reLAKSation 115.
Vote
of confidence: According to IntraFish, there
have been 140 applications for 60 of the new farm licences in Norway, although
the 10 new licences in Finnmark failed to generate any interest. This equates to
140 separate votes of confidence in the Norwegian salmon farming industry. It
also means that 140 applicants are sufficiently confident in the future of
salmon farming in Norway to invest in the industry. This is despite continuing
concerns about falling prices. It’s only a handful of months ago that the
Norwegian industry were so concerned about the low price of salmon, that calls
were made to remove fish from the market through an ambitious freezing
programme.
At
the same time, FHL Havbruk have expressed concern that the release of new
licences will send the wrong message to European bureaucrats and as a result the
European Commission may be more inclined to impose Draconian measures against
Norwegian exports to the European markets.
We,
at Callander McDowell, applaud the 140 applicants for their clear demonstration
of faith in the salmon farming industry. They obviously believe that money can
be made from salmon farming despite the many hurdles which will need to be
overcome. Overall, the salmon farming industry should benefit from willing
participants who are optimistic about their future.
Such
enthusiasm should not be curbed simply because some sectors of the industry are
worried that any further expansion of salmon farming may bring the might of the
European Commission against them. The European Commission have wasted a great
deal of their time investigating accusations of dumping from a European industry
which has consistently failed to capitalise on its own strengths and has looked
instead for a scapegoat to blame for its own failings. Let us hope that the EU
has now recognised that farming is the future of fish supply and should not be
curbed by those unwilling to adapt to a changing marketplace.
The
future of salmon farming is one based on low prices and hence low production
costs. However, there is no reason why margins should also remain low.
Hopefully, this new round of licences will herald the realisation that the
salmon farming industry must move away from a dependence on the production of
whole fish and look towards adding real value, not only for the consumer, but
also in the bank balance.
Vote of
no-confidence: In the last issue of
reLAKSation, we discussed comments made by Alistair Barge, Chairman of the BMFA
who was concerned about the lack of investment and support for fledgling marine
finfish farming industry. We, at Callander McDowell, suggested that perhaps one
reason why investment was not so forthcoming was because the move to marine
finfish farming was being promoted as a way to help salmon farmers to diversify
away from the problems of low prices and overseas competition. Instead, we
suggested that marine finfish farming should be viewed as a viable commercial
proposition in its own right. Unfortunately, this view is not shared by all as
one of our correspondents wrote to tell us that our comments might muddy the
waters for those seeking such investment.
However,
our comments are nothing to the body blow that the marine finfish farming
industry has just received with the announcement that Marine Harvest are to
withdraw from halibut farming in the UK. IntraFish reports that instead, the
company is to concentrate all its halibut farming in Norway in order to achieve
economies of scale. Any potential investors may now be deterred if they feel
that as a large company like Marine Harvest is unable to justify its marine
finfish farming activities in Scotland, then will any other company be able to
do so? As Alistair Barge said ‘will the lights will go out
before they even get started with such new species?’
Marine
finfish farming of cold water species has been the subject of investigation for
over forty years, yet despite extensive research, examples of commercial success
are very hard to find. Over the past decade there has been renewed activity to
commercialise marine finfish species due to the ongoing difficulties experienced
with salmon farming. We, at Callander McDowell, were reminded of a report
entitled ‘Cultivating a Balance. An aquaculture strategy for the Highlands
& Islands 1992-1996’ published by Highlands & Islands Enterprise,
which evaluated the then situation in the salmon farming industry and considered
the potential for marine finfish farming.
On page 8,
the report states: “There are strong pressures forcing species diversification
in the aquaculture industry of the Highlands & Islands The industry is close
to being based on a monoculture of salmon, and is susceptible to the ups and
downs of what has become a world commodity market.
Diversification will lead towards stability in the industry, and is
sought by all who wish to secure the aquaculture industry's current benefits by
helping build a more secure future.”
HIE stated
its vision for aquaculture between 1992-1996 on page 15: “The commercial
hatchery production of halibut in this country should be a reality in three to
five years times, given the present effort being devoted here and in Norway.
Few, if any hurdles are evident from experience of on-growing wild caught
halibut and a rapid uptake of this species is likely from salmon farming
companies in a year or two from now. Whilst poor times in salmon farming have
largely eliminated speculative investment in halibut investigations, it has
raised the pressure to find another fish to farm. Once a modest number of
juveniles can be produced, then companies are prepared to invest.”
“The UK
halibut market is small and while salmon showed how demand can be built, so too
it illustrates the hazards of overproduction. Halibut farming is likely to
develop around perhaps several marine
hatchery operators who will supply on-growing businesses, probably
already active in marine salmon farming.”
Although HIE
stated that certain assumptions had to be made during the development of their
strategy, they also said that such assumptions may well be later disproven in
such a young industry. Thus, it was possible that may have been rather
optimistic when they considered the potential impact on the region. They said
that: “The primary candidate for commercial production in the Highlands &
Islands is halibut. We expect that commercial operations will be established
within three years with farmed halibut initially following a production cycle of
four to five years. The extent of activity could be three hatcheries in three
years supplying between 10 and 20 on-growers, probably located in the northerly
parts of the Highlands & Islands. Production could be in the range 500 to
1000 tonnes by the end of the decade.”
We very much
agree that the market for halibut is very small. In fact, long ago, we had a
conversation with a representative of the marketing department of Seafish who
said that he was unsure as to why there was so much emphasis being placed on
farming halibut when the wild catch satisfied all of the market demand. It was
therefore unlikely that halibut farming would ever make a significant
contribution to aquaculture production. In addition, forecasts of 1000 tonnes
production might even undermine current market demand. It is still not even
clear as to whether farming halibut in Norway will prove to be more viable than
in Scotland.
Halibut
farming may have a future in Scotland, but only as a very small niche market.
Commercial success will only ever occur on a small scale and only in the hands
of an independent farming company. It is still too early to tell whether such a
company might be persuaded to take over from Marine Harvest so the future of
halibut farming hangs in the balance.
This still
leaves the question as to whether cod farming will be more successful?
Certainly, there is a much greater market demand for cod and the future of
current supplies remains uncertain. The key factor will be whether consumers are
prepared to pay more to buy what they consider to be an everyday fish choice.
Only time and the marketplace will really tell.