October 28, 2003
Expanding Total Fish Landings in Portugal 2003
Executive Summary 
Due to resource management efforts, Portugal's total fish landings are expected to expand during 2003, to an estimated 210,000 Mt; about 32 pct will consist in sardines and eight pct, Atlantic horse mackerel. About a fifth of total fish landings will be caught in international waters. The total 2004 fish harvest is forecast at 215,000 Mt, moderately above 2003 levels under the effects of improved fish stock management practices. Local fishing levels are expected to remain mostly stable over the next three-to-five years. Reduced investment supports from the EU will crimp the fishing fleet. In addition, the opening of Portuguese waters in the 12-to-200 mile zone to other EU fishermen in 2004 will prevent total fish landings from increasing, particularly for certain migratory species.
Total Portuguese seafood imports are expected to come down moderately during 2003 to about 442,000 Mt, fresh weight basis, due to a reduction in purchases of cured and canned fish. Total fresh/frozen fish imports will tend to be up though, due to an expansion in fish processing activities -- largely encouraged by the application of the EU import tariff suspension regime to key processing fish types.
Benefiting from a three pct import tariff, imports of frozen cod for processing had a 33 pct expansion during the first half of 2003 relative to the same period of 2002, while other processing fish types were also up. At the same time, salted wet cod imports were down by 20 pct, displaced both by the larger frozen cod processing activity, and by higher imports of salted dry cod brought in from other EU countries. In addition to fish for processing, most categories that have been expanding in 2003 include frozen and fresh hake (+ 11 and 7 pct respectively), and fresh squid/loligo (+ 14 pct).
Total fish imports are likely to suffer another moderate reduction in 2004. Three-to-five year trends will largely depend upon the effects of the new EU fishing policies upon Portuguese fish production. However, processing fish types will tend to continue to expand, in light of local consumption patterns and the difficulties of Portuguese fishermen accessing resources of certain traditional species like cod, now subject to particularly tight production control rules. At the same time, certain popular species will continue to be imported to satisfy a strong local demand, including squid/loligo, monkfish and salmon, among others.
Total seafood imports from the U.S. are expected to be down in 2003, with the local statistics office (INE) reporting a 20 pct reduction in total seafood imports from the U.S. during the first semester of the current year. This reduction was due almost entirely to the lower salted wet cod segment, which was affected by changes in local industry use trends, and by unfavorable price ratios of salted wet cod with frozen processing cod. The U.S. is likely to recover market share in 2004 if the dollar rate does not appreciate significantly against the euro, given a strong local demand for fish types of which the U.S. is an accredited supplier, including frozen cod, frozen Alaska salmon, squid and monkfish.
Portuguese groundfish production for 2002 has been raised to reflect new information published by the Portuguese official statistics office (INE). Leading species in the total were: Greenland halibut (4,319 Mt), cod (3,630 Mt), hake (2,557 Mt), and white hake (3,647 Mt). Groundfish here includes fresh/frozen cod, hake, whiting, pollock, haddock and halibut.
Total 2003 groundfish production is expected to come down moderately from previous year levels primarily due to hake stocks-related issues. The national fisheries directorate (DGPA) reports a 28 pct reduction in first quarter 2003 hake catch relative to first quarter 2002 levels, and is currently reviewing a special program to enable hake stocks to recover. The cod catch is expected to remain basically stable at the level of EU-set Portuguese Total Allowed Catch (TAC). Note that under current fishing conditions, cod is basically caught under the Portuguese TAC in Norwegian waters, as NAFO cod TACs are presently frozen.
Due to current hake stock conditions, the Portuguese groundfish catch is forecasted to suffer another reduction in 2004. While the new EU Fisheries Policy is not expected to have significant effects on Portuguese groundfish production in the near term, it may have an effect in the long-term. For more details on the Reform, please see the "Policy" section.
Quality of fresh groundfish is generally considered high, especially for fresh hake for retail sale. In the case of frozen groundfish, quality is considered variable due primarily to different transportation and storage conditions aboard fishing vessels, although they are generally improving due to continuous investments in fleet renovation. In health and sanitary terms, Portuguese seafood is subject to EU standards and regulations.
The Portuguese market is particularly sensitive to cod fish quality, due to specific standards related to the tradition of salted dry cod consumed in the country. Atlantic cod (Gadus morhua) is considered superior in flavor and texture relative to Pacific cod (Gadus macrocephalus). This relates to intrinsic differences in properties of these two sub-species. Further, Pacific cod is reported to be frequently damaged by parasites, which affects the fish both in edible property terms as well as in what concerns visual attractiveness and appeal of the end-product (primarily salted dry cod) at retail. The larger, thicker codfish are rated as higher-quality and receive price premiums. Pollock is viewed as a cheap, lower-quality cod substitute, primarily used for processing. Fresh silver hake imported by air from the United States is considered to be of high quality.
Consumption of groundfish is expected to grow in 2003 due to an expansion in frozen fish use for processing. This results primarily from comparative cost advantages of using frozen cod for processing into salted dry cod instead of salted wet cod. Further, use of other groundfish for processing may undergo moderate expansion as a consequence of diversification trends of the local industry, including haddock, which is used for mincing. Groundfish use for home consumption is expected to remain mostly stagnant. The price competitiveness of meat products and ready-to-cook meals, in addition to other fish types, tends to prevent domestic groundfish use from growing. Portuguese groundfish consumption is forecast to expand moderately in 2004 as well, provided that the price relationship between imported frozen cod and salted wet cod does not deteriorate.
Portuguese 2003 groundfish imports are estimated to expand significantly relative to CY-2002 levels due to an increase in frozen cod imported for processing. According to INE, frozen product accounted for virtually all groundfish imports during the first semester of 2003. This category had a twenty pct increase during that period compared to the first half 2002. Frozen cod for processing (which accounts for over 60 pct of total frozen groundfish), had a 33 pct increase over first semester 2002 imports. During the same period, frozen hake (36 pct of total frozen groundfish) increased eleven pct over first semester 2002 levels. Fresh groundfish imports are small and consist mostly of hake; imports of this species showed a 7 pct increase during the first half of 2003 compared to 2002 levels. As a consequence of current production trends, total groundfish imports will tend to expand in 2004. Frozen cod for processing will tend to remain the leading expanding segment. Both fresh and frozen hake imports will also tend to grow due to the current problems with hake stocks in national waters.
Portuguese groundfish imports from the U.S. have been off in 2003 due to a slowdown in local demand for pollock. According to INE, frozen cod accounted for 91 pct of total first semester 2003 groundfish imports from the U.S. (70 pct during first semester of 2002), the remaining being accounted for by pollock. However, favored by the lower dollar rate against the euro, frozen cod imports from the U.S. expanded by 15 pct during the first semester of 2003 over first semester 2002 levels. U.S. frozen cod imports from the U.S. are likely to continue to grow in 2004, provided that the dollar does not appreciate significantly against the euro. It is important to note that the weak dollar also favors other cod origins using the dollar as reference currency, especially Russia. Russian cod is considered a direct U.S. competitor, as it is offered in smaller sizes (one to one-and-a-half kilos) and benefits from shorter shipping distances. Imports of pollock will tend to remain weak, being displaced by additional quantities of processing cod.
Trade Matrices for total Groundfish during Calendar Years 2001 and 2002, as well as for Jan-June 2002 and 2003 are given below.
Portuguese resource management in national and international waters is coordinated by the EU, which also negotiates fishing quotas on Portugal's behalf. All international fishing agreements, including Portuguese bilateral accords, are negotiated by the EU.
As a consequence of the EU Fisheries policy reform, species with conservation problems are to be managed through special EU-set recovery plans, which apply in addition to the TAC regime. The EU has already developed plans for Northern Atlantic hake and cod and is preparing another for hake populations in Portuguese waters. The revision of the EU fisheries policy -- contained in EU Regulation 2369/02 - will restrict Portuguese catches in the medium-term, due to accrued fishing limitations related to fish stocks management, as well as new constraints to EU-backed investment subsidization programs. For a discussion of the impact of the Fisheries Reform in Portugal, please see the "Policy" section under "Total Edible Fishery Products" at the end of Report. Under the same section, there is a listing of the more significant groundfish TACs set for Portugal for 2003.
Current groundfish demand trends, and the EU tariff suspension regime for a series of processing fish types create an attractive potential for increased U.S. cod sales here. In addition to cod, pollock and halibut will tend to remain interesting niche markets, while silver hake can profit from the current slowdown in local hake production. Pacific pollock will be in demand as a cheap replacement for salted dry cod for mincing and for the preparation of pre-cooked products. Frozen halibut is primarily used for mincing.
Production (Salted Wet Cod)
Portuguese 2003 salted wet cod production is expected to increase relative to 2002 levels as a consequence of an intensification of frozen cod use for processing, as already indicated under "Groundfish." Due to the scarcity of cod resources, salted wet cod production from national catch is minimal, consisting in a roughly unchanged 50 pct share of cod harvested by Portuguese fishermen which is not immediately exported. This forces the local industry of cod salting and drying to rely almost entirely upon the international market for raw material sourcing. National wet salted cod production is forecasted to go up again in 2004, given the projected increase in domestic demand levels, and the fact that under the current EU tariff regime, wet salted cod processing generally yields higher margins than just the drying of the imported salted cod, n.d..
Portuguese total consumption of salted wet cod is estimated to suffer some reduction during CY-2003 due to trend for salted wet cod to be displaced with directly imported salted dry cod. Total wet salted cod use is forecasted to decline moderately during 2004, if direct imports of salted dry cod should continue to rise.
Salted wet cod is utilized to dry and produce the traditional salted dry cod which is locally used in an infinite number of culinary applications. Though a roughly stable product, salted dry cod use suffered a considerable reduction in past years under the competition of meat products -- including poultry meat and pork -- as well as a series of new food products. Though mostly stable at present, end-consumer use of salted dry cod is considered liable to slide down by around one pct during the current year. In order to modernize and increase competitiveness, the local industry has been increasing the production of pre-wetted cod -- derived from salted dry cod, which is wetted and frozen -- which seeks to address the easy-to-use requirements of current days domestic cooking. Industry sources report that pre-wetted frozen cod presently accounts for roughly thirty percent of total cod consumed at retail.
Salted wet cod imports are estimated to come down somewhat in 2003 relative to 2002 levels, due to the attractiveness of frozen cod processing (see "Groundfish, Whole, Eviscerated"), while larger salted dry cod imports from other EU countries affected the cod processing industry. Another moderate decline in local salted wet is expected in 2004, if the industry continues to process larger quantities of frozen cod as presently expected.
Direct salted wet cod imports from the United States are expected to be down during 2003, with first semester 2003 imports revealing a decline proportionate to that of the total salted wet cod import total. Another proportionate reduction in salted wet cod imports from the U.S. is anticipated for 2004.
INE reports that national CY-2002 salted dry cod imports totaled 81,000 Mt (fresh weight basis), 18 pct over CY-2001 levels, representing 114 Million Euros in trade value. During the first semester of 2003, Portugal's salted dry cod volume imports rose another 14 pct from first semester 2002 levels. First semester dry cod imports were led by Denmark (36 pct of total), Norway (28 pct) Russia (11 pct) and Spain (10 pct).
Salted wet cod has favorable market prospects in Portugal given the current high industry dependency upon imports and presently favorable dollar rates. Further, industry contacts often indicate that U.S. wet salted cod is a more reliable product quality-wise than frozen processing cod.
Due to lack of local buyer's knowledge of the U.S. cod industry and long shipping distances, U.S. fish exporters need to cater to this market, namely by attending local food shows to increase exposure to local buyers, and by maintaining high product quality standards. AGOFFICE strongly recommends, among others, regular participation in the "Conxemar" seafood show, which is held yearly during the first week of October in Vigo, located north of Aveiro, Portugal's cod "capital", where the cod processing industry is concentrated.
Production (Total Fish Landings)
Total 2002 fish landings have been revised to reflect newly published production data by the national statistics office (INE). Sardines account for 32 pct of total 2002 fish landings, and Atlantic horse mackerel for eight pct. A long list of fishes caught in reduced quantities in national and international waters follow.
Total fish landings are estimated to expand moderately in 2003 due to the effects of improved stocks for critical species, including sardines, the chief species caught off the Portuguese coast. This is confirmed by preliminary production data from the general fisheries directorate (DGPA), according to which local first quarter 2003 fish landings rose by eleven pct relative to first quarter 2002 levels.
Favorable production trends related to adequate fish stocks management practices for most species are expected to enable Portuguese total fish landings to rise moderately in 2004. However, the 2004 fish crop expansion will be contained by new production constraints, among which the access of the Spanish fleet to Portuguese waters.
This development, derived from the Common EU Fisheries Policy is to affect catch of certain fishes found between 12 and 200 miles off the Portuguese coast, namely swordfish and tuna fish. Total impact of the "comunitarization" of Portuguese waters is not believed to be nearly as significant as it might seem due to water access terms to be set, which among others, will imply specific activity control rules for newcomers. Further, the bulk of the fisheries resources off the Portuguese coast are concentrated within the twelve-mile limit.
Virtually all of the local fish catch is sold fresh, with only about 30,000 tons being frozen, either aboard the vessels or on land by the local fish processing industry. Canned fish production is expected to increase moderately in 2003 due to the larger catch of fish traditionally used for canning, namely sardines, tuna fish and chub mackerel. Cured fish production from Portuguese harvested fish tends to be stable. Quality of both fresh and frozen fish sold in the market is considered good and in compliance with EU health directives and regulations.
The national statistics office (INE) reports that the Portuguese fishing fleet totaled 10,548 vessels in 2002 (10,532 in 2001) with 110,586 tons (110,072 tons in 2001). Vessels under 5 tons accounted for 86 pct of the fleet number and 13 pct of tonnage. There are 178 vessels fishing in international waters, of which 119 are registered in the Azores.
Portuguese consumption of total edible fishery products is estimated to expand in 2003 in association with the larger domestic fish catch and with a relative price stability of fish products. The national statistics office reports that during the first quarter of 2003, the average consumer price index for seafood products rose by 2.6 pct relative to first quarter 2002 levels, which compares favorably against a national inflation of 4 pct and a 2.3 pct increase in average food prices. Another moderate expansion in domestic total seafood consumption is expected for 2004 due to the positive outlook of the 2004 catch.
Total volume of seafood imports in 2003 is estimated to come down moderately relative to 2002 levels. INE reports that during the first semester of 2003, Portuguese fresh/frozen seafood imports were up by 2.3 pct, whereas cured fish dropped by 6 pct and canned seafood by 42.4 pct. This largely reflects trade developments in the processing cod business, with a trend for frozen cod to displace salted wet cod as raw material for salted dry cod production. In addition to frozen processing cod and salted dry cod, a series of fish types were imported in larger quantities during the first half of 2003. These include live/fresh squid and loligo (14 pct up relative to first semester 2002 levels), fresh monkfish (44 pct up) and frozen monkfish (13 pct up). Another moderate reduction in total seafood imports is forecasted for 2004 due to both the salted wet cod and canned seafood segments.
Total seafood imports from the U.S. will tend to be down during 2003, with INE reporting a 20 pct reduction in U.S. trade into Portugal during the first semester 2003 against first semester 2002 levels. This poor performance is primarily due to the lower wet cod sale caused by a demand slowdown. Other than frozen processing cod, the U.S. managed to increase moderately first semester 2003 frozen salmon exports into Portugal, even when faced with a 33 pct reduction in total frozen salmon imports. Other traditional species have been affected by the commercial aggressiveness of its EU competitors or alleged trade problems. Loligo imports from the U.S. in particular have been affected by the competition of the Spanish squid, which is fished off the Falkland Islands. Level of seafood imports from the U.S. will largely depend upon currency factors, as well as upon the efforts produced by the U.S. fish industry to develop a market here.
The Portuguese fishing industry is subject to the EU Common Fisheries Policy, which was object of a Reform in December 2002. The new EU fishing policies are considered generally restrictive due to both new fish stocks management rules, and changes to the EU investment subsidy regime.
Under the new fish stocks management rules, Portuguese fishermen are affected by both the fishing plans developed by the EU for cod and hake catch in Northern Atlantic waters, as well as by special management plans that are presently being developed for hake and crayfish populations in national waters. The new structuring investment support regime approved by the EU is also considered restrictive, as financial supports for the construction of new fishing vessels, or for any investments to increase fishing capacity, are to be eliminated.
However, this policy has been mitigated by a derogation that allows subsidization of boats under 400 gross tons until the end of 2004. The emphasis of the new EU fisheries policy upon vessel abatement and fishing capacity reduction also expresses itself in the accrued subsidy levels for investments involving a large reduction in fishing capacity when devoted to species with stock problems (a 20 pct subsidy premium is to be conveyed to investments involving a 25 percent reduction in fishing capacity under those conditions).
Portugal currently applies a multi-year Operational Fisheries Plan (POP-4) directed to the re-structure of the national fleet, which will be in effect through 2006. Out of the 52 vessels that were fishing in Moroccan waters during the 1997/99 period, fourteen have been removed from the fleet by way of EU subsidies or shipwrecked. All others have been either integrated in the swordfish fleet operating in the Mediterranean, or exported to third countries where they formed joint ventures or fished under a fishing agreement with the EU. A couple of vessels are reported to have formed joint-ventures in Morocco. For the full text of the new EU Fisheries Policy, see EU Regulation 2369/02.
TACs in national and EU waters are set by the EU, which also negotiates bilateral agreements with third countries on Portugal's behalf, and negotiates TACs with international fishing organizations on behalf of EU Members.
An important issue with consequences for the Portugese fisheries sector currently under discussion is the "communitarization" of national waters. This issue was triggered by Spanish demands for access to waters off the Portuguese coast between 6 and 200 miles under the principles of the EU Common Fishing Policy. This "communitarization" is a complex issue as, unlike most EU countries whose Water Units tend to coincide with geographical borders, the Water Management Unit off the Portuguese coast extends beyond the Portuguese northern and southern geographical borders into Spanish waters.
The implementation of open access to the Water Management Unit will imply access to currently Portuguese waters by the Spanish fleet, and only to limited Spanish waters for the Portuguese one. However, given its political and legal inevitability, Portuguese authorities have pursued action to minimize potential losses. Extension of waters to be "communitarized" was narrowed from the 6 to 200 mile strip as initially claimed by Spanish authorities to the 12 to 200 mile one, thus protecting the 12-mile zone, which is the richer in natural resource terms. "Communitarized" water tends to be populated primarily with migratory species, including swordfish and tuna fish, which were not traditionally fished by mainland Portuguese fishermen.
At the same time, the water "communitarization" will imply enforcement of new control measures to prevent stocks depletion, which will also tend to limit the fishing capacity of the Spanish fleet. Under the Fishing Reform, the Azores and Madeira islands kept a 50 mile water reserve, and are presently negotiating an extension to the 200 mile limit. The new water "communitarization" provisions integrate an EU regulation presently under discussions, which is expected to be approved by the EU Council of Ministers in October.
Portuguese seafood imports are subject to the EU import tariff regime. A list of processing fish is currently subject to the EU duty suspension regime under Council Regulations 104/2000 and 2264/2002.
EU trade policies favor seafood products which benefit from the EU duty suspension regime. These include processing salmon, sturgeon, lump fish with roe, red snapper, hard fish roes, krill, and certain varieties of crabs, which are currently tariff-free. Frozen Alaska pollock fillets and processing prawns also benefit from suspended duties, while processing cod can be imported at a 3 pct tariff rate, and surimi and frozen blue grenadier fillets and meat at a 3.5 % tariff rate.
In order to develop markets here, U.S. exporters are advised to work closely with the local trade, and to participate regularly in regional seafood shows. AGOFFICE strongly recommends among others, regular attendance of the "Conxemar" Seafood Show, which is held yearly during the first week of October in Vigo, Spain. Due to its proximity to northern Portugal, this show is attended by the majority of larger Portuguese seafood importers.
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