Jury Still Out on Brexit Impact on Seafood Prices
While European Union leaders wrestle with what their economic future will be after Britain's exit, Alaska's fisheries economists are keeping a close watch, and trying to calculate how the political upheaval will impact seafood prices.
"It's speculative, but anything that devalues currency relative to the value of the dollar is not going to be good for the export business," said Tyson Fick, communications director for the Alaska seafood Marketing Institute, in an interview on June 27. ASMI, a quasi-state entity with a board representative of the state's seafood industry, promotes the state's abundant seafood all over the world.
"Heading into this year, all the things that made 2015 difficult seemed to be turning around, including currency value," Fick said. The yen is still stronger, but seeing the pound and euro take a beating is certainly concerning, he said.
Meanwhile, in the Lower Yukon community of Emmonak in late June, buyers from Great Britain were back again, visiting facilities at Kwik'Pak Fisheries, a subsidiary of the Yukon Delta Fisheries Development Association, one of six community development quota entities whose role is to boost rural regional economies.
The run of oil rich Yukon River chum salmon came in early and abundant this year, and some 200 residents of Lower Yukon Villages began dip netting for chums on June 7, using that harvesting method to avoid taking any king salmon, because of an international treaty that requires that a certain number of Yukon kings reach the Canadian border. By using dip nets, any king salmon caught can be quickly released.
Dip netting in about a dozen 12-hour periods continued until Alaska Department of Fish and Game biologists determined that the commercial fishery could begin using drift nets, but only for four-hour periods.
"We are at about double where we were a year ago," said Jack Schultheis, general manager of Kwik'Pak Fisheries, and chairman of the board of ASMI. 'The weather has been nice, really kind of sunny. It's been mostly a very warm summer."
Along with his other duties, including overseeing Kwik'Pak's local student employment project involving some 130 youths, Schultheis was busy engaging with buyers from the UK who come to Emmonak every year to see first hand how the Yukon chums are harvested and processed.
"We have customers from the UK here right now and they are very happy with it," he said, in a telephone interview from Emmonak on June 27.
How will Kwik'Pak's markets in the UK and elsewhere in Europe be affected by the decision of UK citizens to exit the European Union?
Schultheis isn't sure, although he acknowledges that the economics of the British pound have a huge influence on markets.
In a worst-case scenario, we will preserve that market," he said. "We have too much invested in this market. Markets go up and down all the time.
"We look at our customers as partners with us, so we don't change sides just because someone pays us a nickel more," Schultheis said. "We have long term relationships with our customers. We are not market changers. They understand what we are about and the value of Yukon fish."
ASMI noted in its draft copy that the UK is a major market for Alaska seafood –Alaska salmon in particular, but also pollock and cod. Last year the UK imported more than $90 million worth of Alaska seafood. Canned salmon makes up about 70 percent of Alaska exports to the UK, which is the largest export market for canned Alaska salmon.
For the short term, the economics and volatility of the market as a result of Brexit are uncertain, and the impacts could include disruption of long-standing business arrangements, the ASMI report said.
The report also notes that about 38 percent of food eaten in the UK is imported, and for the short term the economic consequences of Brexit will impact consumer prosperity, confidence and demand.
Mid-term, it will take two years or more to separate the UK from the EU, and the impact on food policy, tariffs, and trade negotiations are unknown, and for the long term, dissension within the UK is likely, the report said.
The most immediate impact of Britain's exit from the EU will be its impact on currency markets, ASMI's report said.
The vote to exit the EU has caused some of the largest currency movements in decades. Unpredictable markets lead investors to the relative safety of US government bonds, which causes the value of the dollar, which was already strong before the vote, to rise.
Following the vote, the euro and the pound were down significantly against the US dollar. A strong US dollar presents a challenge for exporters, as it makes US products relatively more expensive overseas.
Roe, surimi, sockeye salmon, cod and more in Japan; salmon, pollock and cod in the EU; and salmon, canned salmon, pollock and cod in the UK, are all major markets for Alaska seafood. Prices and overall exports have already been hurt by the strength of the US dollar, ASMI noted.
What happens next is still to be determined, but the good news, said Fick, "is that we have been a trading partner with the UK and EU for a long time, and we don't expect that to change."