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Skyrocketing feed costs, import and inspection worries continue

For around 20 years, the cost of catfish feed has ranged from $200 to $300 per ton. In 2012, feed costs skyrocketed. Low protein feed cost over $500 per ton. Some producers paid $600.

For around 20 years, the cost of catfish feed has ranged from $200 to $300 per ton, although it seldom hit $300. That has changed and – along with cheap imports and a continuing fight to move import inspection from the Food and Drug Administration (FDA) to the USDA – the U.S. catfish industry has been hard hit.

In 2012, feed costs skyrocketed. Low protein feed cost over $500 per ton. Some producers paid $600.

“Roughly, about every $10 per ton of feed represents a penny per pound of production,” says Joey Lowery, president of Catfish Farmers of America. “None of us saw the price rise coming. A high number of producers had feed booked but we didn’t have enough booked to cover the entire season. When your booking runs out and you’re looking at paying $500 to $600 per ton, the bottom line numbers just won’t work. Because of that, producers were forced to cut back feeding and production.

“The heck of it is that, coming into this year, we thought there was probably too many fish. Now, it appears the feed tonnage will be flat compared to (2011).”

Lowery, based in central Arkansas, points out that a decade ago the state produced some 100million pounds of fish. In 2012, according to the USDA’s National Agriculture Statistics Service (NASS) production had shrunk to 20 million pounds of fish.

“It’s hard to see where all this will eventually shake out,” says Lowery. “It would have been helpful if there had been a reduction in the feed tonnage this year. I don’t think that will happen. The only remedy there is a sales increase (of catfish).”

Import/inspection tussle

Input costs are only one front where U.S. catfish producers are under pressure. Despite continuing issues with inspections of imported seafood, some lawmakers have rigidly argued against moving inspections from the FDA to the USDA as called for in the 2008 farm bill.

In fact, the farm bill passed by the Senate earlier this summer did away with the switch. Shortly thereafter, the House Agriculture Committee narrowly defeated a similar proposal, 25-20.

See more here.

Prior to the vote, Minnesota Rep. Collin Peterson, ranking member, rued the fact that the FDA has responsibility for inspecting any food. “Frankly, in my opinion, FDA should have never been given authority over food safety. We should have kept that with the USDA in the first place and we’d have had a lot better situation in this country. If I had my way we’d take all the (food) inspection away from FDA and put it with USDA.”

Reasoning for the USDA seafood inspections often includes the long-standing complaint about the miniscule percentage of imports actually checked by the FDA. A mid-October analysis by The Catfish Institute found that between January and September of this year “citing the presence of illegal and potentially dangerous drugs and/or salmonella, the FDA refused 54 shipments of imported tilapia. … The countries of origin of rejected fish were China (29 refusals), Taiwan (24 refusals) and Malaysia (1 refusal).

“This nine month 2012 data compares with 61 refusals of tilapia shipments during the same period last year. After growing rapidly in recent years, imports of frozen tilapia fillets declined to 292 million pounds in 2011, down from 333 pounds in 2010. U.S. farm-raised catfish is a safe and delicious substitute for imported tilapia.

“Despite poor water quality and lax health and safety regulations, China is the world's largest producer and exporter of farmed fish. More than 80 percent of the seafood Americans eat is imported. Many consumers and experts are concerned because the FDA visually inspects only about two percent of these imports. Moreover, the FDA tests a mere two-tenths of one percent of imported seafood for banned drugs and illegal additives.”

See here for FDA refusal monthly report (click on month, then category 16).

An Oct. 22 report by NASS found that imports of catfish for August 2012 “totaled 23.7 million pounds, up 29 percent from the amount imported in August 2011. Imports were from Brazil, Canada, China, French Polynesia, Iceland, New Zealand, the Philippines, Thailand, and Vietnam. The (catfish) imports totaled 84.0 thousand pounds, which were from China.”

The NASS report, says Lowery, shows that “anytime you have something in the marketplace that’s a lot cheaper and, many time labeling isn’t enforced, it will have a big impact.

“A lot of companies here that are involved with seafood imports are about to come under a zero tariff. That’s because U.S. commerce officials won’t use a surrogate country that better reflects the market. They’re basing pricing and costs on Bangladesh and that skews the numbers. But they keep doing it and, as a result, it’s making it easier and easier for the importers.”

Positives, pay to play

Lowery insists the imported catfish “just isn’t up to the same standards (as U.S.-raised catfish). Too many shipments still aren’t being inspected. It’s a bad deal.

“I’m not making excuses for the U.S. industry, either. Even with everything we’re facing, there are still positives.

“At this time last year, fish was probably about 48 cents a pound higher. We still sold 325 million pounds. That tells me we have a core customer that demands our product.”

What hurt U.S. producers last year “was we just ran out of fish. When that happened, some folks had to substitute (with imported catfish) to keep their businesses going. That was unfortunate.

I think we have ample supply now. We’ve just got to keep input prices at a level where farmers can survive until the excess inventory is worked off.

“We’ve had higher freezer inventories and some claim that’s a cloud over the industry. A month’s processing is about 10 million pounds of fillets. I don’t know if that’s bad, or not – it would seem to tell the consumer there’s inventory available to supply them.”

Lowery isn’t without some sympathy for lawmakers opposed to USDA inspections of catfish. “Think about it: Vietnam threatens politicians. You know, ‘Well, we’re not going to buy your beef. If y’all don’t take our fish, we’re going to quit buying beef off you.’”

He has less sympathy for anyone giving in to the threats. “Well, maybe they would quit buying for a little while. But sit back and consider it. Where else are they going to get the quality they get from the United States? Beef, poultry, anything – where else are they going to go? If they want to feed their people quality products, they’ll be back buying from us.

“I’m disappointed in our trade and commerce (officials). We don’t play hardball like we should with a lot of these issues.

“Of course, there’s a lot more to it than what I’ve seen. However, the United States needs to tighten up our trade policies. If people want to do business on our shores, they need to pay to play. We certainly have to do the same in other countries.”

Input impediment

Catfish Farmers of America hasn’t taken a public, official position regarding the request by several governors to the EPA to waive the Renewable Fuel Standard (a government mandate that calls for set levels of ethanol production) in an attempt to keep more corn in the market and lower feed costs.

More on the RFS waiver requests here.

Still, Lowery says, “most people would agree that given a year like 2012 – with the drought and poor crops in the Midwest coupled with the ethanol mandate – it’s made things tougher. All told, about 50 percent of the crop is taken right off the top to produce a fuel.

“We’re in a situation where we’re trading food for gas. This will eventually show up, I think, with the consumer that buys any kind of beef, poultry, or anything that needs to be fed. It will show up.”

What about the big push-back by the ethanol industry against such claims?

“In a normal year, what the ethanol industry would use of the corn crop might be healthy,” says Lowery. “But in situations like we’ve encountered this year, there needs to be a reasonable trigger to prevent too much corn being taken from producers trying to raise food. With input costs where they are, it’s tough on the farmers.

“The biggest thing that has happened in the recent year is the skyrocketing of input costs, especially feed. That’s our biggest expense on the farm.”

Mid-South “row-crop operations have done well and I’m so glad they have. But everyone should understand that the ethanol mandate can be dangerous. If the mandate is going to keep functioning there needs to be a mechanism to ensure we’re not sacrificing our food for the fuel.”

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