reLAKSation 111.
Re: Members?: We, at Callander McDowell, wonder when those currently involved in the ongoing debate about Producer Organisations will start to realise that they are totally wasting their time. IntraFish reported that fisheries student Nils Kristian Sorheim Nilsen, a scholarship student at the Norwegian College of Fishery Science told Norsk Fiskeoppdrett that Chilean fish farmers should be included in a trans-national system of PO’s if Producer Organisations are to have any proper effect. He said that in a European context, the farming industry can certainly make an attempt to control production, but as long as Chilean fish farmers keep on churning out more fish, then European producers would be wasting their time. He went on to say that if one or more producer countries tries to restrict production, then there will always be others trying to use the opportunity to exploit the marketplace to their advantage.
This may be sufficient reason to justify as to why the Chilean industry should participate in a system of PO’s, but it makes little difference because Chilean farmers cannot join in with PO’s because they are a system specific to the European Community. In exactly the same way, the Norwegian industry is wasting its time in discussing whether they should also join because until Norway joins the EU, Norwegian fish farmers cannot participate in any European system of PO’s. Any further discussion is therefore pointless.
However, Mr Sorheim Nilsen says that the debate should continue simply because whilst the debate continues, European farmers would find it more difficult to pursue any further dumping complaints since by doing so they would be effectively sabotaging their principal strategy. We, at Callander McDowell can only despair. For far too long, there has been a view that the Norwegian industry should act to appease their counterparts in Europe. This is why PO’s continue to appear on the Norwegian agenda at all.
When is the farming industry going to recognise that this international squabbling can only damage the prospects for aquaculture, especially at a time, when farming offers consumers the most reliable and economically viable way of sourcing supplies of fish and seafood. The industry should be gearing up production to meet the shortfall of wild caught marine fish, not looking at ways to control production.
As we have suggested PO’s will never happen. There is no mechanism by which an international system of PO’s can be enforced. It can therefore only work if it is controlled by a voluntary arrangement (although whether this would be legal in terms of international trade legislation is questionable). If PO’s are to be voluntary, then they don’t need to be PO’s. They can be just a voluntary organisation instead. Rather surprisingly, such an organisation already exists; The International Salmon Farmers Association, of which nearly all national salmon farming industries are members. If those industries, which want to see production under more rigorous control, then they have had plenty of opportunities to instigate some voluntary arrangement under the auspices of the ISFA. The fact that this has no yet happened is more indicative of why PO’s should be removed from the agenda. Instead, much more focus needs to be directed at the question of the marketplace for this is where the issues of growing production will be actually addressed.
Space invaders!!: ‘Scotland on Sunday’ columnist, Magnus Linklater has accused the Scottish Government for allowing the salmon farming industry to slip into foreign ownership. He said that the latest statistics indicate that Scottish farmers now only control less than 20% of the industry. More importantly, he says that Scotland has lost any control over the future direction of the industry.
Mr Linklater blames this lost control on an all too familiar story of Scottish institutions failing to get behind a native industry with no-one being prepared to give fish farming the leadership and status that it needs to succeed.
However, we at Callander McDowell, believe that it is too easy to blame Government and other institutions for this lost control and instead the industry should accept much of the responsibility. Fish farming is not some form of social service but a business whose prime aim is to make money for the owners or shareholders. It is too easy to remember that many who came to salmon farming in the early days were attracted by reports of high prices and rich rewards.
Rather than blame government, Mr Linklater should perhaps look to the fact that many farmers were reluctant to adapt to the changing market for salmon. It was inevitable that with more and more start-ups, it would be impossible to sustain either salmon’s high price or it’s luxury image. Despite a changing marketplace and falling prices, farmers have blithely hung onto their perception of what Scottish salmon should be. This means that instead of trying to capitalise on the changing market image, the Scottish industry has invested in a fight to retain their image of Scottish salmon. This strategy has attempted to control production either through dumping complaints in which imported salmon would be priced out of the market place because of the imposition of high tariffs or by trying to cut back production using the perceived powers of a Producer Organisation. One example of these costly campaigns was run inthe British broadsheet newspapers during 1993:
Some Scottish farmers tried to stamp their view of the salmon market on the rest of the international industry and have failed. This is because they forgot that their first priority must be to produce what the consumer wants. It is only necessary to look back to the recent campaign by MEP Catherine Stihler and Scottish Quality Salmon to insist that salmon be properly labelled with the country of origin. They said this is necessary because consumers would otherwise be unable to tell one salmon from another. This is exactly the point. If these farmers want their salmon to be different, then they must ensure that consumers can recognise the difference, otherwise they will have failed and this is exactly what has happened.
The inability to consistently persuade consumers to pay a premium for Scottish salmon in the face of competition from imported fish and the inevitable decline in margins has convinced many farmers to sell up. The only buyers have been Norwegian, spurred on by the need to establish a base within their most important market. This may not be to Mr Linklater’s liking but it makes sound commercial sense. The Norwegian invaders have simply filled the space vacated by disillusioned Scottish producers.
The outcome may have been very different had Scottish farmers tried to capitalise on changes to the market, rather than continue to insist that their salmon was different to imported fish ignoring the fact that consumers clearly did not think so.
Capital idea! IntraFish reported that the Annual General Meeting of the British Marine Finfish Association heard their Chairman, Alistair Barge say that the marine finfish industry was being stifled by a lack of working capital. He said that salmon farmers were struggling to make money and therefore had no reserves to spend on diversification. He expressed the hope that the authorities would do more to improve the financial climate so that the marine finfish industry could realise its full potential. He said that this would also help alleviate the pressure on wild stocks.
Yet, it may not be just this lack of capital which is affecting the development of the marine finfish industry. Budding producers may also be deterred by the fact that they are competing against a wild catch industry, even one which is suffering from over-fishing. This year’s Buckland Professor, John Goodlad concluded that fishermen catching cod would always have a competitive advantage over farmers. He illustrated this point by comparing the production cost for both farmed and wild caught cod. Farmed cod cost just under £2/kg to produce, whilst costs for wild caught fish are less than £1.45/kg for 200 boxes, falling to about £1/kg if more cod was caught. Mr Goodlad pointed out that should wild cod stocks disappear then farming could well become more economic, but he said that he even in today’s uncertain climate, it is possible to catch cod more cheaply than farming it.
Mr Goodlad reiterated our own previously expressed concerns that juvenile production is the costly sticking point and until hatchery costs can be reduced, cod, in common with other marine species, will be expensive to farm. IntraFish recently reported that Mediterranean bass and bream producers have suffered from low prices, often below the cost of production and this is another example as to why marine fish production will not follow the route taken by salmon producers. This is a view echoed by Mr Goodlad who believes that cod farming will never be as big as salmon farming has become over the last 20 years.
Limitations on production may be one constraint, but we at Callander McDowell, are more interested as to whether a market for farmed cod even exists. Certainly, high cod consumption and declining stocks would appear to indicate that consumers would buy all the cod farmers could produce. Preliminary market research by the marine finfish industry even suggests that consumers would be willing to pay more for cod of a consistently high quality. We are not so sure. Evidence from the market place already suggests that as the price of cod has risen, consumers have sought out cheaper, more value for money alternatives. This is why salmon consumption has soared and should continue to soar. Consumers appear unwilling to pay more for their cod and are happy to seek out an alternative. However, we accept that there will always be a small section of the market who will buy cod irrespective of the price and the expectation is that farmed cod will be sold at a premium. However, even before production has made any real impact on the market, farmed cod is selling below the cost of comparable wild caught fish. Earlier this year, Marks & Spencer were selling farmed cod at £11.96/kg whilst their wild caught fish were priced at £13.17/kg. This is below expectation and as volume production grows, this price would be expected to fall. The question which farmers must answer is whether they will be able to produce cod at sufficiently low cost, that can produce a realistic profit. The indications are not too good. IntraFish have recently reported that an expected price rise for Mediterranean bass and bream has so far failed to materialise this year and as a result, fish are being sold below the cost of production. Can cod farmers expect a similar future?