Philip Hall is trying to tread water as the U.S. dollar threatens to drag down his fish import business.
"Every time the dollar goes down, our costs go up because their prices stay the same," said Hall, president and owner of New Zealand Seafoods Inc. "It's a double-whammy because then you've got to pay shipping costs on top of it."
Hall imports orange roughy from New Zealand and Australia, blue nosed sea bass and live shellfish from New Zealand, and tuna from Tahiti, Fiji or the Cook Islands.
Based in Vernon for more than 20 years, New Zealand Seafoods competes with other buyers for the South Pacific catch and with the value of the U.S. dollar having fallen by 50 percent against the New Zealand dollar over the past two years, he's had to pay up or lose out.
In those two years, the price for New Zealand sea bass has risen to $2.75 per pound from $2.40. Some suppliers quote prices in the buyer's currency, which lessens the impact of fluctuating exchange rates, but others keep their prices in New Zealand or Australian dollars.
"New Zealand sells a lot of fish to Australia," Hall said, "and because their dollar hasn't depreciated like the U.S. dollar has, we've had to match the equivalent of what the Australians are paying."
Freight costs, meanwhile, have surged to about $1 per pound for orange roughy from 60 cents two years ago. For shellfish, freight costs account for nearly 70 percent of Hall's outlay, compared with 25 percent two years ago.
Passing the costs onto the customer is not an option because there are plenty of less expensive fish to buy. "Right now we're extremely unprofitable, but like everyone else we're hanging in there," Hall said.
To combat runaway costs, he has started importing fish from Greece and Tunisia because of a more favorable exchange rate. Hall is also trying to source from South American countries, where shipping distances are shorter and fishermen are willing to trade in U.S. dollars. And he's cut back on advertising, trade shows and travel, and is limiting staff and overtime pay.
Larger seafood companies are also feeling the squeeze.
While most international seafood trade is conducted in U.S. dollars, European and Japanese companies buy in dollars and sell their inventories in their own currency, taking advantage of a stronger yen or euro, said Rick Martin, executive director of Red Chamber Co. The Vernon-based seafood company is one of the largest seafood suppliers in the U.S., with about $1.2 billion in revenues last year, and it does business with more than 40 countries.
"It's like giving a competitive freebee to the countries you're competing against," Martin said.
Cost variances are more aggravated with some species of fish than others. Shrimp, salmon and tilapia are widely farmed and have high production levels, so Martin can rely on volume to make up for price fluctuations for other species.
New Zealand Seafoods, and small importers like it, are more vulnerable.
While sourcing fish from Tunisia and Greece helped ease costs for a while, some suppliers have raised prices six times over the last six months as the euro gained strength.
Hall has experimented with currency hedging in an effort to limit his exposure. He uses an online foreign exchange service, and although he checks prices daily, he said he wouldn't describe it as a strategy. "We are utilizing more of those tools now, but if I had a crystal ball, I guess I should have done it a couple of years ago."
Hall is even looking at the possibility of exporting to some of the countries he buys from. That would be quite a departure from the 23-year history of company, but he added: "We're trying to do things to keep the business going."
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