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May 15, 2006

Suppliers of Frozen Tuna to Dictate Price

Report by Masaji Tsuji

Decrease in Numbers Effects a Change in Selling Policy

According to tuna wholesalers, it seems likely that big changes are ahead in tuna selling policies as tuna supplies are expected to decrease by 20 to 30% due to a reduction in the number of tuna-fishing vessels. The dynamics of price making are expected to be reversed from the pricing situation to date, where the mass merchandisers have had the upper hand, to one where suppliers will take the initiative. Moreover, out of a desire to be prudent in the way they sell the tuna that they have secured, suppliers will increase the proportion of supplies that they process in their own factories, put out less processing to subcontractors and reduce the amount they offer on wholesale markets.

Toward a New Supply-Demand Situation
Turning Point Seen to be Two to Three Years down the Road

Sources close to tuna wholesalers said in reference to the recent and forthcoming decline in the supply of frozen tuna due to the reduction in the number of Japanese and Taiwanese tuna-fishing vessels: "Supply is expected to decrease in the short term to medium term by 20 to 30%. However, the reduction in the number of tuna-fishing vessels will serve to replenish tuna resources in the long term, and this will result in an increase in the per-vessel catch. So even if the number of tuna-fishing vessels is reduced, the supply of frozen tuna will most likely recover in the future. We feel that the supply-demand balance will not be disrupted as recent years have seen a slight decline in the demand for tuna in line with the population decline and ageing society." For these reasons, wholesalers see the upcoming 2-3 years as a time of transition, a crucial period during which a new supply-demand equation will take hold. As far as tuna distributors are concerned, the fall-off in the supply of frozen tuna means "not enough volume," "can't get value," "can't sell" and "unprofitable." People point out that "the time has come for the mass merchandisers to pay the price for having controlled the sales of frozen tuna thus far and having left fishing-industry operators to bear the strain."

Regarding sales of frozen tuna by wholesalers going forward, the wholesalers say: "We have no choice but to switch to a strategy that allows us to be prudent in the way we sell the product we have secured. As suppliers will have the initiative in the marketplace, we will not need to engage in negotiations when prices are not to our liking. Moreover, we will be keen to increase the utilization rates at our own processing factories. As we will be concentrating our efforts on our own sales, we will farm out less processing to subcontractors and limit the amount we offer on markets."

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