OUTLOOK FOR JOHN SACKTON DUNGENESS NEWPORT, OR NOV 2, 2017 IN 2018 13TH PRE-SEASON DUNGENESS CRAB PRESENTATION

• Crab, and market analyst since 1997 • Preseason price and market outlooks on shrimp and crab for 20 years – Atlantic Canada, , and US West Coast • Publisher of SeafoodNews.com News • First Dungeness Presentation: 2005 DUNGENESS CLUSTER PRICES VS. SNOW CRAB SHELLFISH Shellfish Price Volatility Continues to be High

Snow crab Lobster meat

• Erratic Price Scallops Movements depress Lobster tail 4 oz purchases • Shellfish has had very high price volatility in Farmed Shrimp recent years • Currently lobster meat and snow crab exhibiting over 50% price increases. SNOW CRAB PRICES HAVE NEVER TRADED AT THIS LEVEL: $8.00 PER LB

25 year Price History for Snow Crab $8.50

$7.50

$6.50

$5.50

$4.50 2017

$3.50

$2.50

$1.50 RETAIL CRAB PROMOTIONS 2 YEARS

Retail Crab Promotions

Dungeness Snow Crab Other

35000

30000

25000

20000 Stores

15000

10000

5000

0 O N D J F M A M J A S O N D J F M A M J A S O Dungness is only crab with Year over Year Increased Retail Promotions DUNGENESS25000 CRAB INCREASED PROMOTIONS IN 2017

20000

15000 Stores

10000

5000

0 O N D J F M A M J A S O N D J F M A M J A S O

Dungeness Snow Crab King Crab Other Linear (Dungeness) Linear (Snow Crab) Linear (King Crab) WHOLE COOKS VS CLUSTERS AT RETAIL 3500

3000

2500

2000 Stores

1500

1000

500

0 O N D J F M A M J A S O N D J F M A M J A S O RETAIL

MOST TYPES OF SEAFOOD HAD LESS VOLUME 2016 2017 PRICES AT RETAIL ROSE 900000 800000

700000

600000

500000

Stores 400000

300000

200000

100000

0 RETAIL SUMMARY

• Dungeness Crab is Well Positioned as a Successful Retail item for 2017-18 • Pricing is favorable compared to snow crab • Snow crab prices not likely to decrease until well after Dungeness Season • Prices are coming down. • Current backwards relationship between snow crab and Dungeness prices is likely to correct • Whole Cooks will be major retail item. • Domoic Acid Could have Impact to push more product to clusters/sections. MACRO FACTORS FOR US

• US economy continues to expand • Foodservice Traffic has declined for 6 Straight Months; with restaurant sentiment weaker than in 2016. Foodservice was main driver of strong seafood demand in 2017. • Retailers have cut back promotions of items like salmon and crab due to high prices • Hurricanes, Fires, and other disruptions of all have the potential to destabilize consumer spending, and lead to lower demand. • Percent of Americans who feel the country is on the wrong track has gone up significantly. This can bleed into consumer confidence and spending patterns RESTAURANTS IN US ‘FACING WORST PERIOD SINCE 2009’ SAYS MILLER PULSE

• Storms Hurt Restaurant sales by 40 basis points in Aug, Sept. • But even without storm impact same-store sales remain historically low, declining for 13 of the past 16 months. • “the restaurant industry faces its year over year declining traffic worst period since 2009.” SNOW CRAB USAGE IS BEING CUT BACK IN US

GULF CASINOS CUT BACK

RED LOBSTER DE-EMPHASIZES SNOW CRAB DUNGENESS ALSO HAS FOODSERVICE OPPORTUNITY IN 2018

• As shown by Red Lobster, Foodservice is willing to shift to Dungeness due to better pricing and availability. • This is mostly for clusters. • Dungeness is now a very competitive substitute for Casual Dining, Buffets, and Casinos. • This is in addition to the traditional West Coast Foodservice Demand, where many restaurants must keep Dungeness crab on the menu. WILD CARDS FOR 2018

• Economists Beginning to Worry about Recession in US as Fed is Tightening, But Many Signs of Weakness Abound. • Trump: His instability has had remarkably little economic impact so far. That could change with the coming year if he escalates trade disputes that have potential for significant disruption with China or NAFTA for example. EXPORT MARKETS ALSO IMPORTANT FOR DUNGENESS

• Live Exports to China have become a significant factor expanding demand for Dungeness • This year there were several short-lived disruptions by Chinese authorities in response to Domoic acid and other issues like Cadmium. • Ecommerce continues to drive Chinese Seafood Import Demand. US LIVE EXPORTS TO CHINA

1,200,000 $10.00 2015 2016 2017 $/lb $/lb $/lb

$9.00

1,000,000 $8.00

$7.00 800,000

$6.00

600,000 $5.00 Pounds

$4.00 Per LB. Customs Price 400,000 $3.00

$2.00 200,000

$1.00

0 $0.00 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec LIVE EXPORTS TO CANADA

4,000,000 $12.00

3,500,000 $10.00

3,000,000

$8.00 2,500,000 Lb

2,000,000 $6.00 per Pounds Prce

1,500,000 $4.00

1,000,000

$2.00 500,000

0 $0.00 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2015 2016 2017 $/lb $/lb $/lb BC LIVE EXPORTS TO CHINA, US

Canada Live Exports BC has not published updated export 8,000,000 statistics for Live Crab, but it remains a 7,000,000 major gateway for live shipment to China.

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

0 2014 2015 2016

United States of America China (Incl HK etc) ECOMMERCE IS DRIVING PROCUREMENT IN CHINA • First live Lobster and Crab Sales focused on hotels and banquets in China

• Competition and Lower Prices brought and to many mass restaurants.

• Ecommerce popularized imported seafood like Dungeness, Lobster and King Crab.

• Alibaba’s Hema Fresh Stores are revolutionizing merchandising

Hema: All Commerce on Smart Phone: Order, Delivery, Pick-up or In store shopping Alibaba uses Customer data to determine locations and what to carry BANNER YEAR FOR CRAB FISHERY IN 2017

• West Coast Landings Totaled 58 million pounds through July. • saw record landed value as good volume combined with high prices • value in 2017 increased by about 33% over 2016. • landed 17.1 million pounds but with lower overall value than in 2016 DUNGENESS SHOULD BE IN FAVORABLE POSITION 22 IN 2018

• Other crab products at record prices last year • Wholesale Prices were near record levels two years ago due to supply cutbacks but section prices have since declined • Red King Crab is now correcting from high prices • Snow Crab is still at record highs, but prospects are for lower volumes in 2018 • Dungeness has stable pricing by contrast, so can take advantage of market demand. DUNGENESS ISSUES FOR 2017-2018

• Will Season Open on Time? • Will volume be similar or above last year • Lately there have been Domoic Acid Issues in California • Inventory situation is good. With favorable pricing, no signs of excess inventory • Both retail and foodservice likely to expand use of Dungeness in 2018 if supply is there • China continues to be a very strong market DUNGENESS SECTIONS AND WHOLE COOKS HAVE STABILIZED IN PRICE

Lobster meat +60% Snow crab +50% Other Products Have Come Down from their Highest Prices Dungy whole cooked + 30% Dungeness section prices have declined over 2 seasons

Snow Crab May be vulnerable to a future price correction Dungy sections + 20% SNOW CRAB IS NOT IMMUNE TO A FUTURE MARKET CORRECTION

Other Products Have Come Lobster meat Down from their Highest Prices 21-25 shrimp However no relief from short Supply of snow crab is in Snow crab Sight. Russia is selling most of it snow crab to Japan. OREGON DUNGENESS LANDINGS

26 Oregon Dungeness Landings and Price

Landings Ex Vessel Price 14000 Jan $8.00 Jan 12000 dec $7.00 Jan $6.00 10000

$5.00 8000 $4.00 6000 000's pounds $3.00

4000 dec $2.00

2000 $1.00

0 $0.00

12 13 13 14 14 15 15 16 16 17 13 13 13 13 14 14 14 14 15 15 15 15 16 16 16 16 17 17 17 17 ------Jun Jun Jun Jun Jun Feb Feb Feb Feb Feb Apr Apr Apr Apr Apr Aug Oct Aug Oct Aug Oct Aug Oct Aug Oct Dec Dec Dec Dec Dec Monthly Dungeness Landings By State

35000

30000

25000

20000 Washington Oregon 15000 California Alaska

10000

5000

0

12 12 12 13 13 13 14 14 14 15 15 15 16 16 16 17 17 17 11 12 13 14 15 16 ------Feb Feb Feb Feb Feb Feb Aug Aug Aug Aug Aug Aug May May May May May May Nov Nov Nov Nov Nov Nov CALIFORNIA NOV DUNGENESS LANDINGS RETURN TO NORMAL 28 California November and Season Dungeness Landings

Calif november Calif Main Season

20000

18000

16000

14000

12000

10000 000' lbs 8000

6000

4000

2000

0 2012 2013 2014 2015 2016 COAST WIDE NOV-DEC Nov-Dec-Jan Landings of Dungeness -JAN LANDINGS 29 CA OR WA 45000

40000

35000

30000

25000

000's Pounds 20000

15000

10000

5000

0 2013-14 2014-15 2015-16 2016-17 NOV-JAN COMPARED TO ENTIRE SEASON Coast Wide Landing Months

70000

60000

50000

40000

30000 000's pounds

20000

10000

0 2013-14 2014-15 2015-16 2016-17

Nov-Jan Rest of Season OREGON PRICE AND VOLUME 2017 31 Oregon Dungeness Landings and Price 2017

Oregon Oregon Price

14,000,000 $6.00 $5.55

$5.06 12,000,000 $4.97 $4.74 $5.00 $4.48 $4.33 10,000,000 $4.00 update $4.00 $3.65

8,000,000 $3.00 $2.89 $2.95 $3.00

POUNDS 6,000,000

$1.86 $2.00 4,000,000

$1.00 2,000,000

0 $0.00 Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Source: ODFW PRICES AND LANDINGS FOR THREE YEARS

32 14,000,000 8

7 12,000,000

6 10,000,000

5

8,000,000

4

6,000,000

3

4,000,000 2

2,000,000 1

0 0 Jul Jul Jul Jan Jan Jan Jun Jun Jun Feb Feb Feb Sep Sep Sep Apr Apr Apr Aug Oct Aug Oct Aug Oct Mar Mar Mar May May May Dec Dec Dec Nov Nov Nov

Oregon Landings Price DUNGENESS PRICE HISTORY 33 • 3 Market segments: clusters; whole cooks, live • Volume and demand for whole cooks and clusters determines initial pricing • If Domoic Acid Suppresses Demand for Whole Cooks, Clusters are Key to Pricing • Volume, section orders, and live / fresh demand determines subsequent pricing, including export demand • Dungeness pricing heavily dependent on pace of landings and total volumes DUNGENESS ANNUAL PRICING 34 Dungeness Annual Pricing (Cluster, Ocean run) $12.00

$10.00

$8.00

High $6.00 Low

Avg

$4.00

$2.00

$0.00 Source: Urner Barry 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 LIVE IMPORT PRICES TO CANADA AFFECTED BY CURRENCY

Dungeness pricing

35 UB Crab, Dungeness, Whole Ckd, 1 1/2 - 2 lbs. UB Crab, Dungeness, Cluster, Ocean Run CA live Imports - $US

$9.50

$8.50

$7.50

$6.50

$5.50

$4.50

$3.50

$2.50

$1.50

11 11 11 11 11 11 12 12 12 12 12 12 13 13 13 13 13 13 14 14 14 14 14 14 15 15 15 15 15 15 16 16 16 16 16 16 17 17 17 17 17 ------Jul Jul Jul Jul Jul Jul Jul Jan Jan Jan Jan Jan Jan Jan Sep Sep Sep Sep Sep Sep Sep Mar Mar Mar Mar Mar Mar Mar May May May May May May May Nov Source: UrnerNov Barry, CanadianNov Customs dataNov Nov Nov PRICE COMPARISON WITH KING CRAB AND SNOW CRAB Dungeness , king, snow crab price history 36 UB Crab, Dungeness, Whole Ckd, 1 1/2 - 2 lbs. UB Crab, Dungeness, Cluster, Ocean Run UB Crab, Red King, Leg & Claw, 16-20 ct. UB Crab, Snow, Newfoundland, Cluster, 5-8 oz.

$18.00

$16.00

$14.00

$12.00

$10.00

$8.00

$6.00

$4.00

$2.00 Source: Urner Barry Comtell $0.00

11 11 11 11 11 11 12 12 12 12 12 12 13 13 13 13 13 13 14 14 14 14 14 14 15 15 15 15 15 15 16 16 16 16 16 16 17 17 17 17 17 ------Jul Jul Jul Jul Jul Jul Jul Jan Jan Jan Jan Jan Jan Jan Sep Sep Sep Sep Sep Sep Sep Mar Mar Mar Mar Mar Mar Mar May May May May May May May Nov Nov Nov Nov Nov Nov DUNGENESS VS SNOW CRAB PRICING

$11.00

$10.00

$9.00

$8.00

$7.00

$6.00

$5.00

$4.00

$3.00

11 11 11 11 11 11 12 12 12 12 12 12 13 13 13 13 13 13 14 14 14 14 14 14 15 15 15 15 15 15 16 16 16 16 16 16 17 17 17 17 17 ------Jul Jul Jul Jul Jul Jul Jul Jan Jan Jan Jan Jan Jan Jan Sep Sep Sep Sep Sep Sep Sep Mar Mar Mar Mar Mar Mar Mar May May May May May May May Nov Nov Nov Nov Nov Nov

UB Crab, Dungeness, Whole Ckd, 1 1/2 - 2 lbs. UB Crab, Snow, Newfoundland, Cluster, 5-8 oz. UB Crab, Dungeness, Cluster, Ocean Run PRODUCT REVIEW 38

• Dungeness market strength is dependent on maintaining all market segments: • Live • Fresh Whole Cooks • Frozen Whole Cooks • Frozen Sections • Crabmeat LIVE MARKET AND EXPORTS 57

• In months of lower volume, live buyers set prices because they can absorb a greater percentage of the total landings; section and whole cook buyers have to compete • In months of high volume, live buyers fill their orders but most of the catch goes to processing – fresh whole cooks, frozen whole cooks, and sections. Demand for the other products sets the market price • In recent years, exports to China have expanded the demand for live products and supported higher prices, but recently the volume and value of these exports has fallen. TOTAL LIVE DUNGENESS EXPORTS TO CHINA 40

US and Canada Live Dungeness Exports to China

BC Exports to China us exports to china US Export Price

10000 $10.00

9000 $9.00

8000 $8.00

7000 $7.00

6000 $6.00

5000 $5.00

Metric Tons 4000 $4.00

3000 $3.00

2000 $2.00

1000 $1.00

0 $- 2010 2011 2012 2013 2014 2015 2016 FRESH WHOLE COOKS

• Processors can sell fresh whole cooks to move volume, but not a very profitable item • Drip loss from cooking, labor add cost, but cannot sell for much more than live price • Product is mostly produced when there is need to run high volume through plant with minimal labor FROZEN SECTIONS AND WHOLE COOKS

• Dungeness section market is currently priced less than snow crab. • When prices are competitive with snow crab Dungeness can expand beyond west coast; when supply limited and prices are higher than snow crab it is a west coast only product. • The expansion of sections to new markets this year will help stimulate demand in 2018. • Plants mostly produce sections and frozen whole cooks during higher volume periods of the fishery • In times of shortage, they may have to bid against live and fresh buyers even when prices are high, so they buy to order only. DUNGENESS SECTIONS AND WHOLE COOKS 43

sections

Fzn whole cook

snow crab

Source: Urner Barry Comtell CRABMEAT

• Dungeness crabmeat is important on the West Coast, and it helps maintain the value of the fishery. Only a subset of packers can actually pick meat. • Meat prices tend to be stable, even when section prices are more volatile. • So far major packers have been able to hang on to that market by supporting some price stability. • Meat market is one of main ways Dungeness can expand foodservice usage. Expanding meat demand helped sustain lobster prices. CRAB SURPRISES

NARRATIVE ISSUES

• 2017 Snow Crab Season was Totally Unexpected Highest prices ever for Canadian snow crab • Driven by product shortages; lack of crab from Alaska Prices soared to record levels. reduction in NL

Even the Big increase in Gulf Snow Crab did not • Japanese became lead buyers have a moderating effect on the market. • High Prices Masked both Retail and Foodservice Lower Usage A recovery in Japan was the main driver for both the high price in Newfoundland and the • Shortage pricing likely to continue with poor outlook in Gulf. 2018 • Long term outlook for snow crab is a concern Long Term Outlook for Supply Getting Worse SNOW CRAB PRICES HAVE NEVER TRADED AT THIS LEVEL: $8.00 PER LB

25 year Price History for Snow Crab $8.50

$7.50

$6.50

$5.50

$4.50 2017

$3.50

$2.50

$1.50 JAPAN TOOK 40% MORE CRAB FROM NEWFOUNDLAND IN 2017, DESPITE PRODUCTION FALLING 23% NL Snow Crab

Japan US Total Sections

90 30,000 Japan’s willingness to buy snow crab

80 Set the market tone in 2017 25,000 70

60 20,000

50 15,000 40 Percent of Pack 30 10,000 Metric Tons of Sections

20 5,000 10

0 0 2015 2016 2017 SNOW CRAB SHORTAGES ARE LIKELY TO PERSIST

• Alaska TAC cut for 2018 to 18.9 Million lbs Alaska Opilio TAC 35000 • Signs Point to Better Recruitment in Alaska 30000 in future years. 25000

• Poor Survey Results for 2018 off 20000 Newfoundland 15000 Metric Tons

10000 • Expectations for Lower landings in Gulf 5000

• Russian snow Crab has increased, but 0 2015 2016 2017 2018 Barents Sea Crab is not Coming to US CUTBACKS IMPACTING US SNOW CRAB SUPPLY

US snow crab supply fell in 2016, and will fall Again in 2017

Imports Alaska production

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 JAPANESE SUPPLY HAS STABILIZED AND MAY INCREASE SLIGHTLY IN 2017

Japan snow crab supply

Frozen Snow Crab Live

90,000

80,000

70,000

60,000

50,000

40,000 Metric Tons 30,000

20,000

10,000

0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 US IMPORTS OF BARENTS SEA SNOW CRAB DECLINED IN 2017 Snow Crab from Barents Sea Declined in First 8 Mos. of 2017

Russia Norway Lithuania China (mainland) Greenland Latvia

20,000,000

18,000,000

16,000,000

14,000,000 Snow crab 12,000,000

10,000,000 Pounds 8,000,000

6,000,000

4,000,000

2,000,000

0 2014 2015 2016 2017 RED KING CRAB MARKET IS FALLING 52

• Fishing Price in Alaska Down Substantially from $10.48/lb of 2016 • CIF Sales to Japan at $17.10 • US Prices $16.50 -$17.50 depending on cluster size (900 gm) FOB Seattle • Inventories built in January and caused Packers to be very cautious even with lower supply 53 NOT ALL CRAB PRICES ARE DECLINING

• Red King Crab smaller sizes are where prices have declined the most • Snow Crab Prices have not declined, and because Japan took such a large share of Canada Production, Prices not likely to change until new Season, when some inventory issues may become visible. • Dungeness has been on a different cycle with prices for last two years well below peak of $9.00 for clusters after 2014 supply shock. PER CAPITA CONSUMPTION OF CRAB REMAINS IN NARROW BAND; CHANGED LITTLE IN 2016

crab

0.70 Crab consumption is still 20% below its peak in 2006, 0.65 2007. 0.60

0.55 With prices increasing, overall consumption will be declining 0.50

0.45

0.40 Pounds of Crab (all products) per capita 0.35

0.30 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 DUNGENESS CRAB IS BETTER POSITIONED THAN OTHER TYPES OF CRAB THIS YEAR 55 DUNGENESS SNOW CRAB AND KING CRAB • Usage Expanded due to Price Advantage • Supply decreasing and availability • King crab prices falling – partly on • Foodservice and Retail both expanded pressure from Japanese usage • Snow Crab Sales momentum is Slowing in US, Strong Prices Due to Japan • Red Lobster Promoted Dungeness Crab This Year • Little unsold crab in market

Conclusion: Dungeness is positioned well in relation to competitive products in 2018 DOMOIC ACID MARKET DISTORTIONS STILL A THREAT 56

• In recent years market has adjusted to later openings (January) • If California delays opening Northern Areas due to Domoic Acid, it could affect whole cook market. • However, customers will seek crab from open areas • Evisceration orders could lead major retail buyers to specify sections rather than whole cooks. • Any effects this year will be less than in prior years SOME POSITIVES FOR DUNGENESS CRAB 57 CONSUMPTION

• China continues to be an important live market • With other products live trade opened up frozen interest as well. • With Dungeness prices lower than snow crab buyers have strong motivation to substitute. Market Relationship between snow crab and Dungeness should revert to a more normal pattern this year, but volume will determine how quickly this happens. • A low volume year will quickly push Dungeness Prices higher than snow crab. • For the second year the combination of higher landings and high prices led to record Oregon value for this fishery. • Last year we said ‘2016- 2017 could see another record for value with an increase in landings, and a relatively small decline in price.’ • This year, higher prices are likely, and with decent volume a third record year is possible; lower volumes however would put that out of reach. 58 OUTLOOK FOR 2018

• Volume is a wild card. • There are lots of reasons for prices to rise. How much may depend on volume. • If California opens normally this year that will stimulate demand. • If volumes are significantly lower prices will be too high to continue attracting new customers outside of the West Coast. • If volumes are similar to last year, customers for Dungeness in other areas should be able to absorb higher prices. • Snow crab shortages are likely again in 2018. WHAT COULD TRIGGER A SIGNIFICANT MOVE ON PRICE

59

CURRENT MARKET POTENTIAL TRIGGERS • Market has Expanded • Lower than expected landings • Dungeness is trading well below the top of its • Volume Landings, but a More Pronounced historical price range. shortage of Snow crab • A supply cutback could quickly push up pricing. • US Buyers cutting back more than • Relationship between snow crab and Dungeness expected due to high crab prices. could revert to its more normal value • Crab Market Strength Currently Depends • US demand for crab remains strong, with a on Japan and China significant increase in per capita consumption OVERALL OUTLOOK

• 2018 Looks positive from a market perspective in that prices for many species will continue to be in the upper end of their historical range. • But there are headwinds: • Buyers have a delayed reaction to high prices. Some of the buying needs seen in 2017 will disappear in 2018. • Japan is becoming an important market again for some species, and is spending again. • Geopolitical risks are much higher this year. If there is a calamity, like a trade confrontation or an incident with N. Korea business projections will go out the window THANK YOU

TIME FOR QUESTIONS