Economic instability and international competition has put the U.S. catfish industry at a crossroads, according to one Alabama economist.

“Up to now, the catfish industry has really been an its infant stage. But maybe the industry is making a transition from a baby to a teenager or an adult,” says Jerry Crews, Extension economist with Auburn University in Auburn, Ala. “Efficient producers with reasonable equity may ride the storm. Others will be tested or go out of business.”

Some economists suggest the catfish industry may be on a 10-year cycle. Supporting that theory are price drops below 60 cents in 1982, 1992 and 2002. “Annual prices for 2002 could be the lowest in the last 20 years with projections averaging between 56 and 57 cents per pound, and I look for the 2002-03 season to be even worse,” Crews says.

“With producer and processor inventories up in 2001, prices received by farmers were 10 cents below 2000 levels,” Crews says. “Typically price rallies begin in late spring, but in 2001 the prices never had a spurt, and then late summer and fall prices crashed to the lowest levels since 1992. With a slowing economy and an acceleration in import volume, the industry is under the worst pressure it's seen in 25 years. The 2002 average price for catfish could be in the range of 56 to 57 cents per pound.”

Combining stagnant processor sales with depressed prices, Crews expects farmgate receipts for catfish producers will be down $35 million from last year, to approximately $350 million for 2002. “In the last two years, total producer revenue has dropped almost $100 million,” he says.

The catfish industry, Crews says, is currently wrestling with several issues, including domestic and international competition, an economy slowdown, and an increasing cost of production.

Competition from imports is a relatively new phenomenon, according to Crews. Imports supplied 1 to 3 percent of the U.S. frozen fillet market in each of the years between 1995 and 1999. Then, in what Crews calls the beginning of a dramatic shift, imported fillets accounted for more than 6 percent of the U.S. frozen fillet market in 2000. That rise in imports has continued, and in 2001, the percent of imported fillets jumped to over 13 percent. “That's an increase of more than 100 percent in just one year, with 95 percent of the imported fish coming from Vietnam,” he says.

A temporary, one-year ban signed into law last year prohibited the U.S. Food and Drug Administration from allowing any catfish to be imported into the U.S. market labeled as “catfish” unless it comes from the North American Ictaluridae family. The restriction expired Sept. 30, 2002.

Imports of fish from Vietnam targeted to compete with U.S. farm-raised catfish present a real threat to the domestic industry, according to a preliminary finding by the International Trade Commission.

The Department of Commerce is expected to issue a final determination between April and June of 2003 in the antidumping case filed by the Catfish Farmers of America and eight processors. If the catfish industry is successful, Crews says, the International Trade Commission could require Vietnam fish exporters to pay high tariffs and limit imports to the United States.

“With a forecast of a flat domestic economy and a continuing volume of imports, the demand for U.S. catfish from the restaurant and food service sectors does not look rosy,” Crews says. “This translates into decreased away-from-home eating which provides strong support for catfish and seafood sales. This market is critical to the industry because this sector accounts for over two-thirds of all seafood sales.”

Further impacting industry profitability is the producer's cost of production. Cost of production is different for each catfish producer, according to Crews. “No two situations will be the same. From the road, two operations could appear to be identical. However, one could be highly leveraged, while the other could be virtually debt-free. This single factor could drastically change their approach to risk management, especially in the face of low market prices.”

While the lower-debt producer may be able to take more risk in terms of stocking density, feeding and aeration operations, the other producer has to be more conservative. “Management is definitely a moving target,” he says.

Under the current economic climate, many producers are re-evaluating their production practices, and some are looking into “modular” components, such as separating by crops, and improved genetic stocks.

Another aspect of production weighing heavily on producers' bottom lines is catfish feed. “Over 50 percent of cash costs are tied up in feed, and every $10-per-ton change in feed cost equates to about one cent per pound in breakeven costs,” Crews says.

“Based on the 2002-03 corn and soybean forecasts, feed costs could go up substantially. Feed prices have been moderate since 1998, which encouraged producers to increase feeding intensity. With lower selling prices, higher feed costs and marketable weights inching up, many producers will rethink their feeding strategies.”


e-mail: dmuzzi@primediabusiness.com.