reLAKSation 178.
"Safeguard
Special"
Safety
in (fewer) numbers: A year after the original application was dispatched to
Brussels, EC Commissioner Peter Mandelson has now decided to impose safeguards
on the international salmon farming industry. IntraFish suggest that the final
decision hinged on a horse-traded deal with some south European countries
intended to protect their textile and shoe producers against cheap imports from
China. Considering the way that this case has been handled, we should not be too
surprised that the only reason why European consumers should be denied access to
a healthy eating, value for money meal choice, is so that the Portuguese and
Spaniards don’t have to walk on Chinese made shoes!! What an ignominious
conclusion to this case, but not much different to its beginnings.
The
EUSPG have always maintained a low profile approach in pursuit of their
application. Despite claiming major injustice, they have remained hidden away
behind anonymous press releases, preferring DG Trade to fight their case for
them. Perhaps, its because their case was never as strong as they claimed, which
is why they adopted the back door approach. Certainly, we have expressed major
concerns about the accuracy of their data and these concerns remain
un-addressed. Even in victory, the EUSPG appear able to cite data which cannot
be validated. Their spokesman states that whilst Norwegian production has
continued to expand, that in the EU has fallen by 16% in 2004 and is set to fall
by a further 25% in 2005. However, we have no way of checking these figures
because the official Scottish production data for 2003 has still to be
published. We therefore cannot gauge the base line on which to calculate how
badly the Scottish industry has suffered. The EUSPG already claimed that
production for 2004 will be only 110,000 tonnes but until official figures are
published, how can anyone really tell if the EUSPG are again ‘crying wolf’?
We, at
Callander McDowell, certainly suspect they are. The EUSPG spokesman has given a
clue to possible motives. He accuses Norway of massive over-production but then
said that the good news for Scottish producers is that the introduction of
safeguards means that ‘we will now be
able to concentrate on growing our industry’.
Surely.
the intention of safeguards was to stop the losses and stabilise the industry,
yet clearly, there is a hidden agenda in which the EUSPG intend to use
safeguards to exploit the huge market potential for farmed salmon without the
threat of competition from other salmon producers. It seems that one country’s
over-production is another’s market opportunity!
Blight
on Blighty: Not surprisingly, a spokesman from the EUSPG strongly welcomed the
Commission’s announcement. He told Seafoodintelligence.com that the blight
that has afflicted the Scottish industry from untenable prices is now over. We,
at Callander McDowell, believe that he is wrong. The blight has only just begun.
The
EUSPG say that these measures will provide a secure floor on the market, a view
echoed by the British Trade and Industry Minister, Douglas Alexander, who added
that they will break the vicious cycle of falling prices and loss making
that affects the industry. We do not share their optimism. We believe that the
implications of these safeguard measures will affect the whole of the global
salmon market and will lead to further market disruption, especially in Europe.
The
problem with safeguards is that whilst they aim to control the minimum import
price and the volume of imported salmon, they do not control the prices paid
within the European Community. Retailers recognise that consumers buy salmon
because it is both widely available and low priced. They also recognise that if
the price should rise, consumers will simply look for cheaper alternatives. It
is therefore unlikely that retailers will continue buying salmon, even from
Scotland, in the same volumes if they have to pay more for it. The salmon market
will undoubtedly remain a buyers market in which the retailers will dictate
prices irrespective of whether there is a short supply or not. Retail buyers
will simply tell farmers that there is a price beyond which they will not pay.
Prices could therefore remain around the current levels, even if supplies are
limited. Exactly that same thing happened the last time the MIP was introduced.
Prices of Scottish salmon fell well below the MIP level, even though the price
of imported salmon remained above it. IntraFish report that the first price
indications, since the announcement of safeguards, suggest that prices have
already nose-dived.
Disrupting
the market: One of the major problems in trying to manipulate the marketplace is
that it is impossible to do so in isolation. Inevitably, the market will throw
up further difficulties which were totally unforeseen. The EUSPG may hope that
restrictions on the volume of imported salmon should be expected to force a rise
in prices. However, many users of farmed salmon will look for cheaper
alternatives rather than accept an artificial price rise. We are already seeing
the increased usage of wild Pacific salmon in processed salmon products, which
previously might have been made from farmed Atlantics. We discussed in a
previous issue of reLAKSation that even cheap chum salmon is making an
appearance in more and more processed product, despite not being of comparative
taste. Scottish farmers might argue that this is not a real problem for them as
their main target market is for superior quality fresh salmon.
Although
Scottish salmon farmers may well believe that their salmon is very distinctive
from frozen Pacific species, most consumers would not. To them, salmon is just
salmon. This means that the increased presence of Pacific salmon must inevitably
impact on the market for farmed salmon.
Since
the Scottish industry first started fighting trade cases in Brussels, back in
the early 1990's, the salmon market has changed. Not only has the market image
of farmed Atlantics evolved from one used for special occasions to being an
everyday meal choice, but also the whole salmon market has become more
competitive. Consumers now have a choice. Not only can they buy fresh Atlantic
salmon but increasing numbers of fish outlets also now offer fresh wild Pacific
salmon. Worryingly for the Scottish industry, these fish are being sold at a
premium price. For example, Marks & Spencer sell two fillets of Scottish
salmon for £3.99, whilst two fillets of wild sockeye salmon of the same weight
sell for £5.99. Unlike the cheap frozen Pacific pink and chum salmon, this
fresh sockeye salmon makes extremely good eating and competes directly with
fresh Scottish fillets. The market for such fish is growing rapidly, helped by
the cache of the wild label. Scottish farmers must be concerned that every kilo
of wild Pacific sold is a kilo of Atlantic salmon, which could have been sold.
More importantly, the import of this salmon is not constrained by
safeguards and other trade barriers and therefore has the potential to grow
unabated. What is more, there is no reason why farmers of Pacific salmon cannot
exploit this developing market, even though they cannot claim the wild origin.
The increasing presence of Pacific salmon in the European market could have a
dramatic effect on the established salmon market, nullifying the effects of
safeguards. The EUSPG would undoubtedly hope that the introduction of safeguards
will stabilise salmon prices, but the salmon market is now so complex that it
will be difficult to isolate and protect the Scottish industry from real market
forces.
2
fingers 2 consumers: According to IntraFish, Domingui Forest of the European
Consumers’ Organisation (BEUC) said that the European Commission couldn’t
care about its consumers. The European Commission stated that consumer
organisations had not expressed an opinion on safeguards, whereas BEUC maintain
they were never asked. Perhaps, the reason that they were not approached was
that when they responded to a similar request with regard to a previous dumping
complaint, their reply was there was no basis to justify any measures against
Norway.
However,
it is not just the European Commission who don’t care about what consumers
want. Members of the EUSPG are just as guilty. The general belief in the
Scottish industry is that the salmon they produce is superior to any other. This
perception supports an expectation that these salmon should be sold at a premium
price. Previous market research suggests that about three quarters of consumers
prefer to buy Scottish salmon and are willing to pay more for it.
However, the reality is that when it comes to actually buying salmon,
these consumers are not so willing to dig deeper in their pockets for Scottish
fish. This is because they are unable to perceive any extra benefit for the
extra cost. This is why most retailers therefore sell Scottish salmon at exactly
the same price as imported fish.
However, the independent
Scottish sector persist with their belief and are determined that consumers
should pay more for their fish, even though this is not what consumers want. The
EUSPG spokesman, welcoming safeguards, said that safeguards will allow us to
develop the market for our ‘excellent’ product. A similar perception of
Scottish salmon was expressed this week by Scottish Quality Salmon (although
remaining outside the safeguard case) when they announced increased sales of
Label Rouge salmon. They said that
‘our aim is
for Scottish farmed salmon to be recognised as the highest quality salmon in the
world. Do they not realise that most consumers don’t want to buy the best
salmon in the world, but instead that they want something for their everyday
meal choice? Must all consumers now suffer the effects of safeguards simply
because a few Scottish producers want to produce the best salmon in the world,
even though most consumers do not want to buy it, at least at a higher price.
However,
we do believe that there is a market for high quality Scottish salmon but it is
a niche market relying on a small minority of the population who do want the
highest quality product and are willing to pay for it. Label Rouge salmon is a
prime example of this market. Scottish Quality Salmon report that exports of
Label Rouge Scottish salmon to France increased by 21% during 2004. The new
figures show the new total to be 6761 tonnes, compared with 5592 tonnes in 2003.
Six
thousand seven hundred tonnes can be hardly called a significant part of either
Scottish production or the French market. It is a drop in the ocean. According
to SQS, Scotland exported 34,000 tonnes of salmon to France in 2003. Label Rouge
accounts for only 20% of these exports and only 4% of Scottish production,
depending on which figures are used. Yet, Brain Simpson, Chief Executive of SQS
said that "Label Rouge Scottish salmon is clearly the favoured salmon
product in France, as this is the sixth consecutive year that exports have
increased.” Even wearing the largest pair of rose tinted spectacles, we cannot
see how Label Rouge salmon can be described as being the favoured product in
France. Certainly, we have had some difficulty in finding examples of Label
Rouge salmon whilst conducting our surveys of the French markets.
This
blinkered focus on the top end of the market completely ignores what the
majority of consumers want, which is value for money fish. This message has been
reinforced this week by one British supermarket chain. Sainsburys fresh salmon
fillet sells for £9.99/kg; the highest price in the British retail sector for
loose salmon fillets from the fresh fish counter. Their standard sized packs of
chilled prepacked salmon fillet sell at £15.76/kg, which is also at the top end
of the market, even more expensive than Marks & Spencer. Sainsburys
customers are clearly not so willing to pay such a high price for their salmon
for this week, to coincide with the imposition of safeguards, Sainsburys have
launched a pack of salmon under the basics label selling for £6.04/kg Whilst the Scottish industry would probably suggest this is another
case of companies selling cheap imported salmon, the fish is actually Scottish
and as we now know, as long as the pack is labelled with Scottish Farmed Salmon
or any combination of these words, the salmon is of the highest possible
quality. Not bad for £6.04/kg?