In the 1990s, a US market for European sea bass was almost nonexistent. Since the turn of the century, imports have grown from zero to almost 10,000 metric tons. From 2015 when the quantities became more significant, the species entered the large whitefish market, although with a significant price premium relative to tilapia, the largest species in this market. This increase in imports suggests strong seafood demand, which in general creates good conditions for aquaculture production to grow.
The U.S. is the world’s largest seafood importer by value, and imports are rapidly increasing. Even though the U.S. is the world’s sixth-largest fishing nation, imports dominate the market as imports are estimated to make up between 65% and 90% of total U.S. seafood consumption.
“U.S. fisheries landings have been relatively stable for decades, and as most stocks are well managed but fully exploited there is little opportunity for increased supply from this sector.”
This is particularly true for fresh fish, as limited quantities of domestic wild-caught fish are marketed fresh. The increase in imports suggests strong seafood demand, which in general creates good conditions for aquaculture production to grow.
Globally, the aquaculture sector has grown rapidly as the landings of wild fish have stagnated. However, this has not impacted the U.S. aquaculture sector very much, indicating that the opportunity created by increased seafood demand is not being exploited by US aquaculture producers.
In this article, we present a paper that use the developments in the imports of one niche species, European sea bass (Dicentrarchus labrax), which is marketed as Branzino in the US, to show that the market is not one of these constraints.
Sea bass aquaculture in the Mediterranean
European sea bass is the most important farmed fish in the Mediterranean region. Sea bass is grown in marine sea-pens, and reaches a market size of 300–500 g in 15–18 months. According to the FAO (2021), farmed sea bass production reached 263,215 mt in 2019. Turkey is the main producer with 52% of the production, followed by the EU with 32% and Egypt with 12% (Figure 1).
The share of Turkish production of sea bass has been rapidly increasing since the early 2000s, as Turkish sea bass production has been increasing much faster. In the EU, the main farmed sea bass producers are Greece (16% of the total sea bass production), followed by Spain (10%) and Croatia (2%). Wild sea bass catches are minor, accounting for 5,206 mt in 2019.
Total sea bass production has grown, at an annual rate of 7.6% but this varies considerably by country, with the highest annual growth rate of 12.5% in Turkey and a much lower growth rate of 4.0% in the EU. Aquaculture production in the EU has increased slightly, despite significant investment aimed to boost aquaculture production.
Lower growth in the EU aquaculture sector can be mainly explained by heavy regulatory burden in terms of both time and impact assessments required, difficulties in access to space and water with competing sectors contributing to higher costs, together with keen market competition as increased imports from Turkey put downward pressure on prices.
The sea bass aquaculture in Turkey has lower production cost and is more profitable than in the EU.
The U.S. market for sea bass
European sea bass is commonly marketed by U.S. chefs under its Italian name, Branzino. It is a fish with white, flaky meat and a mild, sweet flavor, and it is popular on menus of upscale restaurants in the Northeast U.S. and Southern California.
In the 1990s, a U.S. market for European sea bass was almost nonexistent, with as little as 37 mt imported annually (Figure 2) and virtually all of this was frozen. As aquaculture of sea bass gained momentum in the Mediterranean and producers there faced increasing competition and lower prices, they started looking for new markets.
The U.S. became one of these as imports of sea bass slowly increased in the 2000s. In the U.S. import data, sea bass is not separately identified until 2012. However, there are limited imports of any other species from Greece, Italy, and Spain.
Hence, it is reasonable to assume that fresh imports of sea bass from Greece, Italy, and Spain are classified as non specified marine fish prior to 2012 in the U.S. trade data. As shown in Figure 2, this provides an almost seamless transition between 2011 and 2012.
It was not until the early 2010s that fresh sea bass markets in the U.S. became better established, as illustrated by the rapid increase in fresh imports (Figure 2). Imports of sea bass increased more than three-fold from 2,977 mt in 2012 to 9,650 mt in 2019. Nearly 90% of sea bass imports were whole fresh, gutted fish at so-called portion size (1lb to 1.5 lb).
“Using a live weight conversion factor of 1.12, this is equivalent to 10,005 mt live weight of fresh sea bass. This is significant, as it is comparable to U.S. farmed Atlantic salmon production (16,107 mt) and about half of U.S. rainbow trout production (22,370 mt).”
Similarly, fresh imports of sea bass were valued in 2019 at $52.4 million, which is slightly less than the value of U.S. farmed salmon production ($67.3 million) and more than half of the value of U.S. farmed rainbow trout ($95.7 million).
This is a quantity and value that would make sea bass the fourth-largest farmed finfish species by value if it had been produced domestically in the U.S. The trends in U.S. imports of sea bass largely reflect where the production takes place as well as market competition.
“The increase in exports to the U.S. was led by Greece, whose producers faced increasingly keen competition from Turkish producers targeting the EU market. In 2004, Turkey overtook Greece as the largest producer of sea bass.”
As Turkey’s total production has increased, Turkey has steadily taken market share from Greece, including in the U.S., and in 2018 Turkey became the largest supplier of sea bass in the US market.
The rapid development of the U.S. sea bass market is indicative of the strong demand for fresh fish in the U.S. Moreover, being sold as portion-sized fish is a clear indication that the market is open to nonstandard product forms as long as the product is competitive on price and quality.
Many authors have noted how aquaculture producers increase their competitiveness in the supply chain by being able to supply products of stable quality with a high degree of reliability. Figure 3 shows the average import volume of sea bass per month to the U.S. for the period 2012 to 2019.
The figure shows a steady supply of fresh products with virtually no seasonal variation. Hence, it is the market and not the natural production cycle that is determining the supply profile, and the exporters can deliver the same volume year-round.
This is often a challenge for aquaculture producers in the U.S., where the harvest is dependent on the growth cycle. The parallel to fisheries with a race to fish is obvious.
Garlock, Nguyen, et al. (2020) discuss in the case of U.S. aquaculture production how potential production faces three competitive scenarios: it can create new market segments, it can win market share from domestic wild fish, and it can win market share from imports.
A potential importer faces similar scenarios. Figure 4 shows the price development for sea bass together with the price development for tilapia, the most consumed farmed whitefish species in the U.S. market. Two features are apparent.
There is a sharp decline in unit price of imported sea bass between 2012 and 2019. The average unit price in 2012 was $10.00 per kg, which fell to $5.90 per kg in 2019. This is steeper than the price decline in Europe, suggesting that exchange rates have been beneficial in addition to productivity growth for the competitiveness of sea bass in the U.S.
The declining trend in the sea bass price follows a very similar pattern as the price of fresh imported tilapia fillets from 2015, indicative of market integration. However, while the price of sea bass averaged $5.90 per kg in 2019, which is similar to the average price of $6.02 per kg for tilapia fillets, this implies a significantly higher price for round sea bass as it is head-on fish.
In recent decades, increased trade has made the seafood market global for most species, as seafood has become the most highly traded food category. Several studies investigating market integration for specific species or groups of species report that there is a global market for most species groups, but that the markets for different species groups are not integrated.
“In a global market, the price development over time is similar in all regions, even though there may be differences in price levels because of transportation costs and quality differences, as a shortage in one region is corrected by increases in imports from other regions.”
However, there are exceptions in the case of wild relative to farmed fish for some species. Factors that may prevent market integration include high transportation costs leading to a lack of trade, or differences in product characteristics.
The main tool used in the literature to investigate the degree of market integration is to investigate the relationship between the prices of different markets. The results of market integration tests are reported in Table 1 using data starting in January 2015.
The results indicate that one cannot reject the null hypothesis of one cointegration vector. Moreover, as one cannot reject the law of one price hypothesis, the two species share the same price determination process from 2015.
Hence, a successful new aquaculture product does not seem to be able to maintain a separate niche for very long but seems to be rapidly driven into an established market segment, where the best it can do is to obtain a premium associated with quality or other characteristics that consumers prefer.
However, the premium can be significant. This is potentially of great importance for U.S. aquaculture producers. The tendency demonstrated in several studies for U.S. consumers to prefer domestically produced fish to imports, and with a limited preference for wild fish, is important if domestically farmed seafood is to be competitive and maintain a price premium relative to imports.
Sea bass is a recent addition to the U.S. seafood market, and the species appears to have been well received given the rapid increase in imports. This strongly suggests that there is still room for new species in the market, and it is not too hard to introduce them if the price and quality point is reasonable.
Hence, demand does not appear to be a significant constraint for potential U.S. aquaculture producers. Moreover, it strongly suggests that it is possible to develop niches for new species and product forms even in a market that is dominated by a few, mostly imported, species.
However, at a relatively moderate quantity, imported sea bass started to compete in the larger whitefish market where tilapia is the leading species, although obtaining a premium.
“This shows that there is relatively little room to develop new independent market segments, as most products in the U.S. get pulled into one of the large species groups for which there are global markets.”
For an expanding industry this may be an advantage, though, as the price effect is limited by the larger quantity in the market that one enters. The result that foreign aquaculture producers of a new species can create a new market segment in the U.S. with relative ease suggests that this is also an avenue that is open to U.S. aquaculture producers.
One company in Connecticut has started U.S. production of sea bass in re- circulating aquaculture systems, which are arguably more environmentally friendly than the sea-cage farming used to produce imported sea bass, but production is minor.
“That U.S. producers are not able to exploit this opportunity is a strong indication that their main challenges are to be found in other places in the supply chain. Knapp and Rubino (2016) strongly suggest that the regulatory system is the main culprit, and this is substantiated in recent work (Van Senten et al. 2020).”
However, this does not appear to be an easy issue to solve, and Guillen et al. (2019) show how the EU struggles with similar challenges in relation to its aquaculture industry and similarly ends up with increasing demand being served by imports.
Hence, while increased aquaculture production is an economic opportunity, as observed by Garlock, Asche, et al. (2020), it is an opportunity that developed countries fail to exploit despite struggling coastal communities and increasing demand for sustainably produced protein.
This is a summarized version developed by the editorial team of Aquaculture Magazine based on the review article titled “MARKET OPPORTUNITIES FOR US AQUACULTURE PRODUCERS: THE CASE OF BRANZINO)” developed by: FRANK ASCHE – University of Florida and University of Stavanger; TARYN GARLOCK and EDWARD CAMP – University of Florida; JORDI GUILLEN – European Commission Joint Research Centre; GANESH KUMAR – Mississippi State University; IGNACIO LLORENTE – University of Cantabria; GINA SHAMSHAK – Goucher College.
The original article, including tables and figures, was published on MARCH 2022, through MARINE RESOURCE ECONOMICS.
The full version can be accessed online through this link: https://doi.org/10.1086/718437