon's currency.




By Terje Engoe
www.fis.com

141/09/2007 - Hunting down pirates and ministers

The Antares the Russian pirate trawler docked in Norway. (Photo: Greenpeace)

WEEKEND FEATURE: Hunting down pirates and ministers

NORWAY
Friday, September 14, 2007, 23:50 (GMT + 9)


The situation has the elements of crime, politic, and circus; perfect for a modern TV series. The crew of a vessel suspected for illegal fishery is being interrogated by police, a minister of Fisheries, who has declared pirate fishing vessel war, has been reported to the police for neglecting duties. The vessel has just a small cargo of illegal fish, but more interesting, it has tonnes of different stamps needed to falsify documents, and hovering over all this, an envorinmetal activist hunting for blood, both pirate and minister.

The story did not start when the Russian vessel Antares was seized on Thursday this week. It started a couple of years back. The vessel had been fishing in the North Atlantic for cod. On 24 November last year the Norwegian Directorate of Fishery completed a lengthy, well-documented report on the trawler Antares. The confidential report has, as is normal in Norway, leaked out and is now more or less public. In the report there are copies of numerous documents proving illegal activities.

The vessel M-0149 Antares is owned and operated by the company CF Ponoy headquartered in Murmansk, and was inspected on 15 November, 2006 by the Directorate of Fishery, Finnmark Regional office.

This reports covers high seas transfers to the reefer Mumrinskiy taking place on 11 November last year, unloaded by Mumrinskiy in Eemshaven on 24 July last year, with a high seas transfer on 11 August last year and discharge from Mumrinskiy in Eemshaven on 20 August 2006.

Case No. 1
According to the bill of lading collected by the Directorate of Fishery ,during an inspection on 15 November, 2006 the vessels catch journal number PM-060039/01-fc, page 108, states that the Antares transferred 30,300 kilos of cod and 20,670 kilos of haddock (product weight) to the reefer Mumrinskiy on 11 November, 2006 at position 71 00 N 34 10 E.

According to the bill of lading collected from the Mumrinskiy during an inspection performed by the Coast Guard Vessel Harstad on 15 July, 2006 and “Delivery acceptance note” collected by the Coast Guard Vessel Malene Østervold on 25 October, 2006, the transferred quantity from Antares is noted at 81,180 kilos of cod and 20,670 kilos of haddock (product weight).

This quantity is in accordance with documentation received from the Dutch Control Authorities (AID) on the landing of cargo from the Mumrinskiy in Eemshaven the 24 July, 2006.

Discrepancies in quantity of cod and haddock are shown in a separate table,” writes the Directorate of Fisheries.

Case No. 2
This is the first well-documented case in which it is proven that the Antares has been cheating. A second case is described this way: “According to the bill of lading collected by the Directorate of Fishery during an inspection 15.11.06, and the vessels catch journal with number PM-060039/01-fc, page 132, the Antares transferred 55,740 kilos of cod and 30,900 kilos of haddock (product weight) to the reefer Mumrinskiy 11.08.06 at position 71 00 N 34 10 E."

This quantity is in accordance with bill of lading collected from the reefer Mumrinskiy when inspected by Coast Guard Vessels Malene Østervold the 25 October, 2006.

The bill of lading, cargo manifest, landing declaration, and health certificate received by the Directorate of Fishery from Dutch Control Authorities (AID) shows that the Mumrinskiy unloaded 109,590 kilos of cod and 55,980 kilos of haddock (product weight) from the Antares in Eemshafen 20 August, 2006.

Discrepancies in quantity of cod and haddock is shown in a separate table,” writes the Directorate of Fisheries. The rest of the report is mainly copies of all documentation collected to prove the swindle.

Greenpeace,Norway has argued for the Norwegian authorities to blacklist the Antares, and a large number of vessels that has been proven are operating in the same illegal way. Norway was probably the first country in the world to publicly list identities, IMO-number and other details on vessels they declared as blacklisted.

However, despite the Minister of Fishery and Coastal Affairs Helga Pedersen, in a number of national and international forums, spoke of the success of Norway in fighting illegal fishery in the North-East Atlantic, the list is slowly turning into a political problem. One thing is for vessels to be operating under flags of convenience, often flying the flag of exotic countries, which do not even have an honorary consul in the country, and another thing is to police the activities of vessels flying the flag of a big brother in the East: Russia. Right now Norwegian authorites are like a mouse in the shadow of this, and there are those who believe the reason is a small fish called herring.

The Russian President Vladimir Putin has also declared illegal fishing a serious problem. The whole fishery sector is up for restructuring, however Russia does not like interference from other countries telling them how to clean up their own act.

Norway already has felt the power of Russia when a year and a half ago they had the doors closed on them to export their salmon to Russia for reasons to be speculated upon. They know that similar actions towards the pelagic sector would be creating a much worse crisis. A collapse in herring prices would hit hard at pelagic processors already struggling to make ends meet. Moreover, nobody knows the direction of the new Russian Government.

Chairman of Greenpeace Norway, Truls Gulowsen reacted promptly when the Antares was arrested upon unloading fish and receiving fuel in the city of Kirkenes, close to the Russian border.

Gulowsen explained to FIS.com: “If Norway is blacklisting other vessels for the same breaches of fishery rules, and denying these vessels to be serviced in Norwegian harbours, the same rules must apply to a vessels like the Antares. It is the Directorate of Fisheries, a body controlled under the Department of Fishery and Coastal Affairs structure, that has documented clearly the crimes committed by the Antares”.

He adds that: “The minister has been very active in the work to have in place European rules for blacklisting of pirate vessels. But she is afraid of maintaining these rules in our own harbours. The situation is directly embarrassing."

Gulowsen has now widened his hunt for those who are breaching Norwegian Law to not only cover vessels operating illegally. Thursday he reported the minister to the police, by way of letter in which he explains why the minister is breaching, the law.

The letter reads:

“Report on neglect of public duties:
Greenpeace is reporting the Minister of Fishery and Coastal Affairs for breaching the Law of Responsibility, § 8. The law demands that a member of Government be punished shoud this member, by action or neglect, cause or contribute to a decision made by the Storting (Norwegian Parliament) to not be executed or an action be made in conflict with the decision by the Storting.

The minister has, by: allowing continuous access to fishing operation in the Norwegian Economic Zone and for the use of Norwegian harbours, such as Kirkenes, for landing of fish and exchange of crew by the Russian fishing vessels Antares, and for not blacklisting the vessel on the recently Norwegian IUU-list, acted in breach of the decision made by the Storting.”

For the Police it is a delicate situation to receive a well-documented report concerning a minister acting in breach of a decision made by the Storting. It is difficult to believe the Police would do anything other than drop the case. However, Greenpeace raised the attention necessary and owners of pirate vessels worldwide will now watch the case with great interest. Arrested by the Norwegians, would they have a right to demand equality under the Law?

Foreign politicians irritated over Norway’s so-called heavy-handed response against foreign vessels found guilty of breaching Norwegian and International laws and regulations, will use any chance to attack the Norwegian minister for speaking with a forked tongue.

The minister responded on Thursday afternoon, that a loophole in the Law has made it impossible to blacklist the vessel. The Law was changed in May and the vessel will be blacklisted if caught with illegal fish one more time.

The Antares will probably leave Kirkenes harbour after paying a fine if found guilty of illegal fishing. In the worse case, seen with the eyes of Greenpeace, the vessel leave the harbour unpunished and with a guarantee of no future trouble if it is not caught redhanded.

The Antares has been forgiven as it had the right flag and fished illegal in the right spots. However, Minister Pedersen will have a problem explaining her in-actions to the EU and others who have been pressed into actions by her and the Norwegian Government.

The Ministry of Fishery and Coastal Affairs has decided to fund a new fishery newspaper in Northwest Russia. They feel the information given by Russian media, fishery press included, is not presenting the Norwegian views in a fair way. The ministry will possibly need to publish such PR-publications in Europe too.

Gulowsen of Greenpeace will continue his hunt for pirates and ministers. He probably did not get a hit that was big enough, with the Antares, however he has wounded the international reputation of the minister.

By Terje Engoe
www.fis.com

7/9/2007 - Putting a stop to rotten fish

Russian inspections tightening the grip to protect their growing consumer market. (Photo: FIS)

WEEKEND FEATURE: Putting a stop to rotten fish

RUSSIAN FEDERATION
Friday, September 07, 2007, 23:50 (GMT + 9)


Gone is the time when cheap, low quality goods could be poured into the all-absorbing Russian market. Their authorities have now scared seafood exporters from countries worldwide. Suddenly they have stopped all imports from facilities that are not approved by their own nation's health authorities.

Norwegian salmon exporters were in shock when the Russian Federal Service of Veterinary and Phytoveterinary Surveillance (VPSS), at the beginning of last year, temporarily closed down the import of Norwegian salmon. The official reason was the discovery of salmon contaminated with heavy metals.

Norwegian authorities and the salmon farming industry denied that this could have happened. However, in the background lurked the shadow of contaminated ingredients used in the production of salmon feed. One researcher working for the Norwegian Food Safety Authority publicly gave support to the Russian accusations. She was quickly silenced.

The large feed producer EWOS, which had to withdraw feed from the market due to contamination from cadmium, was able to quickly prove that only one in four consignments of salmon were found to be contaminated by this substance as well as lead traced to feed from their company. So though apparently the problem was not due to their feed, the situation remains a great mystery.

Seafood and dirty fire wood

Upon this apparent slap in the face, the Norwegian salmon industry was in an uproar. The fastest growing large market was suddenly closed off to them. The Norwegian Food Safety Authority this week announced, during a conference for the pelagic industry held in Bergen, that they would intensify the controls over trucks used to transport fish to the markets.

The reality is that competition for transport of chilled or frozen fish is so stiff, there is hardly any money to be made. Transporters are desperately looking for return cargo from markets where salmon and other fish is delivered. In fact, they are usually willing to bring back whatever cargo is available. Trucks transporting salmon to the Baltic are filled with dirty fire wood for the return trip. The industry has not focused on what had been in the trucks transporting the contaminated salmon to Russia.

The largest Norwegian transporter of chilled fish, Johannes Lunde AS, last year lost NOK 26.6 million in a turnover of 161,9 million. Another company controlled by Lunde AS is Nordan Transport & Spedisjon AS had a turnover of NOK 151.2 million and a loss of NOK 14.3 million. These two companies illustrate the tough competition.

Times are tough. Without return cargoes, no chance for these transporters to turn a profit exists. Perhaps Norway would be better off making rules for exactly what content is allowe as return cargo.

Protecting Russian consumers

At least the Russian VPSS has made Norwegian authorities push for improved quality control. Not many believe that Norway has a sub-standard seafood industry. However, there is no reason to believe it is infallible. Neither is there reason to believe that their salmon was contaminated during the transport.

In fact, there are many more reasons to believe that the salmon was in up to norms. But Russian checks showed different results and they reacted in the only correct way. They protected Russian consumers.

It is possible, also, that the Russians were not wrong, however nothing has been proven as yet, and the Norwegian industry prefers to believe contamination is a Chinese issue, not a Norwegian one. Russia, however, knows there is a problem, and as the country moves towards a higher average standard of living, the intensive controls involving exporters in more than 20 countries have been put in place for safeguarding.

Controlling pelagic facilites

This week a group of Russian inspectors leave Norway upon inspecting a number of processing facilities for pelagic fish. Only nine processing facilities for salmon are currently allowed to export to Russia. This limitation gives Russia an easier task in controlling the payment of import duties, and lessens the chance of loop holes in the import declarations to avoid taxes and duties by camouflaging produce.

If it works, or whether the Russian border is porous due to corrupt officials allowing salmon across the border under a herring or other cheap fish disguise is another question. In Moscow they have at least started the process of cleaning up their act, or at least their image.

In the wake of what the Russians are doing to safeguard against being used as a bin for substandard products, the global markets are abuzz with rumours. When one Lithuanian and one Chilean company were denied entry to the Russian market with their seafood products, it was expected that all Chilean exporters would be barred from the Russian market.

This happened with Norwegian salmon exporters, when they were all barred from the Russia market.

The Russian newspapers Kommersant and Vladivostok Times further fanned the flames, writing that the Federal Service of Veterinary and Phytoveterinary Surveillance would prohibit imported fish and fishery products to be effective as of 1 July this year.

Stopped the pangasius import

Russian food safety inspectors arrived to Vietnam in March to conduct an inspection tour of fish processing facilities, fishery ports, and aquaculture facilities, as well as fish markets. The Federal Service of Veterinary and Phytoveterinary Surveillance inspectors were there to ensure that seafood shipments being exported to the Russian market were complying with food hygiene requirements. They quickly found problems, bringing them to put a halt to imports.

The growing export of Vietnamese pangasius to the important Russian market was also stopped. But a few weeks ago some relief was in sight after Russia announced that 11 Vietnamese seafood companies could resume exports to their market. The go-ahead is a result of recent inspections of Vietnamese processing facilities meeting a clean bill of health and necessary compliance to norms. Again, the number of exporters has been reduced giving Russian authorities control.

It was first announced at end of July, by the Vietnam Association of Seafood Exporters and Processors, that the Russian authorities had approved 20 companies. So the number of approved exporters could be increased further.

The 11 Vietnamese seafood companies that were given permission to access the Russian market, according to a report published on FIS.com include: Frozen Food Factory No 7 under Agifish; the Southern Seafood Industrial Co Ltd; Cafatex; Changhua Vietnam; NTACO; the Branch of Ben Tre-based Dong Bang Xanh Co Ltd; Basa Joint Stock Company; Pacific Asia Frozen Seafood Factory under Nam Viet Company; Cho Lon Factory; Factory No 4 under the Ba Ria-Vung Tau Seafood Import-Export Processing Company.

These are all modern facilities able to produce under rigorous quality assurance regimes. In addition the authorities decided that all Vietnamese seafood has to enter Russia via St. Petersburg or the Vladivostok port.

Russia takes control

Russian authorities are clearly showing the world that they are taking control of their market. This may be due to the fact that Russian fleet is a disaster, and if it is to be rebuilt, it can only happen if Russian-caught seafood can compete with seafood imported in accordance with Russian regulations.

Strict rules on imports do not favour Russian producers, but it does bring a halt to cheating and tax evasion, which makes locally produced seafood less competitive.

At the same time Russia is implementing standards, which Europe, the United States, and many other countries have been enforcing for many years.

The licence to export to Russia is a golden opportunity, as the Russian market increases in size. And while the doors are open for top quality seafood, the doors are closing for those who try to make money on exporting rotten fish.

Related articles:

-Secrecy surrounds Russian inspection of pelagic plants
-Russian market not restricted for Chilean salmon producers, says SERNAPESCA
-Russia commences food safety inspection over Vietnamese fishing facilities
-Russian okays 20 Vietnamese firms for standards compliance


By Terje Engoe
www.fis.com