Jamaica's fish farmers have lost market share over the past 18 months with locally produced frozen tilapia fillets being replaced by imported product, mainly from China, which, after minimal duties, is around half the price of the comparable domestic product. While importers argue that the market is divided into two distinct segments, one for inexpensive imported frozen fillets, the other for locally produced fresh fillets which can be sold at a premium, Jamaican farmers have had to slash headcount and virtually cease processing to focus on the wholesale farm gate market.
Donnie Bunting recently eliminated his tilapia fillet processing operation, cutting staff from 60 to 20, to focus on the local wholesale market.
Similarly, Jamaica's number one tilapia producer, Jamaica Broilers Group (JBG), which was exporting 100,000 pounds of frozen fillets per week at its peak, ceased processing operations and suspended its contract farming arrangement with off-site producers altogether some 18 months ago to begin importing frozen fillets to retain customers unwilling to take price increases. While Bunting pointed to importers like JBG, National Meats, Rainforest Seafoods and the Hart family's Caribbean Producers Group (CPG) as the private sector companies responsible for making locally produced frozen fillets unviable, importers reason that under existing conditions, there is no way the locally produced productive can be competitive.
According to Rainforest CEO Brian Jardim, the economics do not favour the frozen Jamaican product. "When I went to Donnie's facility, there were approximately five or six people processing fish; we buy a lot from Guyana where a plant may have 300 people; in China it may have 5,000," he said, noting the difference in scale of operations that compete in the global market. "The four or five of us who bring tilapia in, we're coming at it from all sides," said Jardim, noting that China produces 90 per cent of the frozen tilapia in the world, and commands 90 per cent of the US market. "They can produce fillets at less than anywhere in the region," he said. Apart from China, Rainforest imports seafood from Belize, Suriname, Guyana, Trinidad, Peru, Chile, the US, Canada, Norway, Spain, Thailand, and Panama. The company exports primarily to the Caricom region, including countries like Grand Cayman, Haiti, Antigua, St Lucia, Dominica, St Vincent, Barbados, and Grenada.
Despite the pre-eminence of China in the global tilapia market, Jardim said locally grown fresh fillets have a promising future, both for the domestic market where upscale hotels and supermarkets value the fresh factor; as well as for export markets like the US and Europe where excess air cargo capacity can competitively deliver fresh fillets on ice. Jardim, who is planning to open a $500-million processing plant on Slipe Road in Kingston next year, is placing his bets on value-added products which will rely heavily on tilapia and shrimp produced locally.
JBG chairman Robert Levy, who helped foster the growth of Jamaica's fish farming industry, suggested the future of the sector sits firmly in government hands. "If they want to revive the tilapia industry, then the Government has to realise that local producers, who are perfectly capable of meeting the hotel and supermarket demand in terms of quality and quantity, have to be defended," he argued.
Stacks of frozen products at Rainforest Seafoods freeport headquarters in Montego Bay, Jamaica - the Caribbean's largest importer and exporter of seafood products.
While Levy stopped short of detailing precisely what defence mechanism he saw fit for the Government to implement, he acknowledged that Jamaica is in no position to match subsidies assumed to be reflected in the cost of imported tilapia.
"Eight to 10 years ago we were supplying every Jamaican hotel and supermarket," Levy said, adding that over the last 18 months the company saw increases in the cost of inputs with large overseas customers simultaneously being offered more competitive pricing on product from China. US grocers Winn-Dixie and Publix, and UK-based Tesco, once important customers for the JBG's Jamaican frozen fillets, were unwilling to take price increases, Levy said. Levy took issue with the historical policy conflict that prioritises inexpensive food over jobs: "Can a country survive on that premise? No other country does that."
Tufton cited health and safety as another concern related to imported foods. "That's something we've had difficulty ascertaining or getting verified," he said, pointing out that no new import licenses have been granted since a container of tilapia was seized at the port earlier this year over technicalities surrounding its country of origin. Tufton pointed out that the local market is a US$20-million industry and that the ministry will work with the farmers to give them as much support as possible. He noted that other issues which needed to be addressed included ascertaining the size of the market, the issue of whether the frozen fillet market and the fresh market are distinct or not, as well as the local cost of production, where energy costs are an important consideration.
Rainforest Seafoods, which is the largest seafood importer and exporter in the Caribbean, does not have an issue where safety is concerned because it sources only from farms certified through the Global Aquaculture Alliance and the Aquaculture Certification Council, and those that adhere to stringent European Union standards, said its CEO. Nonetheless, Jardim reiterated his commitment to supporting local fish farmers, noting that an array of processed products, from deboned whole fish to spiced fillets and shrimp would be produced at the company's Slipe Road plant starting in 2010.
Jardim said red tilapia raised in salt water had an especially strong market acceptance and that Rainforest would be buying both fresh water and salt water tilapia from local farmers in great quantities once the Kingston plant is operational and ramps up production. Bunting countered, meanwhile, that raising tilapia in salt water, which is not its natural environment, is disadvantageous on two counts, namely the feed-to-protein conversion is less efficient due to the fish's struggle to fight off the osmosis caused by salt water, and tilapia is more vulnerable to parasites in salt water which affects the quality of the meat.
JBG CEO Christopher Levy noted the difference in maturity of Jamaica's poultry industry, which is around 50 years old, compared to the fish farming industry, which has existed for only three decades. He attributed the protection of poultry to this maturity, as well as its generally accepted role in ensuring food security, not just in Jamaica, where imported chicken attracts a duty of 240 per cent, but in developed countries like the US where the industry is well protected against foreign competition. The duty on imported tilapia meanwhile, is negligible, he said. He went on to point out other differences that made defending Jamaica's fish farming industry complex. "A chicken is a chicken, fish are varied.you can't just say we're not going to allow in any other fish. However, I do think it is very important for the Government to create the space for industry to grow - governments create the space, and the private sector fills it."
While the JBG CEO also declined to suggest any specific non-tariff barriers that could be imposed to help defend national tilapia farmers, he alluded to sanitary and phytosanitary measures used to protect the poultry industry in the US, as well as different fuel grade ethanol standards the EU imposes to protect bloc producers as examples. "A country and a government has to decide what they want. if the government decides that this is an industry that it wants to defend, there's no doubt that there's a mechanism they can use," said Levy. "Where there's a will there's a way." The Government has to be thoughtful however, Levy added, noting that any policy decision will have long-term consequences, as was the case when Jamaica saw the demise of its dairy industry following milk powder imports.
"There's a distinct difference between free trade and fair trade," he added. "The term free trade is bantered about freely - fair trade is more complicated. There's no doubt that every country has to defend its agriculture industry and create rural jobs, especially in Jamaica. We have a workforce that is rural, cane is out of play, bauxite has slowed down. the government has to create the space for agriculture; we used to grow all the rice we consumed, we produced all the milk we needed, then the policy changed, cheap milk powder was available from New Zealand.then it became difficult for us to access milk powder, and the dairy industry is just rebounding now. These policies in agriculture have long-term effects. When it comes to agriculture, the discussions have to be very unemotional - there's more at play than the kind of worldview you have," he said.
JBG continues to produce tilapia on its two farms, which have 100 acres of pond each. It no longer exports tilapia and its domestic production, sold to a variety of small-to-medium sized distributors at its farm gates, is down some 30 per cent, Levy said. The contract farmers, which together supplied JBG from a combined total of an additional 100 acres of pond area at the height of production, are now on their own. JBG began importing frozen tilapia fillets to complement its position in the local market," he added. "If the Government wants a policy of importation of food, we're a food company and we have to be in that play," said Levy. "It's a balance." Levy said JBG definitely sees two distinct markets, for frozen and fresh tilapia, but noted there's enough capacity in Jamaica to supply both segments. Whether the company sources everything locally or continues importing to supplement local production, it comes down to the Government's will, he said. "The Government has to be thoughtful; it can't implement a knee-jerk policy."
Bunting, meanwhile, has diversified his operation and has been producing lamb for the past three years to complement his wholesale fish operation. Short of any structural change that could make local frozen fillets more competitive in the domestic market, both CBG's CEO and the founder of Longville Park Farms voiced enthusiasm about the prospect of selling wholesale tilapia to Rainforest Seafoods to let the distributor do the processing at its new plant in Kingston, once it's in operation.
In the meantime, Jardim's message to fish farmers is, "hang in there, we're coming". Rainforest expects to break ground on the construction of its Slipe Road processing facility by October, and it is currently exploring financing options to develop the project having already secured the land. In a statement responding to the company's reaction to the possibility of non-tarriff barriers being imposed on imported tilapia, Rainforest general manager Ernest Grant wrote, "We are in full support of the initiatives recently announced by Minister of Agriculture and Fisheries, Dr Hon Christopher Tufton regarding the regulations which are intended to regularise and provide sustainability to the local supply of the marine life in our territorial waters. Rainforest Seafoods will be making a significant investment in a processing plant at Slipe Road in Kingston which will provide support to the local Tilapia farmers. The growing, harvesting and processing of Tilapia in Jamaica can allow for the development of a lucrative export market to be sustained for fresh fillets as well as value added fillets (breaded jerk flavoured fillets, for example) to become the base of support for the local farmers. This market is distinctly different to that supplied by the low-cost frozen tilapia fillets from Asian sources and should be encouraged and supported by allowing duty-free concessions or waivers to investors willing to enter the market. With regards to non-tariff barriers to restrict the importing of frozen tilapia fillets, which indirectly compete with locally grown product, this requires serious thought. There can be repercussions to trade when the local market grows sufficiently to consider expansion of the export market. There are other countries in the region producing tilapia, namely Belize, Costa Rica and Guyana, which have found lucrative export markets for their fresh tilapia fillets without imposing restrictive non-tariff barriers. If the non-tariff barriers will result in an increase in the price of the frozen tilapia fillets to the consumers, there will undoubtedly be a shift in demand to other economically priced fillets which can be sourced from either regional or extra-regional sources offering comparable taste and texture. This will become true especially as it relates to supplying economical protein options to the all-Inclusive hotels, the major share of the market, which are always in search of good quality, low-priced product. Other options should be considered which will provide the competitive advantage to the local producers."
One compelling argument for the defence of Jamaica's fish farming industry goes hand-in-hand with efforts to preserve the country's coastal fisheries, according to CPG CEO Mark Hart. "If the fisheries division was more vigilant of the size of fish harvested from our coastal waters, that would force the market towards increasing our farm production," said Hart, noting the lack of regulation was really only having the effect of depleting the resource more and more each year. "They aren't serious about protecting our resource," he contended. Bunting voiced similar concern over the banning of spear fishing, which he opined was a misguided effort. Bunting and Hart concurred in that the right approach would be to set size restrictions to coastal fish harvests, and use nimble, random enforcement to get the message out to fishermen.
Hart described CPG as one of the founders of the local fish farming industry, and said the company maintained an interest in seeing its success despite being an importer of frozen tilapia fillets, among a wide variety of other products, for the past several years. Hart also made mention of the demanding nature of the tourism industry and the importance of bringing domestic farmed fish up to the highest standards. "A hotel views a piece of fish, or a bottle of wine, or even a bunch of grapes, as a raw material, so it's vital for them to have proper inputs, that they deem to be necessary to put out the very best product," he said, adding, "at the end of the day that's what's going to add value to the industry and to the country in earning forign exchange. Having said that, what we need to do is encourage in a manageable way to better production locally, not only in quality, but being able to have the tourism industry consider local product, not just for quality but for consistency of supply.
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