reLAKSation 120.
Christmas Offers: In the run up to Christmas, British supermarkets have again offered salmon at discounted prices. These are summarised as follows, together with the prices recorded in previous years:
Asda.
December 2003.
Fresh whole Scottish salmon £3.24/g (Save £1.14/kg)
December 2002.
Fresh whole Scottish/ Norwegian salmon £3.22/kg (Save £1.16/kg)
December 2001.
Whole fresh salmon £3.19/kg
Whole prepacked salmon £3.99/kg
December 2000.
Whole prepacked salmon £4.20/kg
Morrisons:
December 2003.
Whole Scottish salmon £3.99/kg (Standard price)
December 2002.
Fresh whole Scottish salmon £3.95/kg. (Save £0.43p/kg)
Chilled whole prepacked Scottish salmon £3.95/kg (Save £0.43/kg)
December 2001.
Whole salmon - fresh and prepack £4.38/kg
December 2000.
Whole salmon - fresh and prepacks £4.48/kg
Safeway:
December 2003.
Fresh whole Scottish salmon £4.99/kg (save £1/kg)
December 2002.
Fresh whole Scottish salmon £3.99/kg but also £2.99/kg in selected stores
Chilled whole prepacked Scottish salmon £3.99/kg (Save £2/kg)
December 2001.
Whole fresh salmon £4.99/kg
Fresh salmon fillet £6.99/kg
December 2000.
Whole prepacked salmon £8.98/kg
Sainsburys:
December 2003.
Fresh whole Scottish salmon £3.99/kg (Save £4/kg)
Chilled whole prepacked Norwegian or Scottish salmon £4.99/kg (Save £2/kg)
December 2002.
Fresh whole Scottish salmon £3.99/kg (Save £4/kg)
Chilled whole prepacked Norwegian or Scottish salmon £4.49/kg (Save £2.99/kg)
December 2001.
Fresh whole salmon £3.49/kg
Whole salmon prepack £4.49/kg
December 2000.
Whole fish £4.63/kg
Tesco:
December 2003.
Fresh whole salmon £3.29/kg (Save £3.28/kg)
December 2002.
Fresh whole salmon £3.29/kg (Save £3.40/kg)
December 2001.
Fresh whole salmon £3.19/kg
December 2000.
Fresh whole salmon- fresh and prepacked £3.24/kg
Waitrose:
December 2003.
Fresh whole Scottish salmon £4.99/kg (Save £2/kg)
December 2002.
Fresh whole Scottish salmon £4.99/kg (Save £1.50/kg)
Fresh whole Scottish organic salmon £6.79/kg (Save £2/kg)
December 2001.
Fresh whole salmon £4.99/kg
Nok...ing
up the price: There has been a great deal of
conjecture concerning the fate of salmon prices in the coming year. 2003 was
characterised by low prices, although they were not so different from those
experienced during the previous year. Such low prices have continued to erode
margins away from the levels which are perceived to be acceptable to the
industry, even though margins are not just dependent on the price received. The
cost of production is also critical.
When
prices reached their lowest point, the Norwegian industry proposed to take up to
30,000 tonnes of fish out of production through the imposition of a freezing
programme. This proposal was never implemented because prices started to rise
before agreement could be reached. This rise petered out before it attained the
level predicted by some commentators.
Now
as we enter 2004, the crystal ball gazers are predicting that prices will
achieve the NOK 30 barrier by Easter. This forecast is based on the fact the
biomass should be lower than in previous years due to the combined effect of
high harvest rates, lower smolt numbers and various bankruptcies. Yet, similar
forecasts have previously failed to come to fruition. It may therefore be
necessary to seek alternative ways to improve margins.
We,
at Callander McDowell believe that we have the answer. There is a very simple
solution to the problem of low prices. All the industry needs to do is produce a
fixed price list for their salmon. After all, the European Commission was able
to set a minimum import price (MIP) so why can't those farmers who want higher
prices set a recommended selling price (RSP) of, for example, the desired NOK
30/kg. As it is argued that NOK 30/kg is needed to make a reasonable margin,
this set price cannot be seen as price fixing or profiteering. It is simply a
way to ensure farmers can make a living and for their farms to stay in business.
Thus,
with one single action, the problem of low prices can be solved...............or
can it?
Putting
aside any uncertainties about the legality of a fixed price list, the real
question is whether the market would be prepared to pay a higher price for its
salmon? If farmers from just one production area were to adopt such a strategy,
would buyers be prepared to pay this higher price or would they instead turn to
other producers to buy salmon at lower cost? We, at Callander McDowell, believe
that whilst NOK 30/kg was once an acceptable price to pay for farmed salmon, the
market has continued to evolve so that consumers expect to pay a lower price for
salmon. Whilst this may not be what farmers want, the reality is it is the low
price which is responsible for expanding market demand. If prices were to rise,
many consumers, who started to buy salmon just because it is cheap and
represents real value for money, will simply look for cheaper alternatives and
as a result, the market will shrink.
There
is no doubt a relationship between volume and price so that as volume increases,
prices fall and vice versa, however, in the real world, it is not a straight
forward relationship. Many other factors can influence the direction of price
movements, for example, we have mentioned in a previous issue of reLAKSation
that the rate of harvest is also important. However, despite these influences,
higher prices will affect the market size. Even before we have seen any price
rise start to develop, concern is already been expressed about how such higher
prices will affect the market. Bill Hazeldean, Chief Executive of Macrae Foods
in Scotland told European Fish Trader that both jobs and growing consumer demand
will be under threat if salmon prices were to rise. He said that more and more
processors are becoming dependent on farmed salmon as they try to fill the gap
left by dwindling white fish supplies. According to the Scottish Seafood
Processors Federation, 40% of the UK's fish processing industry now have a
significant dependence on farmed salmon. Three quarters of Macrae's 1400 strong
workforce work on processing just salmon. Rhona Grant of the SSPA said her
members welcome quality at 'realistic' prices where-ever they can get it.
Clearly, the processing industry is not prepared to suffer the extra cost of
higher priced salmon.
The
salmon price guide, provided by IntraFish, shows that it is now nearly three and
a half years since salmon prices exceeded NOK 30/kg and it is probably not since
1998 since prices were sustained at that level (The exact figures depend on
which exchange rates are used). Production figures and prices given on the
Federation of Aquaculture Producers website would seem to indicate that if the
relationship between price and volume is used to predict price levels then
European production will need to be cut by 170,000 tonnes to sustain this higher
price again. It is unlikely that such a reduction can be achieved under the
present conditions.
Callander
McDowell is not in the business of price forecasting. Instead, we prefer to read
what is happening in the marketplace and we are not convinced that conditions
are right to sustain a price rise to NOK 30/kg. However, even if we are wrong,
we are not convinced that such a price rise will bring benefits that the
industry anticipate.
Back
to school!: In a New Year interview with
IntraFish, FHL Havbruk's chairman, Lisbeth Berg-Hansen said that 'Fish farmers
need to improve their knowledge of the market'. This is certainly a sentiment
with which we, at Callander McDowell would agree. However, we are concerned that
this New Year message is not what it first appears.
When
Ms Berg-Hansen discussed that salmon farmers must know their market, it would
appear that what she really means is that the industry must seek to improve the
balance between supply and demand in the market rather than actually seeking to
understand what the market really wants. She told IntraFish that it might be
better to focus on smolt releases rather than the total biomass. She also said
that it is important that farmers start to enter into longer term contracts,
rather than rely on the spot market. To us at Callander McDowell, these are
production issues, not one appertaining to the marketplace. We firmly believe
that it is necessary for farmers to look closely to what consumers want and then
adapt their products accordingly. This is the only way that companies will be
able to stay ahead in the marketplace, instead of trailing behind the changing
price of salmon.
The
problem for much of the industry is that many farmers appear to feel divorced
from the marketplace as it is too distant in terms of both the geography and the
end-products. However, this must change. The future of the salmon industry will
ultimately depend on consumer choice and it is to the consumer the industry must
now look. It is simply not enough to think that trying to balance the production
with market demand will iron out the ongoing market disruption.