reLAKSation 198.
Rip
up the Mip:
There appears to have been a generally positive response to the new
‘understanding’ between the EU and the Norwegian salmon industry. This is
not surprising since the MIP is the clearly the lesser of two evils. The
Commission have been very clever in focusing the debate on the choice between
dumping duties or the MIP instead on whether the case was actually justified.
Hopefully, the fight will go on so that the salmon industry can concentrate on
what is important – meeting the needs of the European consumer – rather than
on the outdated perceptions of a small section of producers.
Ole
Eirik Leroy told IntraFish that the agreement is definitely a step in the right
direction. He said that the encouraging aspect of this MIP is that it has been
fixed at a level below the market price, which he says is new in relation to
previous practice. We, at Callander McDowell have already suggested that the
Commission have also broken with accepted practice by reaching this agreement
without reference to the EUSPG. We now wonder whether this is the first step
towards a complete about turn and the withdrawal of the MIP altogether.
Certainly, members of the EU dumping committee are unsure since they were not
prepared to agree to a permanent MIP when they met last week. Instead, they want
to wait until the dumping enquiry is completed, presumably taking all aspects of
the case into consideration. According to IntraFish, the underlying hope is that
it will show that there are no grounds for trade barriers against Norway.
As
Mr Leroy suggests, setting the provisional
MIP at Euro 2.81/kg is a strange decision. Salmon prices are currently
much higher (although we have no doubt that market pressure will eventually
force the price down below this level). At present it has no immediate effect
but even if prices do fall to Euro 2.81/kg and below it will not help the
community producers it seeks to protect. According to the EUSPG submission,
their production costs are much higher. Their submission states that production
costs for 2001 to 2004 were:
2001
Euro3.29/kg
2002
Euro3.63/kg
2003
Euro3.30/kg
2004
Euro3.20/kg
Its
clear that even if the MIP kicks in, these producers will be losing money. It
therefore would make sense if the MIP were immediately removed and free trade be
reinstated. Of course, this might not help any uncompetitive producers. We have
argued many times before that rather than manipulate the market to protect a
minority of producers, it may be preferable to direct specific assistance
towards these farmers to help them become competitive.
Certainly
it seems that priorities have been put in the wrong place. This week one EUSPG
member responded to a previous issue of reLAKSation. He said that protection was
necessary for the good of the last few small independent farmers. We disagree.
We have always suggested that small farmers can have a future amongst the large
multinational companies but they must take a proactive and co-operative approach
if they are to do so. Perhaps EUSPG member Angus Macmillan of West Minch Salmon
has shown the way. He told delegates at the Organic Fish Producers Association
that organic production was a sustainable way of life. What he didn’t say was
that he needed protection to survive.
The
time has come to not only ditch the MIP but finally put an end to these
pointless dumping actions. The salmon industry has a real future but it seems
that despite all the past negative publicity, it could be a few blinkered
community producers who would like to spoil it for everyone.
Plonk
it down!:
The Guardian newspaper reported from the world’s biggest wine trade fair,
Vinexpo, that this year, there were two competing visions of the future wine
industry.
On
one hand they see an industry that is consolidating rapidly in order to stand up
to retail power. In this new world, growers can only compete globally by making
good wines with an international taste that can be aimed at the young and at
women. On the other hand are the keepers of the terroir, that traditional French
view that wine should be a complex thing that speaks of origin and tastes of the
soil in which it was grown.
The
Guardian suggest that the two trends distil the wider row between Tony Blair and
Jacques Chirac: the global free market Anglo Saxon model, versus the local
subsidised, social French model, a group which is now joined by organic and
biodynamic producers, who are also forcing modernisation and change.
David
Skalli, a leading French wine grower summed up the difference by suggesting that
the wine industry in France is divided into the new world and the old, there are
people waiting for subsidies driving the industry down and people who want to
work with supply and demand and listen to the market.
We,
at Callander McDowell would suggest that the wine industry totally reflects the
situation of salmon producers. We certainly believe that it is worth looking at
the wine industry to see how they have responded to their current situation. It
is estimated that 10% of Bordeaux’s 12,000 winemakers are in financial
difficulties. The number of commercial growers in France has dropped from
196,600 to 112,500 from 1994 to 2003. French exports fell from 168m cases to
148m between 1998 and 2003. Wine consumption in France has fallen to 50 litres
per adult per years from a previous high of over 100 litres during the 1960s.
In
response the big names of winemaking are changing their wines to target the
young Bacardi Breezer generation. For example, Fruite Catalan from Cotes du
Roussillon is packaged in pink and sold like a sweet fruit drink in small screw
top bottles for drinking in bars. This is just one of a number of different
strategies including a move away from labels focusing on geographic origin to
those naming just the grape variety.
Salmon
farmers need to target the young in much the same way. Speaking at the organic
meeting this week, Julie Graham of Seafish said that the typical organic seafood
buyer:
-
lives in
London
-
has no
children at home
-
is ABC1
-
is aged
45-64.
The
problem for salmon farmers is that this profile is also very similar to the
typical salmon buyer. As these consumers age, there is a real risk that the
salmon market could even shrink as these consumers are not replaced. The French
wine industry recognises that it must change, despite the continued
protestations of the old guard. Let us hope that the salmon industry can become
just as proactive. The alternative is a place in the dark ages.
Organic growth: The Organic Fish Producers Association met this week in Edinburgh for their inaugural conference. A great deal of the discussion focused on the standards for producing organic salmon, cod and shellfish, but the most telling message for us at Callander McDowell that day came from Marks & Spencer. A notice attached to the shelves of the chilled fish section of their main store in Edinburgh’s Princess Street stated “We are currently experiencing low supplies of organic salmon due to a lack of fish that meet M&S quality standards. As this is a natural product there are seasonal variations that mean at certain times of the year our supplies can be affected”.
This is not the first time that we have seen such a notice in M&S as well as in other supermarket stores. Clearly, the organic sector is not able to meet current demand for organic salmon.
Speaking at the conference, Dennis Overton of Aquascot posed the question as to how big is the European market for organic salmon? The answer seems to be that no-one knows. What we do know is that according to Angus Macmillan of West Minch salmon, production of organic salmon currently stands at about 5,000 tonnes. This is produced by seven farms; three in the Western Isles, three in Orkney and one in Shetland. Certainly, it seems that members of the EUSPG are missing a real opportunity to meet the current shortfall.
Yet despite the shortfall in supply, it seems that the few organic producers are facing a real dilemma. The attraction of converting to organic production is the higher price that consumers appear willing to pay for organic product. However, if production increases, there is a risk that the premium will disappear in much the same way that happened with conventional salmon. The feeling of many delegates at the conference was for the need to keep organic salmon special. One way that this could be achieved is through the development of a seasonal product rather than supplying on a 52 weeks a year basis. It was felt that this would help manage supplies. Already some producers have had to sell off some fish without any premium because of the inability to maintain an even supply.
We, at Callander McDowell, wonder whether the real problem that the industry will face is the difficulty in differentiating between the ethics of organic production and higher production. Much of the discussion time was actually spent not on the question of markets, but rather on the exacting requirements needed for organic production and the need to ensure that these standards are not devalued. It is the organic principle which seems to be of paramount importance whilst the benefit of higher margins is of only secondary interest. If the margins disappear, how committed will organic fish producers be to ensuring that standards continue to be maintained?