With the cooked and peeled coldwater shrimp market stable in the UK, the sector is keeping a close watch on whether the Brexit-bound nation will strike a trade deal with important supplier Greenland.
In November, UK businesses -- mostly in the processing, retail and foodservice industries -- called on the government to extend the tariff-free, quota-free preferential access that products of Greenlandic origin have thus far enjoyed with the UK while it has been a member of the EU.
In 2019, Greenland exported 61,857 metric tons of coldwater shrimp worth £294.4 million in total, according to research by Dwayne Ryan Menezes, the founder and managing director of Polar Research and Policy Initiative, an international think-tank dedicated to Arctic and Nordic affairs. Some 35% of that went to the UK, amounting to almost 22,000t.
An executive with one of the UK's largest importers of coldwater shrimp told Undercurrent News he was following the matter closely.
"I think essentially, they haven't got time to look at a trade deal this year," he said. "They're planning to look at it early next year, but I'm expecting it could be April by the time they've sorted anything."
Now, Greenlandic and UK lawyers are discussing what this means for trade, as "in theory, there could be up to a 20% duty put onto prawns", he said.
There are three potential outcomes for trade with Greenland in 2021: a quick-deal continuation of tariff-free trade to tide both nations over until a more formal arrangement is made; trade with tariffs; or a formal deal is struck before 2021 (which seems unlikely now).
The industry needs some certainty one way or the other, this executive stressed. "There are packers in the UK who are making profit margins of maybe 6.5% -- a 20% duty on imported prawns will knock everything right out."
The UK has already looked to utilize these "trade continuity agreements", signing them with Norway, Iceland and Liechtenstein, Menezes said to Undercurrent. He hopes a bilateral trade deal can be finalized before the end of the UK's Brexit transition period on Dec. 31, 2020, but said failing that, a trade continuity agreement "must ensure that products of Greenlandic origin can continue to be imported into the UK on a preferential tariff-free, quota-free basis".
"In the absence of such a trade continuity agreement, my fear is that there will be severe negative repercussions for UK consumers, when it comes to food prices, food quality and food security for various UK sectors, such as processing, retail and foodservice, and for [numerous UK] economies," he added.
The UK, Norway, and Iceland signed their own trade continuity agreement on Dec. 8, ensuring stability of trade with two other key coldwater shrimp suppliers. The UK government said this was an interim agreement while the countries complete negotiations for a "comprehensive free trade agreement to come into force in 2021".
"The agreement ensures British firms will continue to see duty-free access for all exports of industrial products. In addition, British consumers can continue to enjoy popular Icelandic and Norwegian products such as frozen haddock. Over 30% of the UK’s imports of fish fillets last year came from Iceland, many of which are used in British fish and chips shops," it said. "Without this agreement, duties on UK imports from Iceland and Norway could have increased by an estimated £65m under World Trade Organisation trading arrangements."
Retail absorbs lack of foodservice demand
Back in September Undercurrent reported sources were anticipating that some recovery in the UK foodservice sector, and continued strong retail sales, would keep prices on an upward trend through to the end of 2020.
However, an end to the good weather which had allowed some outdoor dining, and November's second "lockdown", put the dampers on that, the aforementioned importer, and a trader based in Iceland, each confirmed.
"Prices had been on the rise. I thought they'd fall [in November], but they didn't, they've just been flat since September basically," said the importer. "Supply is healthy, stocks are normal for this time of year. There might be a little bit more around due to the lack of foodservice sales, but retail has really absorbed most of that."
With no change in pricing, levels remain at around £6.90 per kilogram for 250-350 count, and £6.50/kg for 300-500, sold from Iceland.
The Icelandic trader foresees little impact for coldwater shrimp trading as 2020 becomes 2021, thanks to the trade deal in place.
"It's clear the transition should be smooth for anything processed in Iceland and shipped to the UK. The only change is that shipments will need health certificates as of April 1, but that's standard in Iceland anyway," he said.
That said, there could be "all sort of hard-to-predict side effects" if Greenlandic sales gain a duty for the UK, including delays or fewer shipments which could result in Iceland gaining market share.
The largest single supplier of the UK's cooked and peeled product has traditionally been Iceland anyway, he added. "I'm sure Greenland has been preparing and shipping a couple of months' worth of stock in time -- nothing will happen suddenly in January."
'Now is the time for retailers to tender shrimp'
As reported at the end of November, UK retailer Tesco is tendering its entire shrimp category as well as chilled whitefish, putting at risk a large chunk of business currently with the seafood arm of meatpacker Hilton Food Group, formerly known as Seachill UK.
The supermarket is tendering its frozen and "industrial" shrimp contracts, as well as the supply for its Booker Group cash and carry operation. The chilled and frozen shrimp tender is advanced and could conclude by mid-January, sources said.
"Now is the time for UK retailers to be tendering," said the UK importer. "Prices still aren't especially healthy, they represent very good value as they have all year. If I was Asda, Sainsbury's, Morrisons, I'd be getting onto shrimp tenders, as prices are far lower than they were last year."
"The lead-up to Christmas has helped a bit, one retailer we heard saw a 30% lift in sales just recently," he said. "I think if we're hit with another lockdown in January then we'll see prices dip again."
"And next year we might see some variable quality as stocks begin to come out from 2019 onto the market, we could see some price differences."
Interestingly, data shared with Undercurrent by Seafish shows the price of coldwater shrimp at UK retail is actually up year-on-year in 2020. For the 12-week period ended Aug. 8, 2020, average price-per-unit was £2.73, 2.4% higher y-o-y.
This could mean that some retailers are still tied into 2019 contracts, or that supermarket chains are committed to cutting the cost of their "standard basket" lines of core items in order to compete with discounters, and so are looking to make their margins elsewhere. " They're certainly buying at lower prices," he observed.
"Most processors right now aren't looking at profits, they're looking to maintain their market, keep product moving, and support their customers," he said. "I'd say we'll be looking at profits again late in 2021, early 2022."
The Icelandic trader, though, was more optimistic on the outlook for 2021, suggesting that once the twin uncertainties of Brexit and COVID-19 were looking more stable -- with a vaccine being rolled out in the UK from December -- demand and prices should begin to tick up.
He estimated the UK market for coldwater shrimp was 40% retail, 30% foodservice, and 30% "manufacturing" -- the smallest shrimp which go into salads, sandwiches, and are most prevalent across city center office lunch eateries. So, even with some more stability, this latter category may take a long time to recover, with office workplaces likely among the last to return to "normal".
Then again, he noted the UK may see a boom in domestic tourism in 2021, if it emerges from the pandemic ahead of other popular holiday destinations.
December 17, 2020 at 05:46PM
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Delayed UK-Greenland trade deal could see 20% tariff on coldwater shrimp imports - Undercurrent News
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