reLAKSation 177.
Go
for PO:
The subject of Producer Organisations
was one of the major issues discussed at the recent FHL Havbruk annual general
meeting. According to IntraFish,
FHL Havbruk has said that there is increasing interest as to the possibility of
forming a Producer Organisation to manage Norwegian production.
Although there has been no clear statement of intent, it would seem to us
at Callander McDowell, that the main reason that FHL Havbruk want to pursue this
strategy is to appease the European Commission in the hope of averting any
further damaging trade disputes.
Although
there is currently no legal framework to permit a Norwegian Producer
Organisation to be established, this may change with the introduction of a new
aquaculture law.
However,
we at Callander McDowell would argue that if FHL Havbruk is so convinced that
forming a Producer Organisation will benefit the industry, they do not need to
wait for any new law as they could set up a voluntary arrangement immediately.
The Scottish industry has always had this option, but despite continually
pushing the idea, they have bluntly refused to do so. They have argued that
without compulsory controls, Producer Organisations will not work. Yet, we
believe that had the industry established a voluntary system, they would have
been in a much better position to demonstrate how a Producer Organisation would
work and show that it would benefit the whole industry. The absence of such a
voluntary system has undermined the credibility of this strategy.
However,
it is not just the failure to set up a voluntary arrangement that brings this
method of industry management into question. Producer Organisations for farming
were first promoted by Professor Chris Ritson because this method of control
already existed within the fisheries sector. The way in which Producer
Organisations managed their quotas were thought to be a successful model for the
farming sector. Yet, the current crisis in the fishing industry with further
cuts in quotas, increased decommissioning of fishing vessels and the possibility
of the closure of fishing grounds clearly demonstrates that the underlying
management system does not work. It has not worked for the fisheries sector and
neither will it work in farming.
Although
the management of a system of Producer Organisations will be difficult, the main
reason that PO's will fail is the lack of real understanding of the salmon
market. The main focus would be
towards raw salmon flesh, yet the salmon market has developed significantly
since the early days of the industry and salmon is now used in a huge range of
added value products. The market for these is still growing rapidly, but it will
be impossible for the PO management group to monitor this growth and ensure that
future production can provide all that is necessary. This is because the growth in added value is being fuelled by
low prices and this would conflict with the aim of the PO to keep prices high.
PO's
are not the answer to the threat of dumping complaints and safeguards. The
international salmon industry needs to decide whether the intention of salmon
farming is to produce a higher priced luxury food or a lower priced every day
meal choice. The EUSPG want the former, but should they be able to dictate how
everyone else produces their salmon?
Sign
on the dotted line: The latest unconfirmed
report from IntraFish is that Peter Mandelson, EC Trade Commissioner, will give
the go ahead for safeguard measures against imported salmon. This is despite a
failure to reach a majority decision at the recent meeting of the Safeguard
Committee. It seems that the Department of Trade prefers to take a
stance, which reflects that of the independent salmon farming sector; that a
minority should be able to inflict their views onto the majority. This
does not even take into account the Norwegian position since they are not
members of the EU, but rather that there is at least 80% of the Scottish
industry who are against this safeguard policy. It is worth remembering that
this 80% operate in Scotland, contribute to the Scottish economy, employ
Scottish people and use Scottish services. It would appear that their views
don't count.
Instead,
DG Trade has been applying pressure to, and horse-trading with, member countries
to persuade them to support safeguards. Fritz-Harald Wenig told Fiskaren that the Commission’s only
wish is that salmon prices rise, which they believe would help farmers on both
sides of the North Sea. Unfortunately, Mr Wenig still fails to appreciate that
if prices rise, consumers will stop buying salmon and look for alternative low
priced meal choices. How he believes that this will help farmers is unclear
unless he wants salmon to regain its former image as a high priced fish
supplying a small luxury market.
Mr
Wenig also told Fiskaren that the EU could make life extremely miserable for the
Norwegian salmon industry if they wanted to, implying that they risk a dumping
case and punitive duties. However, if he has clear and irreversible proof that
the Norwegian industry is guilty of dumping then why not drop the safeguard
issue and impose the appropriate penalties?
Mr
Wenig had previously said that it unrealistic to believe that the European
Commission can just let Scottish fish farmers go bankrupt. Yet, it is now over a year since a handful of small Shetland
producers last went bankrupt and some of them are back in production.
Time has moved on and so has the salmon farming industry. Perhaps, Mr
Mandelson should begin his new position by also letting the issue of safeguards
move on!
Party
time: Having said in 2001, that the party was
over for the salmon industry, Lars Liabo of Kontali told the Laksedagene
conference that the festivities have now begun again. According to IntraFish, Mr
Liabo said that 2005 is set to be a bountiful and lucrative year for salmon
farming. He bases this observation on previous periods of good prices lasting 30
to 40 months, which he believes is related to when fish are released in the sea.
We
at Callander McDowell are not in the business of predicting prices, but we are
not convinced that there is any trend to previous price developments other than
that linking increased production to falling prices. This is because fish are put to sea every year and not every
30 to 40 months. Such cycling might support the argument that the industry is in
a boom bust cycle and this is clearly not the case.
The
problem with using previous price developments to predict future movements is
that salmon prices follow a short term as well as a much longer-term trend. Over
the long term, prices are linked with production volume. As volume increases so
prices decline and vice versa. However,
prices are also influenced locally by such factors as availability and market
demands and the time when the fish are harvested. Clearly, if too many farms
harvest their fish at exactly the same time, the price can fall but if the
harvests are more evenly spread, then prices would not be so threatened.
Thus when Mr Liabo reports that prices are getting tantalisingly close to NOK25/kg, this may not be indicative of the longer-term trend, but may be due to local shortfalls. This is borne out by the suggestion by Mr Liabo that Norwegian biomass is currently 5000 tonnes down on this time last year. This equates to only 100 tonnes a week, hardly enough to influence prices and a shortfall which can be easily met by other suppliers, including those offering wild Pacific salmon.