reLAKSation 121.
Going
going......: During the run up to Christmas,
the web based Shetland News reported that two Shetland salmon farms had gone
bankrupt. This was depressing news for the salmon industry at what should have
been a festive time. However, news of these bankruptcies should not have been
too unexpected since many farms, especially the smaller ones have been under
extreme financial pressure due to continued low prices.
Yet,
whilst it is easy to blame low prices for these insolvencies, it may be that a
better explanation for the failures could be due to a reluctance to adapt to a
rapidly changing market. Whilst, there will be many within the industry who will
passionately disagree with our analysis of the situation, it would seem that
there are others with a more positive outlook. The Shetland News has
subsequently reported that other farming companies have already been making
enquiries about acquiring the assets of the bankrupt farms. This would seem to
suggest that these bankruptcies, however traumatic, are not the start of a major
crisis. There are clearly some companies who are sufficiently confident in the
future to continue investing in salmon farming.
We,
at Callander McDowell, have always believed that the industry has yet to undergo
radical change if it is to successfully adapt to the changing market demand. We
regularly argue that if companies were to be proactive and initiate this change
themselves, they would be in a much stronger position to ride out any future
market disruption. Unfortunately, many companies have tended to focus on the day
to day running of their business rather than give any consideration of what may
or may not happen in the future and as a result, they are not always in the best
position to endure the roller coaster ride of salmon farming. This means that
the radical change still needed, is reactive and therefore will be more painful.
David Sandison, General Manager of the Shetland Salmon Farmers Association told
IntraFish that these current
failures may be a necessary part of industry restructuring and a step towards a
stronger future. He said that there be yet more company failures on the horizon,
whilst others may manage to manoeuvre out of difficulties in different ways. Mr
Sandison said that companies may trade down, trade out or move the main focus of
their production into something else. Yet, if such manoeuvring were possible, we
wonder why companies had not already considered such options and planned
strategically ahead to avoid the problems altogether.
Whilst individual companies may not have considered developing a strategic plan for the future, the Shetland Island Council has. According to the Salmon Farm Monitor, the SIC is still waiting the receipt of a Shetland Development Trust report on a strategic plan for aquaculture in the islands. The principal aim of the ‘strategy’ is apparently to provide a ‘framework for possible investment in a long-term plan to help fish farming.’ This plan was first reported in Fish Farming Today last August when representatives of the Trust visited the AquaNor exhibition to look for ideas. However, the Salmon Farm Monitor report that the ‘plan’ now seems to have been abandoned.
We, at Callander McDowell, would be surprised if any attempt to develop a strategic plan for the Shetlands had been dropped since salmon farming is such an essential part of the Shetlands’ economy. Yet, we are also surprised that the Shetland Island Council is still awaiting delivery of the strategy. This is because the authors of such a strategy do not have many options to call on, especially on Shetland, where the industry comprises of a comparatively large number of small farming businesses.
When we first proposed a strategic approach back in 1990, the salmon industry was still experiencing it’s initial bout of market disruption. It was natural for farming companies to believe that this disruption would be only short term and the developing trend of falling prices could be reversed. History has now shown that this did not happen and as a result salmon farming has evolved from an industry of high margins and low volumes to one of high volumes and low margins. Salmon is no longer a luxury treat but is an everyday meal choice for all. The industry, including that in Shetland, must develop strategies to capitalise on this change, otherwise the spectre of failure looms ahead.
A local industry, such as that in Shetland, has both strengths and weaknesses but there is no reason why farmers there cannot compete against wider industrial scale low cost production.
Any strategy for Shetland will depend on three separate areas of development:
In effect, the small
producers must emulate the development of the large integrators, but at the same
time aiming to benefit from the local Shetland image. This is not a simple
solution nor will it be easy, but it is the only option unless there is a
complete turnaround in the global approach to salmon farming. This will be
unlikely. The only other option is that we will see more and more failures as
the smaller farming companies find it increasingly difficult to compete in the
international marketplace.
Smolt or fault? : IntraFish report that leading industry figures in Scotland have warned that the government must step in to prevent specialist salmon breeders from losing ground that otherwise would be totally lost. This is because smolt placement is likely to fall by another 25% this year. Last December, there was a similar warning from a salmon breeding company in which they said that any cut backs in their breeding programme will have long term consequences. This is why at least one industry figure has said that as Government Minister, Alan Wilson has recently expressed his support for aquaculture, he should now put ‘his money where his mouth is and target support towards the smolt sector.’ This key industry person also said that if there ever was a deserving case, then it is the smolt producer. ‘You’re talking about our seed corn, the foundation for the future of our industry for the next twenty years’ he said.
We, at Callander McDowell, are rather perplexed by this support for the smolt sector from leading industry figures. This is because it was not so long ago that the mainstream salmon industry were not so considerate for the welfare of smolt producers. We should say that we are in no way suggesting that it each case it was the same industry figure involved because we recognise that it is not just personal that have changed, but also the whole of the industry organisation.
Yet back in 1996, when the
Scottish industry were passionately arguing for the imposition of production
control through the introduction of Producer Organisations, they never gave any
consideration for the future of smolt production. This is because under the then
SSGA proposals, membership was to be restricted to only on-growing companies.
This meant that all hatcheries and smolt producers are excluded from membership,
which obviously had equally grave implications for the future welfare of the
industry as those currently suggested.
At the time, we at Callander
McDowell argued that how could a system, which is dependent on the controlled
supply of smolts, exclude those farms which are responsible for the production
of these smolts. (see ‘85 questions about PO’s’ in the reports section of
our website). We said that if a Producer Organisation should decide to restrict
smolt placement, then smolt producers would have no say on the matter nor would
they be able to gain any compensation to cover the fact that they will have
excess smolts that they were unable to sell. For example, if the consultants to
the Producer Organisation had decided that the market was over-supplied and
subsequently recommended stringent cuts in production, it would be the smolt
producers who would undoubtedly suffer most. Many could have been forced out of
business, as demand for their production fell and they would have been left with
smolts that they were prevented from selling. This surely, would have just as
much threatened the whole future supply chain of the salmon farming industry,
but the leading industry figures then seemed happy to let it happen. How times
have changed!
Another hiccup: The
press has had a field day with coverage of the report into contamination of
farmed salmon. Someone from the salmon industry must have upset the Daily Mail
most because they alone ran a full page banner headline about the scare not just
one, but for two days. Hopefully because of the intervention of the Food
Standards Agency and other scientists, this unwanted food scare will probably go
away. As usual, the newspapers have provided their readers with many inaccurate
facts but we were most interested in a full page guide to what’s on the
shelves published by the Daily Mail.
They have listed the various salmon products available from five of the leading UK supermarkets. These are put into one of three sections, fillets, smoked or tinned. It is not a comprehensive list as it provides just one or two examples under each section. However, what is clear to us is that whilst the author has tried to summarise the information on the label, they have omitted much of the relevant detail. This suggests a casual attitude to their reporting, which clearly extends to all their coverage of this latest scare.