China stops buying US squid in advance of tariffs
A California market squid. Photograph courtesy of the National Oceanic and Atmospheric Administration.
The 25% retaliatory tariffs that China has promised to slap on about a billion dollars worth of US seafood imports don’t go into effect for another three weeks, but US squid producers already are feeling the pain.
Chinese buyers have started cancelling their orders out of concern that shipments won’t arrive in time, Undercurrent News has learned.
“People are not buying anything right now,” said Jeff Reichle, president of Lund’s Fisheries, a squid harvester, processor and exporter based in Cape May, New Jersey. “China is completely dead.”
China issued its retaliatory tariffs late on Friday, including nearly 200 seafood items along with numerous agricultural goods in a list of some 545 total items worth a combined $50bn, as part of a tit-for-tat trade battle with US president Donald Trump. Trump earlier in the day had updated the list of Chinese products for which he had levied a 25% import tariff, increasing the number to 1,102 worth $50bn.
Calamari. Photo courtesy of Del Mar Seafoods.
Following China’s response, the White House on Monday night further upped the ante by ordering the US Trade Representative to draw up a new list of $200bn-worth of Chinese goods to hit with an additional 10% tariff.
Beijing’s tariffs threaten to hit a number of seafood sectors particularly hard when they go into effect in a few weeks, including the US lobster industry, which counted on China to buy 7,894 metric tons of lobster in 2017 worth $136.9 million.
Not too far behind the US lobster industry in its reliance on China is the US squid industry.
The US sent China 34,713t of squid worth $92.8m in 2017, nearly half of its overall 71,165t squid export volume and more than half of its $181.9m overall export value, based on National Oceanic and Atmospheric Administration data (NOAA).
By comparison, the second and third largest markets for US squid are Vietnam, which imported 8,855t worth $25.4m last year, and Japan, which imported 8,055t worth $21.5m.
‘We’re all dazed and confused here’
In particular, it’s the California market squid (Doryteuthis loligo opalescens) that the Chinese love. China imports roughly 70% of the 107,048 metric tons of the species caught off the California coast, estimates Joe Cappuccio, founder and president of Del Mar Seafoods, the US’ largest harvester and processor of the species.
Smaller and less expensive than most other squid, the California market squid can reach a total “tube length” of 28 cm, though a more typical size is 10 to 15 cm. They live just six to nine months, dying shortly after they reproduce, but are known for being able to handle a high amount of fishing pressure.
The California squid fishery was started in 1863 by Chinese immigrants, who used torches at night to attract them and skiffs to encircle a net around them. Today they’re caught by purse seiners and light boats who still use lights to draw them in.
When it comes to consuming the creature, “there is no substitute for California squid”, Reichle said. “The person that goes to a restaurant in China and orders a lobster is not the same person that orders squid. The squid, in China, is eaten by everyone, regardless of income level.”
Americans see squid and think calamari. But in China, squid is often served in a hotpot, dropping it into boiling water at a table. As a result, it’s popular during winter months.
China’s move was a punch to the gut for Del Mar, Cappuccio said. His company maintains eight of its own squid harvesting vessels and contracts with three other independent boats to harvest 20% to 25% of the California quota.
Lund’s, which also maintains a West Coast operation, catches and processes about 10% of California’s squid, said Reichle.
“We’re all dazed and confused here,” Cappuccio said on Tuesday.
China recently has paid top dollar for the California squid – roughly $2,700 per metric ton – plus a roughly 27% tariff based on a “minimum price” set by the Chinese government of $3,500 ($945). However, once the new 25% tariff ($911.25) is added on, the cost of squid in China will go from a total of $3,645 per metric ton to $4,556.25, an amount he and Reichle are both convinced the Chinese importers will not being willing to bare.
There are few remaining options for the US companies, except for reducing costs in order to keep the pain as low as possible for the Chinese buyers, the two men said.
“We’re all going to have to cut our margins back, the harvesters and the processors,” Cappuccio said.
On the bright side, as the price of squid is reduced, doors might open in other countries that were outbid by China. Cappuccio mentioned the Philippines, which he suggested could buy eager to buy more than the 1,732t of squid it spent $4.2m on in 2017.
Chinese importers similarly will struggle to replace California squid, Reichle said. There aren’t other kinds of squid that can easily take its place. In recent years when El Ninos, bands of warm ocean water that develop in the central and east-central equatorial Pacific, have hurt production, China simply went without importing as much squid, he said.
Solution needed before October
Undercurrent confirmed at least one report of squid containers on the water that may not get into China. Cappuccio said his company is keeping its fingers crossed for a few that were en route to China on Friday when the news broke about the tariffs.
But it could be worse, he said.
The Monterey Bay area of the California coast where squid are being harvested now accounts for only 20% to 30% of the total annual quota. The much larger portion, roughly 80%, will get harvested in the more southernly California coast between early October and late December.
However, should the Trump administration not be able to work out its differences with China before early October, the US squid industry could be in trouble.
“Come October, our company alone will be packing and shipping 30 containers a day, and we’ve done as many as 40,” Cappuccio said, noting that a single container typically contains 50,000 lbs.
Multiple trade experts have been quoted in the press as expressing skepticism that a deal can be reached between China and the US before July 6, and one trade expert said it could take the rest of the year. But Cappuccio is trying to remain optimistic.
“I think it’s too early right now to know what to think,” he said Tuesday. “We’re all guessing at this point.”
Originally posted: https://www.undercurrentnews.com/2018/06/20/china-stops-buying-us-squid-in-advance-of-tariffs/
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