Waiting for foodservice return is hardest part of 2020 US scallop season

US rocker Tom Petty had it right about the 2020 US scallop season when he sang “The waiting is the hardest part”.

Now, nearly two months in and with foodservice demand yet to return from its coronavirus pandemic-related freeze, Atlantic scallops are much less abundant, smaller and cheaper, Undercurrent News found when it reviewed the landings so far at the seafood auction in New Bedford, Massachusetts, where roughly half of each year’s harvest typically goes. 

Between April 1 and May 15, 2020 – a period of seven weeks — as many as 1,034 metric tons of scallops were sold at the auction, known more formally as the Buyers and Sellers Exchange (BASE), for a combined $18.0 million. That’s 21% less than the 1,306t of scallops landed and 48% less than the $26.7m paid at the auction during the same period in 2019.

The average price paid during the first seven weeks was $7.87 per pound, 15% less than the average $9.26/lb paid during the first seven weeks of 2019, due also to the smaller size of the scallops (more on that later). 

“It would probably be an understatement to say that the foodservice world stopped with the onset of COVID-19,” Michael Lodato, vice president of sales for Bristol Seafood, in Portland, Maine, said in an online presentation he and Peter Handy, the company’s president and CEO, gave to their buyers last week.

Foodservice is commonly estimated to represent about 70% of the market for US scallops.

“Really, in a matter of days, we saw the demand for scallops in the foodservice sector drop by 90% to 100%. It was like running into a brick wall,” Lodato recounted, though he said the numbers have crawled back slightly to where scallop sales to the foodservice sector are now at about 75% to 80% down. 

Lodata and Handy both spoke pessimistically about foodservice sales quickly recovering as the economy reopens, too, given the social distancing practices restaurants will be forced to practice and the leeriness of patrons.

“The economic model that worked for so many years doesn’t add up in a post-COVID world,” Lodato said.

Though several US states are starting to reopen and allow restaurants to have diners as long they comply with space and table restrictions, parts of the country — with 1.58m confirmed cases (30% of the world’s cases), almost 94,000 deaths and 301,000 recoveries overall — are still seeing their numbers climb. 

Some 38 states have allowed some level of restaurant reopening, Eater magazine reported Wednesday. On the same day, Connecticut — a neighboring state to Massachusetts — began allowing restaurants to have 50% capacity, but outdoor dining only and tables must be six feet apart. 

“We are definitely eager to get back to work,” Chris Gavrielidis, the owner of Harbor Lights, a seafood restaurant in Norwalk, Connecticut — a New England state that borders Massachusetts to the south — told Fox News. “Sitting at home for two months is not as comfortable as you would imagine.”

 

Mother’s Day spike

On the bright side, after their initial freefall to start the 2020 season, scallop prices have dropped little since, Undercurrent found in its review of the auction landings.

The $7.87/lb average paid during the first seven weeks overall is actually 2% higher than the average $7.73/lb price during the first two weeks of the 2020 season, Undercurrent discovered when it checked the numbers.

For an example of some scallops holding their prices, consider the load of 6,071 lbs of 10/20s from Nantucket Lightship Closed Area – North (NLCA-N) on May 14 for $60,710 – an average price of $10/lb. Go back to May 15, 2019, and see the load of 13,165 lbs of 10/20s from NLCA-West that sold for $118,522, an average of $9.00/lb — less.

As usual, add $1.50 to $2.00/lb. to cover both the auction’s offload charges ($0.20/lb) and the dealers’ margins to get a true sense of what scallops are selling for at wholesale.

Scallops in the pan. Credit: Aimee M. Lee/Shutterstock.com

Scallops in the pan. Credit: Aimee M. Lee/Shutterstock.com

One strong factor, of course, is that while foodservice demand has plummeted, retail demand has only gained in strength.

Some scallop markets climbed 25% to 30% as a result of the panic buying that took place in March and demand was strong for “Mother’s Day,” too, Lodato said. However, if you take out the “Mother’s Day” spike, retail sales for scallops remain up, on average, about 10-15%, he said.

Still, Lodato and Handy see greater opportunities for scallops both in the retail space, as consumers get more comfortable with preparing their own seafood, and also in-home delivery, a market that has grown by leaps and bounds during the pandemic.

“I see some bright spots, but they require action to capitalize on,” Lodato said.

Still holding back

The lower prices are among the things that’ve kept harvesters off the water.

John Lees is a longtime New Bedford-based scallop harvester with ownership of five boats and working relationships with another eight who combine to land as many as 2.5m lbs of scallops annually. He confirmed in an interview with Undercurrent this week that he, like other scallop harvesters, is still holding back on fishing trips due to the condition of the market.

But Lees said he “100%” expects his boats to be more active soon, maybe in a month.

“Once we go back into what we consider to be some form of normalcy and we start to see some people, you know, getting back out,  I think we’re going to see more demand,” he said.

Harbor Blue scallop vessels

Harbor Blue Seafood scallop vessels.

Also holding back harvest numbers this year will be the 2020 harvest management plan published by by the the National Oceanic and Atmospheric Administration’s (NOAA) National Marine Fisheries Service after being recommended by the New England Fishery Management Council (NEFMC) as part of Framework 32.

By reducing the number of closed area trips, it decreased the amount of scallops that can be landed to a combined 52m lbs (23,587t) of scallops in 2020, roughly 17% less than the 62.5m lbs (28,350t) projected to be caught in 2019. The projected ex-vessel value of the harvest this year was expected to be close to $487m.

‘A tale of two markets’

Another reason for the lower prices paid on scallops in the past six weeks, of course, is that the scallops being harvested are much smaller.

Just 3% of the scallops landed over the first six weeks of the 2020 season were U-10s, the largest size, and 16% were U-12s, compared to 11% U-10s and 19% U-12s during the first six weeks of 2019. Likewise the most common size of scallop – U-10/20s – accounted for 41% of those landed during the first six weeks of 2020, compared to 68% in the first six weeks of 2019.

Meanwhile, small scallops are dominating the 2020 landings, with U-20/30s accounting for 19% and U-30/40s and smaller accounting for 21%. By contrast, U-20/30s made up just 2% of the landings during the first six weeks of 2019 and there were no smaller sizes.

Undercurrent confirmed that one of the major reasons for the increase of small scallops was NOAA’s opening of Nantucket Lightship South-Deep, which the auction refers to instead as NLCA-S, presumably for Nantucket Lightship Closed Area-South. Numerous large landings of 20/30s and 30/40s from NLCA-S were noted in the auction’s records.

Another area that has thus far produced a large number of smaller scallops, based on Undercurrent‘s observations, is NLCA-West. It’s an area that where harvesters were permitted to make up missed 2019 trips during the first 60 days of the 2020 season. 

Of course, with the abundance of small, cheap scallops, bargains can be had. A load of 7,843 lbs of 20/30s from NLCA-S sold at the auction for $48,864 on May 14 – a low average price of $5.98/lb – while a load of 17,683 lbs of 30/40s from the same area sold on the same day for $95,044 – an ever lower average price of $5.37/lb.

As one scallop professional put it: “A pound of scallops in your mouth is a pound of scallops in your mouth.”

But it’s not just size. Another important factor to consider in relation to pricing is the “variability in quality”, Handy stressed. “Often times, the ‘average’ price reflects a mix between a higher-priced, higher-quality scallop, and lower-priced, lower-quality scallop – with very little actually changing hands at the average.

“It’s a tale of two markets,” he said.

China imports still lagging

While fewer scallops will be harvested domestically, the US so far is slightly ahead of last year’s early pace on how scallop imports, based on a review by Undercurrent of NOAA trade data.

Through the first three months of 2020, the US had brought in 4,360t of scallops worth $49.5m, 18% less than the 3,590t and almost exactly the same value as imported in the first three months of 2019.

However, don’t be deceived. Last year saw a big dip in scallop imports due in large part to the US trade war with China and an additional 25% tariff. Overall, the US imported 16,012t of scallops worth $209.2m in 2019, down 24% in volume and 14% in value from 2018.

Credit: gontabunta/Shutterstock.com

Credit: gontabunta/Shutterstock.com

Last year the US imported 3,498t of scallops worth $17.0m from China, roughly a third of the 9,637t of scallops worth $62.2m imported from China in 2018. So far, in the first three months of 2020, China has accounted for nearly a quarter of the scallops imported by the US (1,257t worth $6.4m),  compared to the 1,137t worth $5.0m in the first three months of 2019.

Unlike two of the US’ other large scallop sources – Japan and Canada – China mostly delivers the smaller bay scallops.

Chart courtesy of Bristol Seafoods.

Chart courtesy of Bristol Seafoods.

Based on past years and assuming demand remains constant in spite of the loss of foodservice sales, those scallop US import numbers should increase to compensate for the smaller domestic harvest. As Handy explained in his presentation, the total US scallop supply, from year to year, regardless of landings vs. imports and exports, always hovers at around 80m lbs.   

US scallop exports, meanwhile, are trending down, too, keeping more US scallops in the domestic market.

The US exported 854t of scallops worth $17.2m during the first three months of 2020, down 14% from the 993t worth $20.0m exported during the first three months of 2019. The biggest export destination in 2020 by far has been Canada, which took 339t worth $7.6m, many of which were most likely purchased for reprocessing and further export, including back into the US.  

In all of 2019, the US exported 5,875t of scallops worth $114.2m, down 9% from the 6,429t of scallops and 7% from the $122.5m in value exported in 2018. 

If you are expecting those export numbers to climb in 2020, well, given the recent slide and loss of domestic production, you might be “Waiting in vain”, as Bob Marley once sang.

Chart courtesy of Bristol Seafoods.

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