Economic chaos on Wall Street trickles down to docks
By LAINE WELCH
December 22, 2008
"There's just so much uncertainty," said John Whiddon, manager at Island Seafoods.
"It's scary," echoed Tuck Bonney, operations manager at Alaska Pacific Seafood.
Like so many others, the seafood industry depends upon a long chain of buying and selling to carry out its business.
"Processors buy from fishermen, who then sell to wholesalers who sell to retailers and so on. When things are working normally, a line of credit is a standard part of the business. And many of these companies have been doing business together for decades," said Gunnar Knapp, fisheries economist at the University of Alaska/Anchorage.
If anyone along the chain runs into a credit glitch, it gums up the whole works.
"What it boils down to," Knapp said, "is that businesses are finding it a lot harder to borrow money on credit, partly because the businesses who lend out the money are experiencing difficulties. Money is short and they are extra cautious about who they want to lend to."
Currency exchange rates are also getting whacked around worldwide. That's important to watch because seafood accounts for fully half of Alaska's total exports.
"You need to consider where in the world it is going," Knapp said.
In just the past few months, for example, the value of the Euro has tanked while the Japanese yen has strengthened. That's lucky timing for Alaska crabbers, as Japan bought 65% of the red king crab pack this winter.
"This is a global economic crisis and many of Alaska's competitors may have the same or worse credit and market problems. To the extent they are unable to supply markets, this could benefit the Alaska industry," Knapp speculated.
The global recession could reduce demand for higher priced seafoods, and boost interest in less pricey products. Fishermen should also get a break from high fuel prices over the next few months.
"Fishing is always an
uncertain business," Knapp said. "Diversification in
the kinds of fisheries we are involved in as a state, and among
processors and fishermen, is usually a good strategy, and that
is certainly the case right now."
Brokers who buy/sell/trade fishing permits and quota shares say business is pretty good for this time of year. Spring is their busiest trading season, and already the mood is good going into next summer.
"People are optimistic about salmon right now. I really think they are," said Paul Piercey at Dock Street Brokers in Seattle.
The hottest ticket right now is any salmon permits at Prince William Sound. Seine permits that went for around $35,000 last year have traded as high as $125,000. Drift gillnet permits, which had been holding steady at $50-$55,000, jumped even more, said Doug Bowen at Alaska Boats and Permits in Homer.
"They have really shot up," he said. "The last one we're aware of sold for $130,000. So they've almost quadrupled just since last year."
Dock Street's Piercey cautioned
that it only takes a couple of buyers to create a perception
of the market.
Bowen said Area M (False Pass/Aleutian Peninsula) drift permits were ranging from $90,000-$110,00 and he has seen "renewed interest" in Kodiak seine permits, which were trading at around $25,000, "up considerably from a few years ago."
On the down side, salmon permits at Bristol Bay have dipped to around $80,000, roughly a $10,000 drop from the spring.
"The forecast for next year is down a bit, and I think folks just had a tough time making a go of it this past season, with the fish prices and fuel prices going in opposite directions," Bowen said.
Bowen said business is a bit slower in the halibut IFQ market, and blames the recession for the stall in trading. Still, quota shares of halibut have trended upward in value in the last few years, holding steady at $25-$30/lb in prime Alaska fishing regions. And dock prices hovering near $5/lb at major ports still attract a lot of 'tire kickers' for halibut Q's.
The fact that nearly all of Alaska's sablefish (black cod) goes to Japan has strengthened that IFQ market, Bowen said.
"A weaker dollar against the yen helps us there, and it pushed up quota prices for black cod to new highs this year - up to $19/lb for some shares in the Central Gulf," Bowen said.
Dock Street is the go-to shop for crab quota, and harvester shares of red king crab were trading at about $26/lb; snow crab quota was averaging $10-$11/lb. Tanner crab shares were trading at $10.50/lb, and $8/lb for golden king crab.
Piercey said he believes those prices are likely to hold.
"All things staying the same, I think the market is pretty comfortable at where the prices are. People look at the multiple of ex-vessel (dock) price to the price per pound to buy quota, and that's pretty attractive right now ($5/lb). There's no where else you can put your money that you'd do as well as with crab right now."
Despite concerns about the struggling economy, both brokers said overall, their business outlook is good.
"There's always something going on catch quotas go up in one area or another, fish prices go up and down. It's never dull in this business," Bowen said.
"People are still fishing
and making transactions and making plans for next year, lots
of stuff is going on now," Piercey said. "And banks
have called to tell us that they are still very much in the market
to make fishing loans. Fishing has been a bright spot on their
portfolios and they want to do more of it."
Alaska fishermen can now renew permit and vessel licenses online. The online renewal system is secure and easy to use. Since it was launched on Nov.24, more than 1,000 renewal transactions have been completed from every region of the state, said Yvonne Miller, licensing supervisor at the Commercial Fisheries Entry Commission. www.cfec.state.ak.us .
Alaska Sea Grant College Program is looking for a new "enthusiastic and forward thinking" director to lead its statewide marine research and outreach programs. The position is headquartered at the School of Fisheries & Ocean Sciences in Fairbanks. www.alaskaseagrant.org .