reLAKSation 122.
No
entry?:
We, at Callander McDowell, had hoped that 2004 would herald the start of a new
era of realism for salmon farming. Ever since 1989, when salmon prices first
collapsed, we have argued that the industry needs to look to the marketplace for
solutions. Unfortunately, many farmers have come to accept their remoteness from
the marketplace, both in terms of their geography and their state of mind.
Farmers produce the fish and once they are harvested they are not really of any
concern. What happens in the marketplace is just such a long way off. Thus, the
suggestion to look to the marketplace still appears meaningless. The industry
must yet overcome the bottleneck of the marketplace. We had thought that we had
begun to see signs that the barriers were being broken down, but it would seem
not. As we enter 2004, the old ways have again reared their ugly head.
IntraFish
report that the Norwegian industry and authorities now fear that the Scottish
industry is just marking time until the ‘truce’ following the expiry of the
EU salmon agreement ends. The Scots have apparently made enquiries about the
imposition of measures that do not involve dumping allegations. These may
include import quotas, minimum import prices or even punitive duties.
It
is now nearly 15 years since the Scots first approached the EU complaining about
alleged dumping. After all this time, cannot these farmers realise that such
trade measures are not the way forward. They have not yet helped resolve the
outstanding issues nor will do so in future. This is because the salmon market
today is very different from the one of 15 years ago and all such trade measures
would achieve today is risk permanently damaging the market for everyone,
including the Scottish industry. Sadly, the small inner clique who are behind
these latest approaches appear to be fixated on a crusade from which they refuse
to be diverted.
The
Norwegian industry is at least trying to look forward. The theme for this
year’s NSL Salmon Days conference is market access. Although this is not quite
the same as looking to the market, it is a step in the right direction. Clearly,
the Norwegian industry wants to look to ways in which permanent free access can
be gained without this constant and unnecessary threat of punitive measures. In
the past, Norway has missed opportunities. For example, the EU once considered
the third party fishing agreement which it held with Norway to be the most
important of all. This permitted EU fishing boats access to Norwegian fishing
grounds and it came up for renewal during a previous dumping case. It could have
been used as a bargaining tool to guarantee access for Norwegian salmon farmers
to the European market, but it wasn’t. Norwegian membership of the EU is
another possibility.
However, we, at Callander McDowell, do not think that Norwegian salmon farmers can rely on national agreements. Instead, they should look for their own solutions in the marketplace. One, which we have suggested previously is to capitalise on the growing trend for convenience added value products.
According to Datamonitor, the European market for ready meals is worth about £8.2 billion and is expected to rise to £10 billion by 2007. Of this potential market, the UK accounts for about 49% with an average consumer spend of £69. France is also significant with a spend of about £30 a head. Of course, these figures represent the opportunity and the way forward, not the existing market, but one still to be exploited.
What makes this market interesting for Norwegian producers is that such salmon products carry an export code of 1540 and not the 0302/0304 codes which are the subject of the Scottish industry’s crusade. This means that the Norwegian industry can export as much as it likes at whatever prices it likes without the threat of any punitive measures. This is the type of market access which surely represents 2004 and beyond so that Norway can develop onwards without the repeat of the threats which have dogged the industry for the last 15 years.
Confessional: Lars Liabo of Kontali Analyse admitted to IntraFish that he got it wrong on 2003 predictions. He had suggested that 2003 would be a reasonably good year for the salmon industry but he said now that this couldn’t have been further from the truth.
Konatali produce regular forecasts of salmon production and biomass, which are circulated throughout the international industry. We, at Callander McDowell, have never really taken much notice of these forecasts as we believe that such forecasts simply divert attention away from the real market issues. We firmly believe that individual farming companies should develop their own strategy to take their business forward irrespective of what is or what is not happening elsewhere. Instead, these forecasts perpetuate the production led strategies which have been the underlying cause of much of the past market disruption. They also perpetuate an unwarranted culture of blame. This can be seen even coming from Mr Liabo himself. He said that whilst Norwegian fish farmers have long accused the Chilean industry of over-production, his figures reveal that the culprits were in fact the Norwegians themselves. However, the reality is neither Norway or Chile have been over-producing, although both may have been significantly under-marketing to help boost margins, but this is very different. Mr Liabo says that Norway is over-producing, but if it were, where are the complaints that farmers are unable to sell their salmon because there is too much and no one wants to buy any more.
However, our real interest in these forecasts are that they reflect the similar forecasting which form the central core Producer Organisation management. For many years, there has been a small group of farmers who believe if they can control production, they can regulate prices. The mechanism proposed was based on the Producer Organisations used to regulate wild catch fisheries. Essentially, a committee of industry experts would predict future output and then assign fixed production allocations to each Producer Organisation. The weak point of this strategy is that the forecasts would have to be right, otherwise the whole production control could be undermined. Clearly, if an long standing expert like Mr Liabo can get it so wrong, what hope would there be for similar forecasts made through a system of Producer Organisations? Although PO’s appear to be very much still on the agenda, let us hope that they can not be despatched to the waste bin, where they rightly belong.
Frozen out!: Speaking at the EWOS New Year meeting, Mr Liabo told Norwegian fish farmers that he very much regrets that the industry decided not to initiate the freezing programme aimed at taking up to 30,000 tonnes of salmon out of production and into the freezers. IntraFish report that Mr Liabo believed that the freezing programme would have boosted prices during 2003 but he wouldn’t say who was responsible for putting the plans on ice.
We, at Callander McDowell, have long argued that the freezing programme would have been a disaster for the Norwegian industry. It would not have forced prices up since buyers would have been well aware that 30,000 tonnes was waiting to be sold and would have not succumbed to such manipulation. Back in 1991, the salmon held in the last freezing programme were eventually sold off cheaply so undermining any short term price advantage. The same would have happened again.
The underlying problem is that whilst the industry continues to focus on production issues, it will only consider production solutions. When it instead starts to consider the market, then more appropriate market solutions will become increasingly apparent.