Robert Curtotti, ABARES, Part 1- 'Australian fisheries - outlook and economic indicators'

Uploaded by Abaresoutlook2011 on 28.03.2011


So, as we know the fisheries industry has been doing it tough over the
last decade. prices have been down, costs are up
and profitability, as a consequence, has been suffering.
Today, I'm going to talk about three things surrounding this general theme.
First: the global trends affecting fisheries and what's driving these.
Then: the medium term outlook for the sector. And finally, I'll provide some useful
indicators for monitoring the economic performance of Australian fisheries.
Economic indicators are not only applicable to Commonwealth fisheries, to which
- I'll be showing them today - but also to the fishery sector in general.
... So, on the plus side
a rising world population is driving up seafood consumption
Perhaps less well known is that consumption
at a per person level is also rising. So, changing demographics is what
is driving this trend. Countries are getting richer, urbanisation is increasing
and age profiles are changing - all of which together
are leading to changes in comsumer preferences. As you can
see here, most consumption is in developing countries, where the population
is greatest. In these countries the seafood consumption
mix is changing towards greater consumption of processed products.
As is the case in developed countries. Since 2000
the share of processed fisheries products in these countries has risen from 36%
to 41% - so this trend has some way to go yet.
... One last thing about
consumption. There's a big difference in the
importance fish makes in diets across countries. So in our key
exports markets of Japan, United States and Europe, fish consumption is
higher than the world average: roughly around 20kg per person.
And just under 60kg in Japan; which is quite an important for us.
This contrasts with developing countries, where the global average is more
around 14kg per person.
Given the rise in population and rising consumption, it's no surprise that
global production is also rising. Here though, there's a story to tell
about aquaculture. Aquaculture is essentially filling a gap from a stalling of wild catch
production - with its share increasing over time and sitting
now at around 37%. This of course
is increasing competition for exporters to the region, particularly exporters
of aquacultural produced goods such as crustaceous species.
As well known to Australian prawn exporters, lower prices in Asia from competition
with aquaculture produced forms is the norm nowadays - and this competition
is also felt in the domestic market from our own aquaculture sector.
This I'll touch on a little bit later.
... So now
looking at trade. Turns out that 38% of
fishery production is traded across international borders. This of course
is good news for Australian exporters
... Asia continues to be a huge market for most of our most valuable
species - like rock lobster, abalone and tuna.
Currently it's the fastest growing for imported product - but this market tends to
import a lot from itself. North America on the other hand
is a fairly mature market with little growth occurring. But together, these
regions give Australian producers plenty of choice, with trade for most
categories of fisheries production increasing. However, as in the past
our regional export focus is likely to remain on Asia.
... Challenging to the local industry
over the last decade has been a trend decline in global prices of
fisheries products. The Australian wild catch prawn industry has
experienced the brunt of this decline - with the decline in the world price of
crustaceans directly linked to increased aquaculture production in Asia.
In contrast, the international price of
molluscs and fish species has been more stable.
So that's pretty much in a nutshell what's been happening globally, so now I'll talk a little
about the local scene ... Production
volumes - and that's not what's shown here - this is values - production volumes have fallen
slightly in the last decade but the mix of species produced in Australia has
changed. Production of some high value species, like wild caught prawns
rock lobster and tuna is down - while aquaculture's productions
are increasing its share of the mix with a sustained rise in the production of salmon and
tuna. It's different for production value though.
There has been a significant trend decline in value over time.
The key driver here has been the appreciation of the $A from around
50c in 200/2001 to around about
parity nowadays - and the negative impact that this has on beach prices for the
industry. Beach prices have fallen most for our export species
and those where international aquaculture competition is greatest.
This figure here gives us a closer look
- in general beach prices are down
most for prawns and tuna. In contrast, beach prices for
rock lobster have been rising since 2004/5 as a result of
tighter supply and a strong Asian demand for live lobster.
... At a species level, the impact of
both price and production changes, of course, impacts on value.
Lower prices have essentially halved earnings from prawns
in the last ten years. However, for rock lobster and tuna
lower production volumes has been a key driver, with the volumes of these species
down by around 60% over the decade.
In contrast, the rise of salmon production volume
has increased fin fish species production value.
... On the trade front,
Australia is a net importer of fisheries products in volume
and value terms now. This reflects the appreciation
of the $A, which has made exports less competitive and increased
import competition in our local market. Also, changing demographics
in Australia - with Australia's rising population the change in the mix of the population -
is increasing seafood consumption.
Imports to date are mainly sourced from New Zealand and Thailand but imports
from Vietnam and China are increasing also.
Now looking at the trade mix. We export
mainly high value products, like rock lobster, pearls, abalone and tuna
- with rock lobster remaining our most valuable export.
In contrast, Australia imports lower value products, like frozen fillets and canned
products ...
... Looking at the
destination of our major exports; there's an interesting story here. Over half our
exports are now sent to Hong Kong, which is a big change on a decade ago -
when it was Japan which was our most important export
destination in terms of value.
This trend towards Hong Kong being an important market is unlikely change over the outlook
period ...
So, given all this - what is the outlook for
fisheries production? In the past this outlook
has been strongly influenced by exchange rate movements, as shown in this figure.
So, given the assumed appreciation of the $A
- which we heard about this morning over the medium term - the outlook is for some modest
improvement in unit export prices and beach prices.
Given this, Australia's value of fisheries production is forecast
to steadily rise in real terms over the period to 2015/16.
This is quite an important point because this contrasts dramatically with the period
of decline that the industry has just come through.
... So while the boost to earnings from a lower dollar is of course
good news for the industry, there are other factors out there that will keep profitability
under pressure. Higher fuel prices
and tight labour markets are unlikely to ease up any time soon.
Competitive pressures from producing regions outside Australia will of course continue.
These are things we cannot change. So given this
it's important that we focus on areas where we can make a difference
One area is management. management of fisheries shold be as cost effective
as possible - and fissuring effort applied fisheries needs to be consistent
for achieving maximum economic returns from the catch.
This is the so-called economic objective of fisheries management - and this objective
is increasingly being incorporated in management of fisheries
across Australia ...
To ensure that maximising returns is being met, measurement
tools are obviously needed. So, gross value of fisheries production
- what we have been looking at up until now - is of course one such tool. But apart
from helping us to monitor trends of activity over time it tells us very little
about the economic returns in the industry and how these returns are changing.
So other indicators can help you. For example,
direct measurement of economic returns through industry surveys - a thing that Abares
does quite habitually for Commonwealth fisheries.
Profitability indicators and measuring the factors that contribute most to profitability
... In the next few slides i will show you some examples of these -
all of which come from the Commonwealth ... sector and the southern and
eastern scale fish fishery.
A fishery that closely monitored by Abares. I'll briefly take
you through each but before that I'll give you just a few facts about the fishery.
... So this is the area we're talking about.
Off the coast of south east Australia; an area extending from Barranjo Point, just
north of Sydney, around Tasmania to Jervis Bay in South Australia.
The Commonwealth [ trawl ] sector is one of the largest commonwealth fisheries
supplying a range of fresh fish to the domestic market, both in Sydney and Melbourne.
The main fishing method is bottom trawling, so fuel input costs are important.
They make up a high proportion of operating costs.
A range of fin fish species are caught, with the main species being blue grenadier
and tiger flathead currently - but this of course changes over time.
The red areas in the map show where fishing activity is greatest, with the main
areas being located off Eden in NSW and Lake's Entrance
and Portland in Victoria. This sector
has been through an extended period of restructuring, following the introduction of total
allowable catch limits in the sector in 2001 and the completion of the buyback
of commonwealth licences in 2006 - which reduced fishing concessions
... from around 90 to 52 in 2007/08.
So here we can see the economic returns of a fishery mapped out
out over a number of years - and it's an indicator that Abares tracks every
two years. As can seen here, low - in fact negative
- economic returns for a string of years were experienced
early in the last decade. Returns have recovered somewhat
following a period structural adjustment in the late 2000s.
So this particular indicator is important for monitoring trends in
economic performance over time - which is important to know but it gives little
insight as to why the trends are changing.
This indicator is also important because it provides the base survey data for
the next two indicators that I'll share with you today.
It's important to note that these indicators are just examples of what's possible.