reLAKSation 139.
Is
this a crisis?: “The Community Atlantic
salmon industry is in a state of crisis.” so reads the opening sentence of the
British application for safeguards measures. The British Government claims that
parts of the industry face likely collapse unless safeguards are immediately
imposed. Presumably, this means that if the Community Atlantic salmon industry
is not in a state of crisis, then such safeguards are totally unnecessary.
This
leads us, at Callander McDowell, to ask whether the salmon industry is actually
in crisis and if this application for safeguards has been somewhat ill-advised?
We have previously discussed the application document in reLAKSation no 128 but
in the run up to the forthcoming meeting of the safeguard committee, we make no
apologies for repeating some of the major issues.
Whilst
the safeguard application was submitted earlier this year, the copy of the
document provided by IntraFish was not actually dated. It is therefore unclear
when it was written and whether it is actually relevant to the present
situation. A possible clue appears in the document’s executive summary. It
states that the Community industry is suffering serious injury because EU
producers lost almost one sixth of their market share just in the first nine
months of this year. As this year is only four months old, they must mean 2003.
The summary also states that Scottish salmon prices fell by 20% just in the last
six months. Reference to the IntraFish guide to prices shows that prices fell up
to Week 28 of 2003 but have steadily increased, bar one or two minor hiccups,
ever since. This means that the application document must have been written
between August and October 2003. Its quite possible that parts of the Scottish
industry believed that they were facing a crisis then, but now seven months
later, the picture appears to be very different. Certainly, the intervening
period has produced little evidence to support the belief that the industry has
been facing collapse. In fact, the opposite may be true.
The
only real indicator that the industry could be facing difficulties is the spate
of five farm bankruptcies in Shetland. However, the suggestion that these
bankruptcies reflect the precarious state of the industry is misleading since
the closures may have more to do with poor business practice rather than cheap
imports. Of the five bankruptcies, three were examples of multi-ownership with
the owners not only still farming salmon in Shetland, but setting up a new
company to buy up the assets of the bankrupt businesses. The reality is that
only two farms have gone bankrupt in Shetland this year. Whilst, these closures
are unwelcome, they do not represent a crisis in salmon farming. In fact, Martin
Leyland, an executive with Johnson Seafarms told IntraFish that the worst of
industry consolidation in Shetland is over.
Inevitably,
such closures mean that jobs have been lost. The application document states
that since May 2003 there have been a number of announcements of significant job
losses in the industry. The document does not clarify how many jobs have been
lost. Interestingly, the Scottish Executive published a report in March this
year on the employment situation in salmon farming. Their message is upbeat and
there is no reference at all to any recent decline in salmon farming jobs, even
in an appendix or footnote.
Whilst,
the recent bankruptcies and associated job losses in Shetland may be cited as
examples of a crisis in salmon farming, there are also examples of continuing
investment. In addition to Foraness Salmon, which was established in Shetland in
January, Loch Duart Salmon announced last week that they had bought out the
business of Ardvar Salmon, doubling their potential capacity. Loch Duart are one
of the companies listed as supporting the safeguard application, but their
recent purchase does not suggest that they are a company in crisis. In fact,
their Managing Director, Nick Joy, told IntraFish that the company is looking at
further ‘organic’growth as demand for their salmon continues to increase.
Loch
Duart Salmon suggest that demand for their salmon continues to increase, yet,
the application document states that there has been an unexpected slowdown in
demand for salmon. Loch Duart produce salmon for a niche market and could be
said to be bucking the trend, despite their support for safeguards. However,
sales of Scottish salmon appear to be increasing across the board. Brian Simpson
of Scottish Quality Salmon announced at the Brussels Seafood Exposition that
demand for label Rouge salmon has increased for the sixth consecutive year.
Exports of Label Rouge salmon to France have increased by 5.5% during 2003. By
comparison, exports of all Scottish salmon to France have risen by 25%
suggesting that salmon demand may not have slowed as the application states.
This is confirmed by total exports of Scottish salmon, which have grown by a
massive 48%. Demand is clearly expanding, not slowing down. If this is evidence
of an industry in crisis, then what could it achieve if it were not in such a
predicament?
Whilst
demand appears to be still growing, the application document states that
production in Norway and other importing countries has increased faster than
demand. The document illustrates this rapid growth using figures provided by the
European Salmon Producers Group. We have previously questioned why the British
Government would use this data when their own official figures as well as that
from Norway and other countries are readily available. The ESPG figures suggest
that Scottish production would peak in at 138,000 tonnes in 2003 and then
decline rapidly to 110,000 tonnes this year. By comparison, the Government’s
own figure estimate 2003 production at 176,596 tonnes, a substantial difference.
This difference cannot be explained other than to suggest to the Commission that
the Scottish industry is being harmed by imports. What is even harder to
comprehend is the difference in 2002 production figures. These are not estimates
as given for later years but fact. ESPG state that in 2002, Scottish production
reached 133,000 tonnes whilst the official figure published by the Government
show that production was actually 7,500 tonnes higher. These ESPG figures are
extremely distorted and provide a unrealistic picture of Scottish production.
The official figures for 2003 have yet to be published but indications suggest
that they are more in line with Government predictions than those offered by the
ESPG. Exports of Scottish salmon have hovered at about 50% of total production
for some years. Export figures for 2003 reached 86,356 tonnes which would
suggest that total Scottish production for 2003 will be around 172,712 tonnes,
which is much closer to the 176,596 Government estimate.
The
large differences between official and ESPG figures raises the question as to
exactly who is the ESGP? This mysterious organisation appears to have the
Government’s ear but is otherwise hidden in the shadows. Who are they, who do
they represent and from where do they obtain their data?
Finally,
the application document also focuses on salmon prices. They state that prices
fell by 20% in 2003. However, the figures given in the application document only
run until September 2003 and appear to stabilise for the last three months.
Since then prices have steadily risen to their current peak. Allan Wilson,
Scottish Minister for Aquaculture has said that the safeguards are needed so
that the Scottish industry has the breathing space necessary to allow them time
to implement the urgent changes needed to make them more competitive. We would
suggest that the steady price rise since last summer has given them exactly
this, negating any need for safeguards. It is up to the industry to use this
time to most effect rather than be complacent; expecting the European Commission
to have to bail them out.
The
application document is clearly out of date. The industry has moved on since the
document was written and the economic situation has changed. The claimed crisis
has not happened and whilst prices remain at current levels, is unlikely to.
Salmon farming is a business and it is up to individual companies to ensure that
their businesses respond to change whilst remaining viable. Many companies now
recognise that the industry must evolve with a changing marketplace and have
started to implement the necessary changes. The industry should not be forced
into an unwanted political solution because a handful of producers, lacking the
necessary vision, believe that the European Commission owes them a living.