There has been little improvement in the market for farmed seabass and seabream so far in 2019, with oversupply and low prices prevailing. However, expectations for significantly lower juvenile stocking this year suggest we may be approaching the end of the bust stage of the now familiar boom-andbust cycle.

Production

After seven years of consistent and rapid growth in total production levels, the Mediterranean seabass and seabream sector is now finally beginning to decelerate. The plunge in prices that marks an oversupplied market has inflicted widespread damage to aquaculture companies, particularly in Greece, and the incentive to increase volumes further has completely disappeared. Total supply of farmed seabass is expected to drop by around 2–3 percent in 2019, while seabream volumes will likely stay close to 2018 levels.

Greece is expected to account for around 21 percent of total seabass supply in 2019 and 25 percent of seabream harvests. The equivalent shares for Turkey are forecast to be around 46 percent and 30 percent, respectively. The next largest European supplier is Spain, which contributes around an 8 percent share of total production for both species. Egypt is a large producer, accounting for 13 percent of seabass harvests and 14 percent of seabream, but the vast majority of its production is directed to the domestic market. There are reports of sector investment in Middle Eastern countries such as Oman, but it will be some time before these new entrants can supply meaningful volumes.

In Turkey, the largest contributor to harvest increases in recent times, unhealthy inflation and a heavy debt burden is now discouraging further investment and business planning is increasingly more conservative. At the same time, deteriorating market conditions are acting as a catalyst for consolidation across the sector.

Major industry restructuring is still ongoing in Greece, as efforts continue to push through the necessary deals to create a new aquaculture giant incorporating two of the largest seabass and seabream companies, Nireus and Selonda. The European Commission (EC)’s competition regulators will only allow the proposed merger to go ahead if the new entity first sells a number of assets, including farms producing 10 000 tonnes and hatcheries with 50 million smolt capacity. Observers have questioned whether the potential new owner of these relatively limited assets will be able to compete effectively in Greece and in the wider market, but others point to the necessity of large-scale consolidation if the Greek industry is going to be able to compete with Turkish companies that can offer a cheaper product and have access to a more diversified range of export markets.

The need to access differentiated, value-added segments amidst difficult market conditions has generated strong demand for certification at farm level, and the Aquaculture Stewardship Council (ASC)’s newly developed standard for seabass, seabream and meagre is proving to be popular. In June of this year, two farms in Greece and two in Turkey became the first in the world to receive the new certification. A significant number of additional farms across the Mediterranean are currently awaiting audits. The standard sets out best farming practices that are the result of multi-stakeholder engagement and identifies the key performance indicators against which compliance will be measured.

Markets

Low prices now seem to be negatively affecting campaigns to expand into new markets, as the risk appetite of stakeholders all along the supply chain is now much reduced. This is evident even in Turkey, which has been the industry leader in terms of developing alternative export destinations such as the United States of America and Lebanon. The Turkish domestic market is suffering from the same economic difficulties that are impacting producers, eroding an additional source of demand. The combined effect of these factors has seen more seabass and seabream directed to the traditional large markets in the EU28, particularly Italy. Already overloaded wholesale markets have been hit with even more fish and prices have suffered as a result.

Lower farm gate prices can be counteracted to an extent by differentiation and value addition, and the seabass and seabream industry is pursuing three main strategies to achieve this. The first is branding with a focus on origin and this the favoured approach of the Greek sector. Greek fish already sells at a premium to Turkish product due to its relatively better image amongst many European consumers, particularly in France, and this is an advantage that Greek stakeholders urgently want to preserve.

Accordingly, one of the objectives behind the recent establishment of the Hellenic Aquaculture Producers Organization (HAPO) was the better coordination of branding development and marketing campaigns that emphasise Greek origin. The second strategy is value addition through processing and here it is Turkey that has been most proactive in their efforts, targeting markets in Northern Europe with increasing quantities of fillets. The third strategy is certification under various sustainability standards such as ASC or Friend of the Sea. A growing number of Mediterranean producers are actively seeking inclusion in these ecolabelling schemes, which communicate to the consumer the company’s adherence to environmental, animal welfare, safety and social governance standards.

Trade

Greece exported seabass and seabream worth almost EUR 100 million in the first three months of 2019, marking a drop of around 5 percent in value compared with the previous year, despite a 6 percent increase in total export volume. Increased Turkish export volumes in the first quarter of 2019 were primarily destined for the EU28, with Italy, Greece and the Netherlands as the top three importers of Turkish fish.

Imports of Turkish-origin seabream by Greece have been increasing fast, with the total value of EUR 5.9 million imported in the first quarter representing a 27 percent increase relative to the same period last year. This suggests that resistance to the more attractive price level is weakening fast in the Greek domestic market. Italian imports of Turkish fish also increased significantly in the same period, up by 43 percent volume terms to almost 4 000 tonnes, helping Italy increase imports from all origins by 10 percent. However, lower prices saw a marginal drop in the value of Italy’s imports over this same period.

Prices

Prices of farmed seabass and farmed seabream have diverged somewhat in 2019, with the latter species faring considerably better. The most recent prices for seabass were EUR 3.60 per kg for 300–450g Greek fish on the Italian market in July, while prices for similar-sized seabream were approximately on a par with 2018 prices for the same month at EUR 4.40 per kg. This is a recovery for seabream compared with prices in the first quarter, but it marks a further slide for seabass. Export prices (FOB) for Greek, Turkish and Spanish seabream and seabass averaged at EUR 4.18 and EUR 3.86 per kg respectively in the first quarter of 2019.

Outlook

According to market research firm Kontali, preliminary estimates for juvenile production in 2019 point to a 24 percent drop for seabass juveniles and 30 percent decline for seabream. Particularly sharp declines are observed for seabream juvenile production in Italy and France, 50 percent down compared with 2018. Although these are early estimates, they suggest that the sector as a whole is looking to tighten supply significantly in order to lift prices once again.

Indeed, these levels of juvenile production, if accurate, would be the lowest since 2010 and would translate into a substantial decline in harvests over the next 2 years. This pattern has been observed before and typically marks the start of a boom period when the seabass and seabream sector cycles back into its profitable phase on the back of falling volumes and climbing prices. If this is indeed the start of the uptrend, coordinated and proactive efforts by all stakeholders will be needed to lock in and build on market gains while at the same time ensuring controlled adjustment of supply growth to balance the market without another price crash.