reLAKSation 10.
Cheap Food: 'We like cheap food. We prefer cheap food. We don't care about how our food is produced as long as it is cheap. Cheap food is here to stay.' So wrote Matthew Fort, food critic for the Observer newspaper.
Mr Fort was commenting on the public response to the outbreak of Foot and Mouth disease on UK farms. This is a disease, which has led to the destruction of thousands of cattle and sheep and the closure of much of the countryside.
Many blame the outbreak on so called intensive farming practices, whilst others blame politicians or the influence of the major retail supermarkets. However, Matthew Fort lays the blame where the blame clearly lies, with the consumer. Farmers and supermarkets have just responded to consumer demand and this demand is clearly for low cost food.
It could be suggested that if consumers were willing to pay more for their food, then farmers could de-intensify production and thus their animals might be less susceptible to these recurring disease problems. Yet, Mr Fort argues that whilst consumers have pursued a preference for cheap food, they have also been fooled into believing that they have become 'gastronomically enfranchised'. This implies that they now take an avid interest in the food that they eat. However, this may be because they have become deluded by the endless number of food and cookery programmes on TV, the huge range of food magazines and supplements and the many high profile cookery and lifestyle books, which are all readily available.
Matthew Fort quotes some interesting statistics to support this view. He says that much has been made about the rise of organic food, yet 75% of organic produce is bought by only 7% of the shopping population. UK consumers spend less of their disposable income on food than any other European nation. The proportion of fresh food bought every year drops every years, whilst the proportion of prepared food goes up. UK consumers own more microwave ovens than anywhere but the US and Japan. 60% of 8-15 years olds never eat with their families and the average office worker spends only £1.50 on lunch and spends 18 minutes eating it. Mr Fort asks whether such statistics represent consumers who really care about the food they eat?
The Norwegian salmon industry have debated as to whether they should use the disease outbreak as an opportunity to promote their salmon, although many feel it would be wrong to capitalise on the misfortunes of the farming sector. However, despite this reluctance exports of salmon to the EU and more especially to the UK, have been increasing.
Yet, Andreas Grimelund of salmon export company Rolf Olsen, is quoted by FIS as saying that he is not convinced that these increased exports are the result of the problems of the farming sector, but rather that they are simply the result of the lower salmon prices. His assumption is probably correct, not just because Matthew Fort has suggested that consumers are motivated by low prices, but because closer examination of the underlying trend of salmon price movements clearly demonstrates a relationship between low prices and increased demand/production growth.
Mr Fort is a great exponent of high quality food and cooking and he laments the intensification of modern food production and also of an apparent decline in consumer standards. However, as many failed companies will attest, it is not possible to force producer ideals on unwilling consumers. Successful companies have to respond to what the markets want and in the case of food production, this means a desire for cheap food.
Whilst many salmon producers perceive that the fish they produce are of the highest possible quality, and worthy of a premium price, salmon producers are not immune from the market demand for cheap food. Although salmon was once regarded as an expensive luxury item, the advent of farming has meant that salmon has now evolved into a value for money, low cost, and everyday food. This is why demand for salmon has continued to keep pace with production and this is without the need for expensive promotional campaigns to further stimulate consumption.
Several commentators have suggested that salmon prices will soon rise. Certainly, prices will firm up during the run up to Easter, but in the longer term; salmon prices will undoubtedly remain low. This is because consumers clearly prefer to buy cheaper food. If prices rise too high, then many consumers will simply turn away from salmon and look elsewhere for cheaper alternatives.
Consumers would like to believe that the food they eat is both safe to eat and of the highest possible quality, but they also believe that it should be available at the lowest possible cost. This is the clear message to which the salmon farming industry will have to respond.
EU-Norway Deal (part 3!): According to IntraFish, the Norwegian fishing industry's foremost anti-dumping expert, Per Dag Iversen, has proposed two possible outcomes as to what might happen when the current EU Norway salmon agreement expires. He suggested that either the agreement could be extended or alternatively it could be scrapped altogether and full free trade be allowed to resume.
Full free trade must be the preferred option, yet Mr Iversen is hesitant to recommend it as being the best choice for Norway. His reasoning is that the removal of the agreement would encourage Scottish competitors to make a further dumping complaint against Norway for selling cheap salmon on the European market.
Whilst Mr Iversen may well be a leading expert on anti-dumping, his reasoning is flawed. Firstly, the Scottish dumping case submitted in 1996 was never about dumping at all. Instead, it was about the Scottish industry's failure to achieve their perceptions about a market position for Scottish salmon. Producers in Scotland firmly believed that their salmon was superior to that produced elsewhere and as such it warranted receipt of a premium price. Unfortunately, as discussed in the previous comment, consumers are much more interested in the price than any market image. This meant that any anticipated price premium failed to materialise.
Rather than look towards their own shortcomings at marketing, the Scottish industry chose to blame others for their failure to achieve a premium price for their salmon. They attributed this to the presence of cheaper (and presumably inferior) Norwegian salmon in the marketplace, which clearly consumers preferred to buy. The Scots claimed that the presence of cheaper salmon in the markets devalued the market image of the fish they produced. They hoped that if they could exclude Norwegian salmon from Europe, through the imposition of high countervailing duties, then the perception of Scottish salmon as a high value product could be regained. However, consumer choice prevailed and as a result many farmers now accept that consumers are unwilling to pay more for Scottish salmon. Perhaps, this is because when it is displayed on the supermarket shelves, one cut of salmon looks just like another and hence, consumers are simply unable to tell the difference.
Of course, there are some farmers who have specialised their production in some way or other. This could be organic or by growing fish in fast flowing water and as such, they believe that they can generate a premium price for their fish. As in all areas of animal production, there is always a demand for small, niche markets. However, this is not the same as the blanket expectation that all Scottish salmon should receive a price premium.
In the five years since the imposition of the salmon agreement, many farmers have recognised that they cannot rely on consumers to pay a premium price for Scottish salmon and therefore it is unlikely that they would ever be motivated to submit another quasi- dumping case again.
However, it is just not the expectation that has changed. Many farmers, disillusioned by the fact that their perceptions of the salmon they produced failed to live up to the realities of the market place, decided to get out of the industry. Overseas farming companies, especially those from Norway, have acquired these farms. These companies feared that they might be excluded from the European market and therefore opted to buy into Europe to ensure at least some access to the market place. The inevitable result is that overseas companies dominate ownership of the Scottish industry. Mr Iversen should ask the question whether companies like Nutreco, with huge interests in Norway, Statkorn, Pan Fish, Fjord, Stolt, etc would allow the Scottish industry to submit a dumping complaint against Norway ever again?
Finally, Mr Iversen rightly points out that the European Commission is unlikely to want the EU salmon agreement to continue. It has cost DG1 a great deal in terms of resources, often as much of 80% of the department's capacity has been used to monitor the agreement. However, it is impossible to have any sympathy for DG1 since right from the start, they refused to accept independent submissions questioning the validity of the case. Had they done so, it is quite possible that the case would never have been progressed and thus the need for any agreement and all the associated monitoring would have been negated.
There is only one option, which Mr Iversen should consider as the follow-on to the EU salmon agreement and that is a resumption of full and free trade.
More dumping: Alaskan fishermen have claimed that the Chilean salmon industry is over-producing and dumping cheap salmon onto the US market. The Chileans are being accused of selling at prices below that of Alaskan wild caught salmon and hence the Alaskan fishing industry want restrictions placed on Chilean imports. These restrictions would either be a ban on imports during the wild fishing season or the imposition of new duties to make Chilean salmon more expensive.
This is an interesting spin on the previous salmon dumping cases, all of which have related to farmed salmon. The accusation that Chilean farmed salmon can be produced and sold more cheaply than salmon caught from the wild by Alaskan fishermen will certainly be difficult to judge should the case goes for further investigation. How is it possible to rule whether something which has a known production cost is undercutting something which does not?
Alaskan fishermen have to offset the fixed cost of their boat and nets. This will need to be met whether the boat stays tied up in harbour or whether its holds are jammed full of catch. Clearly, if the catch is poor, then their costs are relatively higher and this is what seems to be at the root of their current difficulties.
A report in IntraFish indicates that the current forecast for the Alaskan wild catch will be down on previous years. The forecast for 2000 was 153 million fish and for 2001 this has been reduced to142 million. However, this years forecast is actually above last years catch of 136 million, so it is quite likely that the final catch could well be below even this figure.
It is quite usual that as wild stocks decline, there is an associated rise in prices. Alaskan fishermen might well expect to see such a rise to offset their lower catch. However, as previously indicated, consumers have shown a preference for lower cost fish and the Chilean industry is simply reacting to this demand. Had the wild catch been high, then salmon prices would have remained low and Chilean salmon would have been expensive by comparison.
Many wild catch fisheries are under threat from over exploitation. Aquaculture may well be the only way in which future supplies of fish can be guaranteed. Commercial fishermen should look at diversification into aquaculture rather than try to stifle its continued development through unwarranted trade actions.