reLAKSation 172.
Production
survey 2003: In the last issue of reLAKSation, we discussed how the
Scottish salmon industry has so far failed to publish any cost of production
data, despite a specific declaration of intent to do so in the Executive's
Strategic Framework document. Instead,
Deputy Minister for Aquaculture, Lewis MacDonald has suggested that the European
Commission should conduct an in-depth investigation of Norwegian production
costs and that members of his department would be made available to help.
Why such an investigation is necessary is unclear as the Norwegian
Government regularly publishes data for both costs and profitability on an
annual basis. We, at Callander McDowell, wonder whether Mr MacDonald is trying
to divert attention away from his own industry's deficiency in supplying this
data?
The
possibility that the Scottish Executive is trying to push all the emphasis away
from the Scottish data is heightened by the delay in publishing Scotland's
annual production survey. This is usually published around October time, but
this year, it has so far failed to appear. Every year, the Marine Laboratory in
Aberdeen collects production data from every aquaculture farm in Scotland and
publishes it in an annual report. The report for shellfish farms has been
published but not the one relating to salmon farms. We wonder whether the delay
may have something to do with the possibility that the data does not support the
claims made by the European Salmon Producers Group.
When
the British application was made to Brussels for the imposition of safeguard
measures, much of the data was supplied by the EUSPG. This included production
data for Scotland, despite the fact that the Scottish Executive had available
data from its own production survey. Rather strangely, the EUSPG's data and that
produced by the Scottish Executive did not match up. We, all Callander McDowell
discussed this anomaly in reLAKSation 128 (available on our website). The
Scottish Executive's data from the 2002 survey was:
00
128959 tonnes
01
138519 tonnes
02
145609 tonnes
03
176596 tonnes est
By
comparison, the EUSPG figures are:
00
120000 tonnes
01
131000 tonnes
02
133000 tonnes
03
138000 tonnes
est
04
110000 tonnes
est
What
makes these figures difficult to comprehend is that the data for 2000 2001 and
2002 is already well established by the Scottish Executive's survey, yet the
EUSPG have downgraded these figures. The estimates for 2003 differ hugely and
whilst the Scottish Executive's estimate is now probably too high, only
publication of the 2003 survey will show whether any decline in production
output is as the EUSPG claim. We somehow doubt not but we must wait for the
survey to be published to see. According
to the Marine Laboratory, the Scottish Executive in Edinburgh is sitting on the
report. We can only conclude that
it fails to agree with the data from the safeguard application.
Perhaps the Scottish Executive would like to prove us wrong!!!
Easily
dismissed: Paul Aandahl of the Norwegian Seafood Export Council told
IntraFish that increasing Chilean production will be diverted to Europe as the
US market starts to stagnate. For
the period Jan-Aug, year on year, imports of Chilean salmon have increased by
58%.
Mr
Aandahl does not believe that these Chilean imports are significant, since in
his opinion, Chilean salmon will probably fit into other market segments than
those currently filled by Norwegian fish. He believes that Chilean salmon will
capture market share where Pacific salmon would normally dominate, rather than
those that rely on Atlantic salmon. Typically, he believes that this includes
the market segments where the focus is on the lowest price. Mr Aandahl cites the
example of discount chain Lidl who he says use salmon in their products and that
can mean all sorts such as salmon burgers.
We,
at Callander McDowell, wonder whether Mr Aandahl has arrived at his conclusions
based on too many preconceived ideas. Lidl
and the other discount chains do sell at low prices, but this does not
necessarily mean that their products are made from the lowest priced
ingredients. These supermarket chains have established quality standards in
exactly the same way as the major retailers. Where they differ is by operating
on extremely small margins. Lidl, may be cheaper, but in common with the other
discount chains such as Aldi, their salmon products are made from Scottish or
Norwegian fish, at least they are in the UK.
If we follow Mr Aandahl's assumption, then Chilean salmon is unlikely to
replace this fish because it is clearly not the cheapest available.
A
few years ago, the Scottish industry dismissed the presence of Chilean salmon in
much the same way. William Crowe of the then Scottish Salmon Growers Association
said that whilst he was aware that some Chilean salmon was being imported in to
the UK, he knew that none was being sold in the retail sector. In fact, not only
was Chilean salmon being sold in at least one British supermarket, it was sold
as fresh and at a higher price than comparative Scottish fish.
It
is very easy to assume that just because Chilean salmon is cheap, it is of
inferior quality. Dismissing
Chilean salmon as being of little significance could be a major mistake. The
challenge for European producers will be to raise their game and keep ahead of
this potential competition.
Sweet Breams? Despite an up-market image. Sea bass and sea bream prices are currently down by as much as 50%. Hank Van Hangem, Managing Director of a medium sized Turkish sea bass and sea bream producer, told IntraFish that one of the problems is that much of the annual production of these fish is harvested when it suits the producer, not when it suits the market. The production peak is in autumn, but consumption peaks in the spring. We, at Callander McDowell, would suggest that this is yet another classic case of production-led strategies dominating a fish farming industry and inevitably leading to problems of low prices and reduced profitability.
Mr Hanegam also suggests that the bass and bream industry is now emulating the salmon industry in that increasing production has forced down the average price so that these fish are losing their up-market image and instead becoming more of an everyday meal choice. He said that now that everyone is producing these fish, the only criteria to compete on is price. Mr Hanegam believes that the industry must start to innovate and look to more value added production, a view to which we would wholeheartedly agree. He said that the one positive thing is that demand for these fish continues to increase and that it is turning up in many more markets throughout the whole of Europe.
We, at Callander McDowell, are not surprised by Mr Hanegam’s comments. Like salmon, sea bass and sea bream were selected as candidate species for aquaculture because they had an up-market image. In just the same way as for salmon, the very act of farming has increased the availability of these fish and devalued this image so that the fish are now considered to be part of the any-day menu.
Unlike salmon, sea bass and sea bream farmers in the European Community are unable to go rushing to Brussels to complain about unfair competition, because it is the European Community producers who have made the biggest impact on production volumes. Producers like, Mr Hanegam from outside the European Community are also unable to complain and have to just get on and look for better ways to compete. This is a lesson which independent Scottish producers could well learn.
Interestingly, whilst the salmon and bass/bream industries share much in common in terms of industry development, the one difference is the total absence of a single predatory Norwegian producer. Perhaps, the bass and bream sector have shown that low prices and reduced margins are both predictable and inevitable irrespective of the species, the producers or the markets!