Our 2019 U.S. Shellfish Industry Outlook

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Over the last ten years, we have seen the oyster market explode. We saw the rise of farmed oysters, the rapid openings of raw bars, and the expansion of the cocktail-size oyster market. The shellfish industry continues to surprise us with innovation and newcomers. But as it grows, it is also drawing more attention from the public sphere. As we look forward into 2019, here are the industry issues and trends we are thinking about and how they may affect the shellfish market.

Supply Trends

Climate Change

At the most recent 2019 Northeast Aquaculture Conference & Exposition, climate change was the hot topic. The ramifications of climate change for the shellfish industry are far-reaching. Ocean acidification and warming waters are affecting shellfish health and development. Shellfish are becoming more susceptible to disease and less resistant to invasive species. More frequent and extreme weather systems also increase the risk of losses. Stormwater runoff carrying excess nitrogen is causing more algal blooms harmful to shellfish.

Figure 2.31: Shells Dissolve in Acidified Ocean Water (Nina Bednarsek, National Oceanic and Atmospheric Administration Pacific Marine Environmental Laboratory )

Figure 2.31: Shells Dissolve in Acidified Ocean Water (Nina Bednarsek, National Oceanic and Atmospheric Administration Pacific Marine Environmental Laboratory )

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2019 IMPLICATIONS

Climate change is the new reality, and it will likely continue this year and into the near future. The consequences of climate change will definitely affect supply. Winter storms, wind, and other weather systems will limit farm access and production. There could be more frequent shellfish area closures due to heavy rain or algal blooms. Vibrio bacteria also thrives in warmer waters, which increases the risk of illnesses and related closures.

The warmer temperatures will likely induce shellfish to spawn sooner and potentially longer.  This will affect their quality during the warmer months. The soft shell clam fishery continues to struggle with climate change, and its decline will limit supply. Connecticut, a large producer of hard shell clams, is seeing a decline in wild set seed. This will likely put future pressure on hard shell supply as well.

Regulations affecting catch and harvest

“They have no idea about the impact on the habitat and the fishery… And they’ve made a regulation that’s going to affect people dramatically in a negative way.”

- Former New Bedford Mayor Scott Lang

Public agencies and regulators are trying to mitigate the effects of climate change. Unfortunately, these regulations can hurt the industry. This past December, the New England Fisheries Management Council closed an area in Nantucket Shoals to protect aquatic habitat. The area, however, was also vital to the surf clam industry. The closure may cause surf clam harvest and production to drop by 50%. Surf clam is a New England staple — it’s the main ingredient in New England clam chowder.

2019 IMPLICATIONS

Market prices on wild shellfish will likely increase with supply constraints. Product costs on surf clams have already gone up since the closure. These costs inevitably get passed along the supply chain to the consumer. Local, state, and federal regulations affect the industry's ability to produce and sell. If new rules apply in 2019, they may pose unforeseen supply challenges.

Oyster farmers are more prepared

Despite all the doom and gloom around climate change and regulations, oyster producers are readier than ever. Growers have had to deal with the effects of climate change and red tape for more than a few years now. Oyster hatcheries now breed seed to adapt to ocean acidification. Industry changes have forced growers to find smarter approaches, and they’re now more prepared for the unexpected.

Preparing oysters for winter on the Standish Shore Oyster Farm

Preparing oysters for winter on the Standish Shore Oyster Farm

2019 IMPLICATIONS

If Mother Nature is kind, farmed supply will be relatively steady throughout the year. It's hard to predict unforeseen forces like new regulations or industry shifts. So if all stays the same, weather aside, we expect oysters to be fairly available moving through 2019.

Market Trends

Credit: Sara Norris

Credit: Sara Norris

Interests in something new

The raw bar market is starting to mature. Restaurants and diners are now looking to branch out of local varieties. Demand for Pacific oysters is growing on the East Coast. Interest in Northeast oysters is growing in Gulf regions. The Midwest is seeing a lift in shellfish growth from both coasts.

2019 IMPLICATIONS

Demand for local seafood will remain strong, but this increasing interest for different and new will help farms reach markets outside their local regions. Smaller producers will have more opportunities to find their niche market. More restaurants are also adding oysters to their menus, so businesses will need to stay creative to entice their customers with their shellfish offerings.

Interests from abroad

Despite growing domestic demand, the international appetite for American shellfish is even greater. Asia and Europe are heavy seafood consumers. Domestic producers can command a higher price in these export markets. As of late, politics have definitely affected seafood exports going to China. The West Coast shellfish industry is feeling its effects. On the European front, the FDA is working with the EU to lift an import ban on American oysters.

2019 IMPLICATIONS

The global political climate has been difficult to predict. If trade tariffs stay, shellfish exports, especially to China, will continue to struggle. As a result, Pacific shellfish availability could improve in the domestic market. If the FDA and the EU are able to lift the American oyster ban, this will be great news for producers. Peak shellfish consumption in the EU occurs during the winter when consumption is slow in the US.

More aquaculture, more public visibility

The growth of the shellfish industry has definitely not gone unnoticed. The oyster farm boom has drawn attention in many local communities concerned with their water access and waterfront sight lines. These NIMBY (“Not In My Backyard”) issues are miring the industry in lengthy and/or costly legal battles. These issues are leading to delays in permitting and sometimes, forcing farms to close up shop.

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More consumers enjoying shellfish also means increased risk of shellfish-related foodborne illnesses. These illnesses receive more media attention, which can become greater public concern. Media outlets sometimes paint the industry as careless despite the industry’s preventative efforts.

2019 IMPLICATIONS

The good news, however, is that many in the public, especially younger generations, have good faith in the industry. They understand that farmed shellfish and aquaculture are sustainable choices. Misinformation remains, but consumers are getting smarter by engaging with producers and suppliers. They are educating themselves and asking questions about their food sources.

This good faith has helped the industry weather difficult situations. There have been times past when the public has come to the industry’s defense. Our industry will continue to invest in public education and marketing with hope to continue this momentum of public support.

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Overall, we expect 2019 to be a pretty steady year. But then again, that can all change in a second based on the whims of Mother Nature. It’s part of our jobs to deal with the unexpected, so we’ll figure it out as an industry. We have seen lots of change over the years, so this year may be no different. Keeps us on our toes. In to 2019 we go.

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Why is there an East Coast oyster shortage?

As an oyster company, it's sad when we don't have oysters to sell. We don't like telling customers, "No, not today," or "I can only offer you one bag," but the reality is, this year's winter and spring East Coast oyster shortage has been more prevalent than years past. Everyone along the supply chain is feeling it -- the growers know it, we know it, our customers know it, and everyone is asking why. So what is causing the market's East Coast oyster shortage? What is different this year than years before?

There's always the weather

Every year, oyster supply tightens during mid-winter through early summer. When the waters get colder, the oysters slow their metabolism significantly because there is no food. Algae is least abundant in winter because cold water temperatures inhibit their reproduction and growth. Without food in the water, the oysters survive on their fat reserves to get through the winter.

Weather-related issues directly affect the oyster supply.

This year, weather played a huge role as the lead antagonist. The East Coast was barraged with snow, cold winds, rain, and even set some record lows in March, only a month away from spring! Weather-related issues directly affect the oyster supply. If there is ice, it can be difficult or dangerous to harvest (see our article on ice fishing); if there is strong wind, it is unsafe for fishermen to get out on the water; and if there is heavy rain, areas are subject to rain closures prohibiting harvests, which may last as long as 3-5 days.

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Cold water temperature is also an accomplice in this oyster melodrama. Algae thrives in warmer waters, and the late spring we are experiencing is delaying algae blooms that nourish the oysters to grow. In New England, this affects many farms because typically, growers decide to sell all their market ready product in the winter before the next batch of oysters reach market size. Low inventories in the spring lower labor costs and ensures a better yield by avoiding possible mortality on the farm. Since waters are not warming, growers are now out of last season's inventory and waiting on this season's oysters to grow.

Weather issues, however, is not new news. Yes, weather this year has been really bad (it's hard to ignore climate change), but we as an industry have been able to manage through tough weather in years past without setting off alarm bells across the market. What is different this year is added regional and market conditions that are also applying pressure to the market like a domino effect, further compounding the oyster shortage.

Gulf oysters are nonexistent right now

Just 4 years ago, the Gulf led the country in the production of oysters, accounting for 59% of the national total according to the EPA. Then, in the same year, the Deepwater Horizon oil spill happened and has been wreaking havoc on the oyster population since. Contrary to popular belief and media coverage of animals covered in oil, the oysters in the area are not dying because they are smothered in black residue. After the spill, floodgates in Louisiana were opened to prevent the oil from contaminating the estuaries and marshes. This was effective in keeping the oil at bay, but a ton of fresh water was released into the Gulf, affecting the salinity levels of the water. This fresh water is problematic, and it's causing oyster deaths and preventing recovery.

Ken Brown, a Louisiana State University biologist, said he and his colleagues haven’t seen any major effects from the oil on adult oyster mortality rates, but when fresh water dilutes salinity levels ‘below 10 parts per thousand, and especially if you get below 5 parts per thousand, then oysters have problems.’
— Nola.com, "Louisiana Seafood: In wake of BP spill and river diversions, oysters show strain"

In other parts of the Gulf, like Texas, public oyster season ended April 30th, and supply will be limited to private leases with historically low levels of production. An algae bloom found to cause toxins in shellfish forced area closures in March, and the three-year long drought is adding too little fresh water to dilute the high-salinity waters of the Gulf.

Supply needs to come from somewhere

So, the Gulf is out of oysters. Where does everyone turn to?

The north, of course! Colder waters mean less year-round closures; oyster farms are popping up left and right. The oysters may be slightly more premium, but hey, they're oysters, and they taste great!

Just like that, demand spiked overnight for oysters from the Chesapeake. This put pressure on the Mid-Atlantic oyster supply that caused more supply shortages. The oyster population in the Chesapeake is definitely recovering from implementing harvest regulations and numerous efforts to improve water quality, but like the Gulf, public oyster beds also closed March 30th in Maryland and April 30th in Virginia. The harsh winter and strong spring winds have limited Mid-Atlantic supply, and now, oyster production will need to rely on private leases.

What we are seeing at Pangea

Blue Point Oysters are a staple at Pangea Shellfish. Last fall, we saw an average of 30,000 Blue Point Oysters leave our shop each week. Since the oyster shortages in the south, we now sell an average of 80,000 Blue Points per week! The supply we're getting isn't even close to covering all our demand, but given the weather conditions and all the factors explained above, it's hard to come up with more oysters.

Prices are also at a record high. We have never charged as much as we have on Blue Points. A shake-up of a major producer in Connecticut caused prices to rise by putting more pressure on other producers in the state. We hate accepting price increases, too, but sometimes it's the difference between having product for our customers or no product at all.

Despite supply challenges, outlook is positive

Supply will steadily increase from now until fall... we will see the market flooded with market size oysters come September.

In our thirteen years of operation, this year was the first time we had a week without any Canadian oysters. Our inventory looked like shit. But the good news is, the Canadian oysters are now back, and it's a reminder that production will continue to improve as temperatures get warmer and spring growth happens. Supply will steadily increase from now until the fall, and because of the late spring, we will see the market flooded with market size oysters come September.

Demand is also at an all-time high as the oyster is experiencing a renaissance. We will continue to see demand pressures on supply during these mid-winter and spring months, but outside of these months, growing demand is great news for our industry. We appreciate your patience and understanding as we get through these tight months. And we promise you, oysters are coming. Yes, they are.

Special thanks to John Brock from Pappas Restaurants and Mike McGee from Chincoteague Shellfish for contributing to the research of this piece.