Q *< °' C % % X J s Utes o* * ^ SHRIMP -A New Picture For 1974 Notes and analysis of events associated with the industry's heavy inventory position in early 1974 noaa ATMOSPHERIC ADMINISTRATION / Fisheries Service SHRIMP -A New Picture For 1974 Notes and analysis of events associated with the industry's heavy inventory position in early 1974 Morton M. Miller Chief, Market Research and Services Division Richard W. Surdi Coordinator, NMFS Market Review and Outlook WASHINGTON, D.C. JUNE 1974 st>22y. UNITED STATES / NATIONAL OCEANIC AND / National Marine DEPARTMENT OF COMMERCE / ATMOSPHERIC ADMINISTRATION / Fisheries Service O, Frederick B. Dent, Secretary / Robert M. White. Administrator / Robert W. Schoning, Director ® «5 Digitized by the Internet Archive in 2012 with funding from LYRASIS Members and Sloan Foundation http://www.archive.org/details/shrimpanewpicturOOmill SHRIMP - A NEW MARKET PICTURE FOR 1974 Notes and Analysis of Events Associated With the Industry's Heavy Inventory Position in Early 1974 Table of contents Page Abstract 4 Introduction 5 Situation analysis 6 Initially, buildup was timely 6 Sharp gains in breaded and raw headless 7 Supplies improve, but consumption lags 8 Price an important factor in shrimp sales 9 Early stage of increasing price trend associated with short supplies 10 Inflated economy a factor in "shrimp price gains" 12 Holdings increase over long-term rate 12 Shorter term cycles in holdings levels 14 Prices drop in early 1974 15 Outlook 19 Landings/imports 19 Seasonality factor 20 General economic condition 20 Gasoline problems 21 Historic consumer response to price changes 21 Beef and poultry situation 21 Adjustment process 21 Statistical appendix 22 ABSTRACT The shrimp industry in the United States in early 1974 was undergoing a period of adjustment to altered conditions within the industry and the general economy. The machinery of adjustment went into motion after a sharp buildup of cold storage holdings of shrimp during the last 4 months of 1973, when demand for shrimp became sluggish and landings and imports were rising. In the last quarter of 1973, consumption dropped 22 percent below the comparable quarter of 1972. Inventories at the end of the new year reached 84 million pounds and continued to climb into February, contrary to normal seasonal movement. Buyer resistance to high prices was the most obvious factor that softened demand for shrimp. Shrimp prices increased steadily at all levels throughout 1973, picking up momentum as the year progressed. The increasing prices in the first 8 months of the year were consistent with declining supplies. But the momentum carried over into the last quarter when prices should be at seasonal lows. This situation coincided with a break in the prices of meat and poultry, which weakened the competitiveness of shrimp as a protein food. Cold storage holdings inevitably increased. Not surprisingly, wholesale and exvessel prices of shrimp began to drop after the beginning of the year. Wholesale prices in February 1974 were about 10 percent less than in December 1973, and cuts in exvessel prices were much sharper particularly of the high-count (smaller sized) shrimp. With the notable exception of the high-count shrimp, dockside prices in February 1974 were still considerably above a year earlier. But prices paid for much of the shrimp in storage reflected price increases beyond February 1973. Also, vessels received nearly 40 percent less for high-count shrimp in February 1974 than a year earlier. Price adjustment s--and probably some promotional efforts--in early 1974 had an apparent salutary effect on shrimp consumption in the United States. Consumption increased from a low of 19.6 million pounds in December 1973 to 33.4 million pounds in January 1974. The outlook, however, is for substantial increases in domestic landings and imports--at least through the first half of 1974. This, plus recessionary tendencies in the U.S. economy, the energy crisis (which affects restaurant sales), and expected gains in beef and poultry production later in the year will continue to depress shrimp prices. Thus, the market will likely adjust at prices well below what they were at the year's start. On the bright side, there is the factor of a long period of strong demand for U. S shrimp, and this rules against the possibility of a prolonged depression in shrimp markets. In summary, prices will likely remain relatively soft through most of 1974 but consumption will pick up and adjust the inventory position to a more normal level. THE SHRIMP SITUATION Background Notes and Analysis of Events Associated With the Industry's Heavy Inventory in Early 1974 Introduction Seafood markets — particularly for fresh and frozen products — are entering the 1974 Lenten season vith considerable uncertainty. On the basis of established trends, prospects for 1974 would be bright with respect to demand and concern would center about the condition of short supplies. However, severe changes in the general economy have helped alter the situation. The new year began with unusually heavy cold storage holdings 459 million pounds on January 1, 1974. Last year's carryover was 415 pounds; in 1971 the figure was 302 million pounds. Normally, the heavier carryover stocks would be welcome assurance of an undisturbed flow of products through increasingly expanding pipelines. But 1974 is different. Sales of many popular fishery products in the last quarter of 1973 — particularly at retail levels — tended to be sluggish. One major reason was the generally favorable supply of meats and poultry. Consumer resistance to high prices also was apparent. And to complicate the picture, the gasoline shortage was threatening restaurant sales, which account for a large proportion of the seafoods consumed in the United States. Whatever the causes and their order of importance, the effects were clear: The industry was faced with growing inventory costs and an uncertain demand outlook. Shrimp was the most visible case in point. Cold storage holdings of shrimp in February 1974 were at a record level for the month, following a sharp cutback in U.S. shrimp consumption. Industry concern about the immediate future was justifiably widespread. Obviously, the industry was facing adjustment. On the assumption that these adjustments can be made more effective (or less painful) if related decisions have the benefit of perspective and facts, the National Marine Fisheries Service's Market Research and Services Division has prepared the following analysis of the events that led to the shrimp inventory problem, together with comments on the outlook. This report has a relatively brief narrative and is supported by a detailed statistical presentation that the reader may find useful in appraising the situation. *Prepared by Morton M. Miller, Chief, Market Research and Services Division and Richard W. Surdi, Coordinator, Market Review and Outlook Situation Analysis Cold storage holdings of shr pounds. This was the highes noteworthy because it repres Normally, shrimp holdings wi continue to drop until the h But the picture in 1974 appe quantity of shrimp in storag year ago, holdings during th by 10 million pounds. Table the last 6 years during Janu imp on February 1, 1974 were 68 million t figure on record for February and was ented an increase over January 1974. 11 decline seasonally in February and eavy landings season begins around June, ars quite different. During January, the e increased 3 million pounds, whereas a e first month of the year were reduced 1 shows changes that have occurred in ary. Table 1.--U.S. frozen shrimp holdings Year 1974 1973 1972 1971 1970 1969 Jan. 1 Feb. 1 Change - - - - Million pounds - - - - 84.0 86.8 + 2.8 95.8 85.9 - 9.9 74.2 72.5 - 1.7 78.7 69.8 - 8.9 68.6 65.7 - 3.3 60.6 53.9 - 6.7 Initially, Buildup Was Timely The buildup of shrimp inventories began during September 1973, but caused little alarm at the time. The upturn was, in fact, timely, because holdings were unusually low. Shrimp landings in the Gulf during the first three quarters of 1973 decreased about 30 percent from a year earlier, and imports also were considerably less. The drop in new supplies (landings plus imports) during January- September 1973 delayed a seasonal increase in holdings that normally begins in early summer (fig. 1). When holdings started upward, however, the rate of increase was relatively fast (table 2). Table 2. — Month-to-month increase (decrease) in shrimp holdings Year : Sep. 1-30 • • : Oct. 1- 31 : Nov. 1- 30 : Dec. 1-31 • • : Net change : Sep. 1-Dec. 30 Million pounds ■ 8.8 1973 : 6.5 10.8 6.2 32.3 1972 : (0.2) 5.4 2.5 (1.8) 5.9 1971 : 9.5 1.6 1.9 1.7 14.7 1970 : 6.4 6.6 2.8 2.7 18.5 1969 : 6.5 5.9 4.7 4.3 21.4 1968 : : 5.2 8.7 8.7 (2.0) 20.6 BEGINNING-OF-THE MONTH SHRIMP IKVENTORIES (UNADJUSTED) poi """ 1 1 1 1 inds 1 1 1 1 1 100 * „ - ' S 90 " 'y ^1974 ' " 1972 -%/ 80 * / \ N. / 70 - X • / * - 60 50 ^1971 40 30 1 1 1 1 1 1 1 1 1 1 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC FIGURE 1 Sharp Gains in Breaded and Raw Headless Heavy inventories in February 1974 have been associated with most of the popular shrimp products, with the exception of peeled shrimp. By far the sharpest gains have been in breaded shrimp holdings, which peaked at about 14.6 million pounds of January 1 and dropped slightly— to 13.7 million pounds— by February 1. At these levels, holding were about 40 percent above comparable months in earlier years. On February 1, 1974, breaded holdings comprised about 16 percent of the total, whereas a year ago the comparable figure was 11 percent. Since September 1973, raw headless (shell-on) shrimp have been responsible for most of the buildup in inventories. Holdings of this product form, which usually accounts for half or more of shrimp in storage, nearly doubled from September 1, 1973, to February 1, 1974, from about 25 million pounds to 48 million pounds. Holdings of breaded shrimp during the same period increased about 39 percent, from just under 10 million pounds to nearly 14 million pounds. However, holdings of breaded shrimp were relatively high through most of the earlier months of 1973. While holdings of raw headless shrimp were declining from January through August, holdings of breaded shrimp were stable and formed a growing proportion of total holdings. Breaded holdings were 10.7 percent of the total on January 1, 1973, and increased to nearly 20 percent by August 1 and slipped less than a percentage point on September 1. Supplies Improve, But Consumption Lags Vastly improved landings in the Gulf and heavier imports contributed to the late 1973 increase in shrimp holdings. But there was a third — and disturbing--f actor that entered the picture. U.S. consumption of shrimp began to slip noticeably, after a sustained period of strong demand (fig. 2). During the final quarter of 1973 apparent U.S. consumption of shrimp totaled only 72 million pounds--well below the preceding llillion pounds 360 340 320 300 280 260 \ \ % FRESH AND FROZEN SHRIMP CONSUMPTION ^k » \ ^ 9 X t X \ / ^ y, < 1968 1969 1970 1971 1972 1973 FIGURE 2 8 quarter and below comparable periods in earlier years. Normally, demand for shrimp increases during the late year holiday season, but, in 1973, fourth quarter consumption was 9 million pounds below third quarter of 1973, and nearly 18 million pounds lower than average fourth quarter consumption for 1968-72 (table 3). Table 3.--U . S. shrimp consumption 1st 2d 3d 4th Total Year qtr. qtr . qtr . _cjtr . year Million pounds - mm m m« 1973 79.4 75.7 81.2 72.2 308.5 1972 78.2 83.8 95.9 92.7 350.6 1971 80.1 72.1 80.2 89.6 322.0 1970 75.5 81.3 83.2 92.5 332.5 1969 73.6 65.5 84.5 86.6 310.2 1968 73.7 68.8 84.2 88.2 314.9 Price an Impo rtant Factor in Shrimp Sales Buyer resistance to rising prices is the most obvious factor associated with decreased consumption of shrimp. Historically, consumption has waned during rising prices and increased during declining prices (fig. 3). Just how strong consumers react to changes in prices of shrimp depends on many variables such as the price of other foods, personal income, and season of the year. Shrimp prices began inching 12-MONTH CENTERED MOVING AVERAGE: SHRIMP CONSUMPTION VS. WHOLESALE PRICE* Million pounds 29 28 27 26 I I I I I I M I I I I I I I I I I I i I I I I I I I I Consumption 1 TTT i i I i I II T— i I V| Dollars pound Wholesale price 25 I I I i M I I i I i I I i I i I I I I I I i i I i i i i I i i i i i i i ■ i i i JOJAJOJAJ OJAJO 1968 1969 1970 1971 * Wholesale price for 26-30 count shrimp at Chicago 11 M I i l I I I I I I I i j I I i . I I I JAJOJAJO 1972 1973 2.^0 2.00 1.70 1.40 1.10 FIGURE 3 up in late 1972 and picked up momentum in the early months of 1973 (fig. 4). The swing upward was particularly sharp during the last half of the year. Wholesale prices for 26-30 count, raw headless at Chicago averaged $2.77 per pound in December 1973 compared with $2.18 during June and $1.82 in January. Thus, in the last half of 1973, these prices rose 27 percent, compared with a gain of 20 percent in the first half. Changes were even more pronounced at retail. For example, the retail price of 21-25 count, raw headless, in Baltimore increased 3-1/2 percent during the first 6 months and 29 percent in the last 6 months. Early Stage of Increasing Price Trend Associated with Short Supplies The rise in shrimp prices during the first half of 1973 and beyond was consistent with steadily declining supplies. This decline was, in part, seasonal (fig. 5). As a rule, new inputs to supply — landings plus imports — are at seasonal lows from February through April and inventories are drawn down. Prices move up seasonally. Usually landings begin to pick up during May and the seasonal increase in supplies begins — which leads to seasonally lower prices (table 4) . In 1973, landings and imports were down considerably, and inventories were drawn upon throughout most of the first three quarters. During May, total supplies dropped below comparable 1972 totals, and by August, total supplies were running below 1971 on the basis of month-to-month comparisons. Table 4. Fresh and frozen shrimp - seasonal indices • • Total Apparent Wholesale Cold storage Manth supplies consumption price holdings Million pounds— — gents /pound Million pounds January \ 105.1 103.1 99.8 116.8 February 94.6 86.0 104.6 198.8 March 90.8 96.3 107.2 99.8 /fc>ril 82.6 88.3 104.6 90.6 May 87.1 94.1 106.4 83.7 June 94.8 98.5 100.7 82.2 July 96.6 109.4 97.5 85.2 August 97.2 107.1 98.4 90.3 September 102.9 99.1 99.9 99.2 October 117.5 122.2 93.0 106.1 November 116.2 101.7 94.0 117.4 December 114.5 94.1 93.9 119.9 10 SHRIMP: FRESH AND FROZEN CONSUMPTION VS. WHOLESALE PRICE Million pounds 30 25 20 15 Dollars per pound 2.50 2.00 t I I I t I I I I I I i I I I I I t I I I I I I I I I t t I I I I I t l l .00 1.50 A J 1971 J 1972 A J 1973 J 1974 FIGURE 4 TOTAL SUPPLIES OF SHRIMP ( BEGINNING INVENTORIES, LANDINGS, AND IMPORTS) Million pounds i i | r 140 130 120 110 100 90 80 70 FIGURE 5 11 Inflated Economy a Factor in "Shrimp Price Gains" Factors related to the general economy were also apparent in the increases in prices of shrimp in the first three quarters of 1973. Overall, the rate of increase in the price of shrimp during this period was in line with, or below, the rate of change in other food prices (fig. 6). Hie consumer price index (CPI) for breaded shrimp increased 18.0 points from January through August 1973, compared with 42.4 points for meat and 21.8 points for "all foods". In September 1973, however, when shortages had pushed meat prices to peak highs, shrimp prices began climbing more sharply than the prices of its protein competitors. Poultry prices, which had peaked in August, were on the way down; the peak September meat price was not much above August; whereas the CPI for breaded shrimp moved up a sharp 2-1/2 points. Retail prices for raw shrimp likewise increased; for example, in Baltimore, the prices rose from $3.13 per pound in August to $3.57 per pound in September* Shrimp prices continued to climb through the end of the year, while prices of poultry and meat continued to drop, and whatever price/value differential consumers had recognized favoring shrimp soon disappeared. Table 5 summarizes the comparable changes between the CPI for breaded shrimp and competing products during 1973. * Table 5. — Consumer price index shrimp, meat, poultry, fish Item : Jan. : 1973 Aug. 1973 Change Jan. -Aug. Dec. 1973 Change Aug. -Dec. Breaded shrimp Meat Poultry : Fish : 140.3 : 137.7 : 116.1 : 149.2 159.2 180.1 225.3 165.1 +18.9 +42.4 +109.2 +15.9 175.0 167.5 149.0 178.8 +15.8 -12.6 -76.3 +13.7 * 1967 =100 Holdings Increase Over Long- •Term Rate The level of cold storage inventories of shrimp products reflects long-term trends, as well as seasonal and other short-term phenomena. With the U.S. demand for shrimp on an increasing trend, it has been necessary to increase average sizes of inventories to assure adequate distribution through marketing pipelines. But holdings have increased more than proportionally to the increased quantities demanded. From 1968 through 1973 the exponential trend rate of increase in average shrimp holdings was 0.80 percent per month. The comparable rate of increase in consumption was 0.17 percent per month. A linear trend measurement of the same data shows average inventories increasing by about 490,000 pounds per month, whereas consumption has been increasing at the rate of 46,000 million pounds per month. (See figures 7 and 8.) 12 CONSUMER PRICE INDEX: BREADED SHRIMP, MEAT, AND POULTRY Percent Jan 1971 = 100 160 140 120 100 I I » I I I I I I ' I I 'I ' i Million pounds 90 70 50 FIGURE 6 TOTAL INVENTORIES OF SHRIMP (PRODUCT WEIGHT) I i i IT I I ! I I i I I I I I i I I I I M I I l| I II || II II ' I I I I I I I II I I I II I I i I I M I I I 30 . i n ii iiuil ii i n I inn n ii n I iii ii i i mi I il in L) n hi ii i in J AJ0JAJ0JAJ OJAJOJAJOJAJO J 1968 1969 1970 1971 1972 1973 * Y = 44.6036 + .49175x x ■ 1 month Figure 7 13 Million Pounds : i — r 34 30 26 22 18 _L J_ FRESH AND FROZEN SHRIMP CONSUMPTION (Heads-Off Weight) "I 1 1 - T _L _L J_ _L J 1968 J J A J J A J 1969 1970 1971 J 1972 _L A J 1973 Figure 8 The differential in rates of increase between inventory levels and consumption has increased the ratio of holdings to consumption considerably. In 1968 the quantity in storage at the beginning of a given month was about 1.8 times the month's consumption figure. By 1973, holdings levels had climbed to 5 times the monthly consumption rate but the ratio began to recede slightly to reflect the long period of withdrawal from inventories during January- September 1973 (fig. 9). Shorter Terms Cycles in Holdings Levels There are also cycles in the levels of cold storage holdings, as well as cycles in consumption and prices. (The three factors, of course, are closely interrelated.) The lines representing "centered moving average" in figures 7 and 8 depict the cyclical tendency and also indicate that the duration of the cycles is decreasing. The inventory cycle, for example, moved upward over a 24-month period extending from October 1968 through September 1970. This rise was followed by a 15-month downward swing. The next cyclical peak was reached in 14 months. The shorter cyclical periods likely reflect a growing complexity in the variables that affect shrimp markets. One example would be the presence of Japanese buyers as a significant factor. Another variable is the uncertainty of supplies associated with resource problems. 14 RATIO OF SHRIMP FIRST OF-THE MONTH INVENTORIES TO CONSUMPTION H/r r*H„ percent S/C ratio A 4 3 k Centered , J 1 ■ f\/\ ' Jt-'l N 2 A l\ moving l\ K] \ hi *\ 1 \ / V a average / \_ . / \ ll I \ i 1 i 1 1 1 1 1 l 1 1 1 1 1 1 1 1 1 1 1 . 1 1 JAJOJAJOJAJOJAJOJAJOJ A J J 1968 1969 1970 1971 1972 1973 Figure 9 In any event, shorter cycles could mean more frequent --and perhaps more noticeable—adjustments in the markets. Prices Drop in Early 197 4 Predictably, shrimp markets in February-March were reacting to a heavy inventory position with price adjustments, as well as other promotional activity. In the Chicago and New York wholesale markets, prices were cut 7 to 10 percent from December levels and exvessel prices generally were reduced even more— which is not unusual during industry-wide price adjustments (fig. 10), For a frozen commodity such as shrimp, a lag generally can be expected between the time new wholesale prices go into effect and retail prices change. Old stock is likely to be sold at old prices, as retailers act to protect margins in case of falling prices or avoid adverse consumer reaction to sharply rising prices. Thus, February 1974 retail prices slightly increased over the prior month. Table 6 and 7 show comparative price changes. 15 Table 6.-- Comparative shrimp price changes - wholesale & retail Month Dec. - 1972 Jan. - 1973 Feb. - 1973 % change Dec- Feb. 1 Raw he adl ess ; Breaded : Wholesale Wholesale : Retail : 26-30 ct. 26-30 ct. : 21-25 ct. : Wholesale : Chicago New York : Baltimore \ Chicago 72 : 1.70 1.68 : 2.84 1.29 73 : 1.82 1.73 : 2.84 1.33 73 : : 1.93 1.87 : : 2.89 1.39 : +13.5 +11.3 : • +1.8 +7.8 Dec. - 1973 : 2.77 2.74 : : 3.79 1.80 Jan. - 1974 \ 2.72 2.64 : : 3.88 1.76 Feb. - 1974 : : 2.51 2.47 ; : 3.94 1.67 % change DecrFeb, : -9.4 -9.9 : +4.0 -7.2 Table 7 .--Comparative exvessel prices of shrimp •15-20 ct. : 15-20 ct. : 31-35 ct. : 31-35 ct.: 51-60 ct.:51.60ct Month ' (brown) : (pink) : (brown) : (pink) ' (brown) : (pink) Dec. - 1972 Jan. - 1973 j Feb. - 1973 - : 1.50 1.76 : 1.89 +26.0 1.60 1.40 1.62 1.60 1.70 1.70 - - Precentase change +6.3 +21.4 1.32 1.36 1.47 .92 1.08 1.10 .90 .98 1.05 Dec,- Feb. ■ +11.4 1.98 1.83 1.59 +19.6 1.30 1.11 1.00 +16.7 Dec. - 1973: Jan. - 1974: Feb, - 1974: : 2.92 : 2.88 : 2.62 - - IX>Iiars/Dound- - - - 2.60 2.06 2.56 1.84 2.30 1.70 1.22 .99 .66 Dec. -Feb. : -10.3 -11.5 -17.5 -19.7 -23-1 -45.9 16 Dollars per pound I'-T-TT SHRIMP EXVESSEL PRICES 1/ I I : I I 1 I < I I I TT~\ — I I I I 1 — i — r 3.00 2.00 1.00 - 1 ' ' I I L_L Mil'' I i 1 1 I t I I I I I I I I j a j o j ; 1971 1/ For brown shrimp at Brownsville, Texas. J 1972 A J J 1973 1974 Figure 10 When evaluated in light of normal seasonal movements, the reductions in shrimp prices at the wholesale and exvessel levels were quite severe. For example, between December and the February following, wholesale prices will normally increase about 11 percent (based on changes in the seasonal price index.) Thus, a 10-percent drop amounts roughly to more than a 20-percent cut in seasonally adjusted prices. In the context of longer term comparisons most shrimp prices in February 1974 were considerably higher than in February 1973, but there are some important exceptions. Exvessel prices for high-count shrimp in February 1974 dipped well below year-earlier prices. For example, the February dockside prices of 51-60 pink shrimp averaged $0,88 per pound this year compared with $1.05 a year earlier. This change is notable because landings of pink shrimp in early 1974 apparently were less than a year earlier. Current data by species by size count were not available, but, overall, pink shrimp landings for January and February 1974 at principal Gulf ports were about 12 percent below a year earlier. It is probable that exvessel prices of high-count (51 and over per pound) pink shrimp were depressed partially because of heavy landings of similar count sizes in other species. Combined landings of all species of 51-60 count shrimp at principal Gulf ports was up 39 percent for January/February, compared with a year earlier. Also, shrimp landings of all sizes and species at principal ports during January/ February were about 11 percent above a year ago (table 8). Table 8.— Landings at principal Gulf ports Dec. 27 to Feb. 21 Shrimp 1973 • • • • 1974 : Change : 1973-74 and po und 9,077.4 + 10.9% All shrimp : 8,187.4 Pink - all sizes Brown - all sizes White - all sizes : 3,612.8 : 3,204.3 : 1,305.2 3,181.6 3,106.5 1,871.2 - 11.9 - 3.1 + 43.4 Under 30 ct, - all species 31-50 ct. - all species 51 and over-all species : 4,343.0 : 2,000.2 : 1,844.3 4,209.4 2,309.5 2,558.5 - 3.0 + 15.5 + 38.7 Exvessel and other shrimp prices in U.S. markets in early 1974 were also under pressure from relatively heavy imports, particularly in the high-count shrimp. Imports through the third week of February 1974 totaled about 32.4 million pounds compared with 18.0 million pounds during the same period a year earlier. About two-thirds of the 14-million-pound increase was in the 51-count and oversize categories as noted in table 9. Table 9. Shrimp imports, Dec. 27 to Feb. 21 Category 1973 1974 Percent change 30 ct, and under shell-on raw peeled Total 31-50 count shell-on raw peeled Total 51 and over shell-on raw peeled Total Grand Total - Thous 5,586 2,643 and pounds- 8,826 2,082 Percent + 58.0 - 21.2 8,229 2,876 1,362 10,908 4,429 1,320 + 32.5 + 54.0 - 3.1 4,238 5,749 + 35.7 2,337 3,244 4,636 11,141 + 98.4 +243.4 5,581 15,777 +182.7 18,048 32,434 +79.7 18 OUTLOOK The principal question raised from the near-term outlook for shrimp in 1974 concerns the duration of the downswing in prices and the severity of change. The best indicators as of March 1974 point to continued downward pressure on shrimp prices throughout the rest of the year, with some variation in the amount of pressure tied to the movement of meat prices. Consumption appeared likely to increase moderately, in association with lower prices. The following variables were taken into account in reaching these conclusions: (1) Substantial increases in domestic landings and imports. (2) Normal seasonal decline in prices after midyear. (3) Slowdown in U.S. economy. (4) Gasoline shortages. (5) Historic observation of relatively sluggish consumer reaction to price changes. (6) Expected gains in production of beef and poultry from tne second quarter throughout the year. Landings/ Imports Total landings of shrimp in 1974 will increase significantly from the previous year. Gulf landings were depressed following the spring floods in 1973--but the climate this year is much more favorable. An indication of this was a more than 40-percent rise in January Gulf landings, compared with January a year ago, and continued improvement in February. Indications are that South Atlantic and Gulf landings will top 55 million pounds during the first half of the year. This amount will be about 20 percent above last year, but somewhat under the record 1972 figure. Imports will also give a large boost to the quantity of new supplies received. Consumers in Japan reportedly have resisted high prices, and stocks are high. Japanese competition with the United States for world supplies thereby will be greatly reduced. There is even the possibility that Japanese trawlers operating off Central and South America may divert their catches to U.S. markets. The Japanese yen was recently devalued* thus making imports more expensive. Japanese traders reportedly were withholding shrimp from the market as a strategy to drive up prices. The reaction of Japanese consumers has led to a decline in shipment to Japan in early 1974. 19 Imports of shrimp into the United States during January- June this year could easily top last year by 25 to 30 percent, which means a total of about 125 to 130 million pounds. Imports in January 1974 were 30 million pounds — up 62 percent from a year earlier. Landings and imports added to carryover inventories will mean supplies of about 260 to 265 pounds during the first 6 months of 1974. Assuming 70 million pounds as an acceptable July inventory level (the 1972 figure was 64 million, and 1973' s subnormal figure was 52 million pounds) and allowing 30 million pounds for export and canned pack, the required consumption of fresh and frozen shrimp during January- June would be 160 to 165 million pounds. January 19 74 consumption was about 33 million pounds, and, if this rate were maintained, the 160-to-165- million-pound total would, of course, be reached. However, considering the factors affecting demand (as discussed below) prices will probably have to remain relatively soft to achieve this level of consumption. Seasonality Factor Current supply conditions have contributed to price declines outside the normal seasonal pattern. Assuming even the possibility of the market adjusting to an equilibrium by midyear, the normal expectation should be seasonal declines in shrimp prices throughout the second half of the year. General Economic Condition Economic forecasters appear to generally agree that the U.S. economy will undergo what economists at the First National City Bank of New York term "a relatively mild, two-to- three quarter recession in the United States followed by a rather sluggish recovery."* This plus the effects of continued inflation will erode purchasing power and concentrate consumer spending more heavily on the necessities. The Department of Agriculture predicts that food prices, overall, will increase 12 percent during 19 74.** Shrimp, as a relatively high-priced food item, can be adversely affected by this set of conditions. In fact, economic studies have produced evidence that there is a close correlation between rising incomes and increases in the demand for shrimp. A soft economy also could mean a slowdown in the rate of food purchases away from home. This would affect shrimp particularly, because an estimated 60 to 70 percent of shrimp is consumed in restaurants or other outlets away from home. * "The sound of the economy", First National Bank, New York, N.Y. ** U.S. Department of Agriculture, "National Food Situation", March 1974 20 Gasoline Problems Continued shortages of gasoline likely will take a toll on sales in restaurants that are located in outlying areas or that cater mainly to the tourist trade. Shrimp, being an important menu item, will be affected accordingly. Historic Consumer Response to Price Changes There is evidence that shrimp consumption is inversely related to price and that demand for shrimp is inelastic with respect to price. Thus, a given change in price will induce a less than proportional change in consumption in the opposite direction. It requires a rather sizeable decline in price to stimulate a substantial increase in consumption. A rough idea of how this works can be obtained by observing price/ consumption changes over two selected periods in the past. In the period January-September 1970 there was a 2.2-percent increase in consumption associated with a 6-percent decline in prices (both variables seasonally adjusted). In an immediate following period — September 1970 to October 1971 — consumption dropped 4.3 percent in association with a 38-percent increase in prices. Beef and Poultry Situation Beef and poultry were steadily rising during the first quarter of 1974. Shrimp prices, concurrently, were on the way down — thus improving the relative attractiveness of shrimp. The Department of Agriculture, however, predicts that during the second quarter the output of beef and poultry products will begin to expand relative to year-earlier levels and will post further gains throughout the year. This output will tend to dampen further price increases and, according to USDA, there will be a seasonal decline in beef prices in the final quarter of the year.* Adjustment Process A bright feature of the outlook is that market forces are moving shrimp markets toward a satisfactory equilibrium. Adjustments, of course, present problems — more to some than others. Shrimp vessel earnings, particularly, will be vulnerable during the adjustment period. Vessel operation costs have been substantially increased as a result of high fuel prices and other cost factors. Lower prices thereby create a need to increase production and productivity, in order to sustain revenues and profitability. Shrimp processors and distributors who were holding heavy inventories when prices began to slide also will cope with a squeeze on profitability. But given the long-term evidence of a strong demand for shrimp in the United States it is not foreseeable that shrimp markets will plunge into prolonged depression. Rather the adjustments now underway should restore normality in the markets by the end of 1974, probably sooner. *USDA, op. cit. 21 STATISTICAL APPENDIX 22 Table A-l. — Shrimp, first-of-the-month holdings, total Month : 1970 : 1971 19 72 ': 1973 : 1974 Thousand p 74,233 January : 68,607 78,690 ounab"' 95,772 83,967 February 65,603 69,805 72,519 85,942 86,814 March . 61,982 63,318 65,453 81,239 85,307 April May June . 57,517 55,098 62 , 89 3 71,286 . 55,899 47,293 61,689 62,762 . 52,414 43,353 64,329 57,774 July Augus t September October November December . 54,756 47,287 66,579 56,543 . 57,676 49,427 71,894 56,552 . 60,223 .' 66,605 1 73,179 ! 75,977 59,463 68,993 70,608 72,500 89,868 89,732 95,113 97,610 51,721 58,194 68,995 77,790 Source: N MFS, DMNS Table A-2. — Shrimp, first-of-the-month holdings, raw headless Month • • • • • : 1970 r 1971 : 1972 : 1973 . 1974 Thousand pounds 47,444 January : 44,105 52,807 52,721 47,097 February ; 42,099 37,325 46,517 45,557 47,863 March ; 39,429 35,158 40,705 40,358 46,891 April 36,560 29,756 36,710 32 , 306 May . 35,277 23,869 35,730 29,358 June ; 32,628 20,580 35,479 26,210 July : 34,699 22,961 37,054 25,706 Augus t : 36,094 25,473 40,054 26,831 September : 37,513 34,342 49 , 306 24,579 October : 42,718 41,745 49,326 30,069 November : 47,847 55,148 50,879 35,629 December : 50,290 48,102 52,877 42,085 23 Table A-3. — Shrimp, f irst-of-the-month holdings, breaded Month ; • • • • 19 70 : 19 71 19 72 : 1973 : 19 74 January ; * 25,883 10,583 10,246 14,581 February 8,974 9,947 9,655 13,697 March 7,661 9,719 9,785 12,612 April 7,488 9,892 10,966 May 7,2^2 9,618 10,043 June 7,2£2 9,168 10,891 July 8,336 9,811 11,064 August 8,369 9,085 11,256 September 9,478 9,935 9,902 October 9,747 9,069 10,597 November 9,758 8,841 12,937 December 9,213 10,399 13,972 *All breaded for 1970 included in unclassified table. Table A-4. — Shrimp, f irst-of-the-month holdings, peeled Mon th » • * • 19 70 : 1971 19 72 : 1973 1974 Thousand poun 11,976 January : * 25,651 17,401 February 14,673 12,263 23,738 18,103 March 13,724 11,516 25,048 18,344 April 12,057 11,810 21,684 May 11,011 11,408 17,080 June 10,076 13,805 16,112 July 12,787 15,986 14,325 Augus t 12,145 17,960 13,991 September 12,152 25,080 13,034 October 13,549 25,819 13,791 November 11,507 27,402 15,994 December 11,238 27,363 16,044 *A11 peeled for 1970 is included in unclassified table. 24 Table A-5. — Shrimp, first-of-the-month holdings, unclassified Month 1970 : 1971 : 1972 : 1973 1974 January : *24,502 4,230 7,154 4,888 February , *23,207 8,833 3,792 6,992 7,151 March ; *22,553 6,775 3,513 6,048 7,460 April : *20,957 5,797 4,481 6,330 May : *20,622 5,161 4,942 6,281 June : *12,786 4,740 5,877 4,561 July : *20,057 3,203 3,728 5,448 Augus t : *21,582 3,440 4,795 4,474 September : *22,710 3,491 5,547 4,206 October *23,887 4,042 5,518 3,737 November : *25,332 4,195 7,991 4,435 December . *25,687 3,947 6,971 5,689 *Included breaded and peeled. Table A-6. — Gulf shrimp landings Mori th • • 1970 1971 1972 : 1973 : 1974 Thousand pounds • January : 5,025 5,173 7,517 5,405 7,9 36 February 5,113 5,048 4,601 4,091 5,625 March ; 4,818 4,300 5,753 4,190 April 5,181 3,890 4,490 3,956 May . 12,317 12,173 13,970 7,975 June . 21,992 20,588 17,593 17,510 July : 16,192 18,819 20,165 14,485 Augus t : 16,876 18,639 19,901 9,653 September : 15,779 13,853 15,309 10,310 October 18,440 18,299 13,892 13,962 November : 13,995 14,027 12,189 11,297 December : 9,617 8,268 8,289 10,425 25 Table A-7. — Shrimp landings (heads-off weight) Month ; 19 70 : 19 71 19 72 : 1973 19 74 ■ Thousand poun 13,243 January : 9,738 9,666 13,471 13,700 February 10,821 11,956 9,403 12,006 March 13,881 13,726 11,382 7,371 April ; 10,861 6,558 7,724 8,031 May ; 16,020 17,354 19,453 14,830 June : 29,176 25,293 28,616 27,202 July . 26,459 30,719 34,536 26,747 Augus t : 25,801 30,191 31,109 24,044 September : 23,931 24,007 22,656 24,973 October . 24,776 26,701 25,313 25,059 November . 19,220 21,357 17,360 20,950 December 13,535 13,917 13,964 17,730 Total 224,203 234,190 234,759 222,414 Table A-8. — Shrimp imports, total Mon th 19 70 : 1971 : 1972 : 1973 : 1974 Thousand p 17,818 January : 18,637 15,212 16,530 25,343 February 14,532 11,356 14,353 14,839 20,906 March : 18,535 14,6jL6 14,383 14,397 April : 16,372 13,195 15,942 15,216 May : 15,514 14,2(&7 15,933 21,368 14,541 June ; 19,748 20,452 13,623 July : 16,083 14,677 20,327 14,735 August : 13,428 14,781 17,084 16,048 September : 18,182 16,996 16,799 16,169 October 24,569 18,647 26,379 26,419 November : 22,648 17,180 19 , 700 21,686 December : 20,464 24,519 18,618 18,401 Total 218,712 191,319 223,223 202,603 26 Table A-9. — Shrimp imports, raw headless Month • ! 1970 1971 1972 1973 1974 • • ousand dou • m rMi January : 11,868 3,684 10,774 10,633 14,297 February : 9,064 7,100 8,921 8,773 10,420 March : 11,408 8,766 8,768 9,318 April : 10,881 7,768 8,904 10,304 May : 9,622 8,673 9,651 9,432 June : 12,616 10,215 10,624 8,451 July 9,914 9,858 9,988 8,349 August : 6 , 816 8,622 •8,375 8 ,463 September : 12,013 11,436 9,859 9,754 October : 17,112 15,036 16,756 16,673 November : 15,257 12,526 12,275 12,338 December : 13,407 15,244 11,875 10,767 TOTAL : 139,978 123,928 126,770 123,255 27 Table A-10. — Shrimp imports, peeled raw Month : 1970 1971 1972 1973 1974 January : 6,289 5,678 6,493 5,427 9,220 February : 4,872 3,685 5,177 5,517 8,855 March : 6,344 5,167 5,222 4,402 April 4,893 5,160 6,581 4,421 May : 5,146 4,909 11,161 4,423 June : 6,439 5,143 9,031 4,656 July : 5,330 4,286 9,656 5,852 August : 5,550 5,608 8,169 7,077 September : 5,151 4,908 6,447 5,997 October : 6,527 3,193 9,249 8,609 November : 6,721 3,842 6,947 8,321 December : 6,239 8,579 6,010 6,717 TOTAL : 69,501 60,158 90,143 71,419 28 Table A-ll. — Shrimp imports, breaded >fc>nth 1970 1971 1972 1973 1974 January ! 218 130 -1UUUOCU1U ^UUl 183 118 119 February : 149 146 74 141 147 March : ; 276 123 90 131 April : 181 19 65 56 May : 41 151 109 121 June : 151 105 271 98 July \ 102 45 221 1 August : 50 8 75 51 September : 41 26 81 15 October : 57 107 4 76 November : 64 191 71 87 December : 83 161 78 83 TOTAL 1,413 1,212 1,322 978 29 Table A-12. — Shrimp Imports, canned Month '. 1970 1971 1972 1973 1974 January '. 179 425 234 112 835 February : 173 201 49 159 1,054 March : 256 295 121 228 April : 253 156 77 241 May : 359 281 74 391 June • 272 227 53 267 July ! 409 143 90 310 August l 375 138 4 94 September : 287 289 99 172 October ': 478 134 105 310 November \ 366 175 20 303 December i 468 277 197 440 TOTAL 3,875 2,742 1,123 3,027 30 Table A-13. — Shrimp imports, other (peeled cooked, not breaded and dried) Month 1970 1971 1972 1973 1974 ■Thousand pounds- January : 33 295 134 241 873 February 274 224 132 248 430 March : 251 265 182 317 April : 164 92 315 194 May : 346 193 373 174 June : 270 242 473 151 July \ 329 345 373 223 August ! 637 405 461 363 September : 690 337 313 231 October ! 395 177 265 751 November | 240 446 387 637 December ! 267 258 453 394 TOTAL 3,948 3,279 3,366 3,924 31 Table A-14. — Shrimp imports, total by count size (shell-on) 1971 1972 1973 Under 15 15,439 16,034 14,326 15-20 13,907 12.105 10,986 21-25 : 12,945 10,272 9,559 26-30 : 10,470 8,652 8,682 31-40 : 13,271 12,930 13,759 41-50 9,105 8,371 10,012 51-60 4,942 4,339 5,695 61-70 3,004 2,604 2,852 71 and over 3,433 3,103 3,626 Other ! 9,984 7,742 12,764 TOTAL 96,500 86,806 92,397 32 Table A-15. — Shrimp imports, total by count size (raw peeled) : 1971 1972 1973 Under 15 892 1,914 1,704 15-20 : 2,470 3,343 3,245 21-25 : 2,442 3,796 3,166 26-30 i 3,031 4,832 3,941 31-40 : 4,080 5,632 4,763 41-50 : 2,331 2,854 2,937 51-60 : 1,940 2,605 2,518 61-70 : 1,324 2,036 1,733 71 and over '. 13,047 32,558 26,102 Other ! 5,416 12,584 7,879 TOTAL J 36,975 72,206 57,991 33 Table A-16. —Total supplies of shrimp (heads-off weight) Month 1970 1971 1972 1973 1974 usand pour 99,472 January : 89,734 96,350 118,727 118,400 February : 83,707 83,611 92,219 105,952 113,100 March : 87,185 84,293 86,762 102,757 April : 76,745 70,618 83,697 89,473 May ; 81,416 71,966 97,461 83,665 June : 92,805 78,631 103,569 90,513 July : 86,918 83,291 109,905 85,282 August : 86,432 84,979 111,554 82,042 September : 94,105 93,079 125,729 80,319 October : 109,287 107,450 134,273 99,279 November : 108,565 101,388 130,465 103,286 December : 103,759 106,923 125,154 105,057 34 Table A-17. — Fresh and frozen shrimp consumption Month 1970 1971 1972 1973 1974 ■ Thousand pounds- January : : 24,726 29,979 26,016 31,033 33,400 February : 22,572 21,271 28,097 21,402 29,600 March : : 28,181 28,805 23,189 26,961 April : 22,873 25,197 22,955 26,527 May : 27,261 25,971 30,305 22,726 June : 31,088 20,933 30,548 26,482 July : : 27,976 30,468 33,071 28,574 August : 24,127 25,439 29,488 30,592 September : 28,171 24,272 33,342 21,951 October : 34,420 32,614 35,786 28,911 November : 31,038 24,547 29,495 23,722 December I 27,109 32,475 27,409 19,633 TOTAL : 329,542 321,971 320, 601 289,254 35 Table A-18. — Wholesale price at Chicago, 26-30 count shrimp Month i" 1970 1971 1972 1973 1974 Tho 1.20 usand pound 1.93 January : 1.32 1.82 2.72 February : 1.33 1.30 2.05 1.93 2.51 March : 1.32 1.39 2.06 2.05 2.42 April 1.32 1.43 2.04 2.04 May : 1.34 1.54 2.09 2.14 June : 1.35 1.58 1.92 2.18 July : 1.27 1.55 1.92 2.20 August : 1.23 1.63 1.77 2.51 September : 1.15 1.56 1.78 2.73 October : 1.16 1.59 1.72 2.61 November : 1.18 1.73 1.68 2.76 December : 1.18 1.80 1.70 2.77 36 Table A-19. — Wholesale price at New York, 26-30 count shrimp Month 1970 1971 1972 1973 1974 Dollars per pound January : 1.28 1.20 February : 1.30 1.24 March : 1.29 1.31 April : 1.28 1.42 May : : 1.29 1.52 June : 1.27 1.51 July ; 1.22 1.49 August : 1.22 1.62 September : 1.19 1.57 October : 1.15 1.60 November : 1.16 1.74 December : 1.16 1.79 1.88 2.01 2.05 2.06 2.03 1.93 1.94 1.82 1.70 1.75 1.66 1.68 1.73 1.87 1.99 2.02 2.13 2.16 2.18 2.48 2.69 2.61 2.68 2.74 2.64 2.47 2.38 37 Table A-20, — Monthly retail price at Baltimore, 21-25 count shrimp Month 1970 1971 1972 1973 1974 Dollars per pound January 2.19 2.10 2.75 2.84 3.88 February 2.14 2.12 2.83 2.89 3.94 March : 2.14 2.16 2.84 3.06 3.93 April i 2.01 2.25 3.02 3.05 May 1.97 2.32 3.05 3.01 June : 1.97 2.47 2.99 2.94 July : 1.97 2.49 2.92 2.94 August \ 1.97 2.52 2.95 3.13 September \ 2.02 2.59 2.99 3.57 October S 2.09 2.59 2.99 3.75 November S 2.12 2.59 2.89 3.79 December | 2.14 2.52 2.84 3.79 38 Table A-21. — Shrimp exvessel price index (1967 = 100) Month 1970 1971 1972 1973 1974 January : 117.0 104.9 158 . 1 146.7 221.8 February : 132.7 112.5 163.8 159.8 March : 126.2 124.6 159.4 168.6 April : 127.9 143.3 172.4 179.2 May : 118. A 148.0 161.6 181.9 June : 123.8 132.8 150.6 182.3 July : 115.4 147.3 154.7 193.1 August : 118.9 146.6 141.1 219.0 September : 103.1 153.2 140.3 229.4 October ! 104.4 141.9 147.1 220.4 Nov ember : 104 . 6 150.8 142.3 230.6 December ! 104.9 159.5 142.9 229.4 39 fl *T -i r» *H >. ^ J5 S3 e i . 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