reLAKSation 186.
Banking
on cod?: Following a FIFG award of £446, 380
to Nufish to help with the expansion of cod juvenile production, Dennis
Blackmore told IntraFish that the real problem that’s holding back the further
development of cod farming in the UK is the lack of capital and the lack of
confidence from the banks. He said that until the banks get their confidence
back, it will be a critical time for expansion of cod.
We,
at Callander McDowell are not surprised that the banks have yet to show their
support for the fledgling cod farming industry. They have clearly not being
persuaded by the great deal of hype about farmed cod both within and outside the
aquaculture industry and they are still smarting from their experience with
farmed salmon. This is not the banks fault as the fish farming industry has only
itself to blame.
The
banks like any other business exist because they hope to make money and in
recent years, the fish farming industry has not given them reason to think they
will. It was very different during the early days of salmon farming when the
expectation was much higher. Salmon farming expanded rapidly on the back of high
margins and significant profitability. This was because salmon was still
perceived as being a luxury food for which consumers were prepared to pay a
premium price. Whilst expansion was rapid, the total production was still
relatively small and salmon was still not widely available in the marketplace.
However, the then profitability encouraged others to invest in the industry and
together with growing production in Ireland, Faeroes and Norway, salmon became
widely available to consumers. Unfortunately, no matter what the product, it is
impossible to produce something in quantity and expect to maintain a margin
based on its rarity value. Salmon had to evolve from a luxury food to a value
for money everyday meal choice.
Rather
than adapt to the changing marketplace, the Scottish industry rebelled. They
tried to persuade the European Commission that this change was all Norway’s
fault and that as a result, the industry was in over-production.
Since
then, a diminishing group of independent Scottish farms have tried to reverse
the trend and make salmon special by forcing limits on the amount of salmon
against which they have to compete. These attempts have ranged from imposing
mandatory production controls to various trade actions’ in the hope that
punitive duties will force imported salmon out of the European market.
What
these independent farmers have failed to realise is that their attempts to
disrupt the free market have irreversibly damaged confidence in the industry in
all sectors, but most especially banking. Why would anyone want to invest in
salmon farming and then be faced with being told that there are limits to the
amount of fish they can produce? Investors and the banking sector only invest
because they expect a good return on their investment. Claims of over-production
and production controls are a sure-fire way to deter investment, whether in the
private or banking sector.
Sadly
after fifteen years of such claims, the underlying issue has not yet been
resolved and confidence in salmon farming remains low. As a result, some
independent farmers have decided to exit from salmon and have opted to grow
alternative species, especially marine fish. They may have simply jumped from
the frying pan into the fire?
Marine
fish farming is not new, but it has never really taken off in the UK. This is
because it has been extremely difficult to grow these species profitably, both
because of technical difficulties and because consumers have not been willing to
pay a premium price. Unlike salmon in its early days, marine fish species lack a
certain market caché. Despite such problems, cod farming has caught the
imagination with Johnson Seafarms in Shetland receiving a great deal of
publicity. However, Johnson Seafarms are the pioneers and no doubt will do well.
They have already attracted major city investment and stimulated significant
interest in some overseas markets such as North America. Johnson Seafarm are
clearly one of the pioneers in this area; the question will be what happens to
those coming afterwards?
As
production increases, the price of farmed cod will inevitably fall, as it has in
salmon farming. Will cod farmers be able to adapt to these changes or will we
see a repeat of the problems of the salmon industry with accusations that other
nations are over-producing and dumping cheap fish into the marketplace? What
about the supply of wild caught fish, will these influence the market?
Most
importantly, in the meantime, will consumers be prepared to pay a premium price
for farmed cod? It is interesting that Johnson Seafarms were represented at the
Boston seafood show because with an expected production of only 3,000 tonnes by
2007, we wonder why they need to seek such faraway overseas markets. Is there
insufficient demand in Europe for farmed cod, that they already need to glean
orders from the US and Japan? Of course, Johnson Seafarms are pinning much of
their expectation on producing an organic cod, which should generate the sort of
price premium that will satisfy their investors. Interestingly,
Seafood.com reported that Johnson Seafarms departed the Boston show claiming
great success with its organic farmed cod, but questioned whether the lack of US
standards meant that almost any speciality seafood could be marketed as organic
if there was some control over feed and the environment. They reported that
because organic farmed cod is not a retail item, sellers have much more leeway
in describing their products to restaurants and chefs!
Cod
farming is still in its infancy. There is still a lot to prove, especially to
the banks. We at Callander McDowell welcome the advent of cod farming as long as
there is a real commercial rationale for farming cod and not because it is an
escape from the problems of salmon farming. The influence of salmon farming
extends well beyond the cages of the salmon farms as Dennis Blackmore has
clearly identified. Certainly, the aquaculture industry shouldn’t bank on it.
Explanations
in Edinburgh: The organisers of the
forthcoming aquaculture conference have pointed out that their conference
programme does include discussion about the ongoing dispute concerning
safeguards and dumping actions. Willem de Munck of DG trade and Frank Asche of
the University of Stavanger will both discuss various aspects of the case.
However, the point we made in the last issue of reLAKSation was the absence of
any speaker from the independent farming sector willing to justify why they had
yet again taken a complaint to Brussels and more importantly, why they are so
unwilling to adapt to a changing market place. Sadly, delegates will have to
remain mystified as to the rationale for the continued desire to seek trade
protection. Even Willem de Munck seems intent on avoiding the issue. Interviewed
by Fishupdate.com he said that he will explain what the Commission is doing in
terms of the safeguard and anti-dumping case. We can only hope that he will also
tell delegates as to why they are doing it and why, like the Scottish
independent farmers, they are so unwilling to accept the realities of the
marketplace.
Bang
bang: At least the international salmon
industry should be grateful that the independent Scottish farmers have not
resorted to similar tactics to some radical French winegrowers. According to the
Guardian, activists threw dynamite into a government office in Carcassonne,
whilst other activists attacked offices in Montpellier and Nimes.
France’s
wine industry which employs 75,000, is suffering from dwindling consumption at
home due to health concerns and campaigns against drink driving. Consumption has
dropped to 58 litres a year from 100 litre in the early 1960’s. Exports have
also fallen by about 3% because of increased competition from new world wines.
Dynamite,
nor trade actions, are the answer to a changing marketplace. Producers, whether
wine growers or salmon farmers, need to adapt to these changes. This is the only
solution.