reLAKSation 215.
Cryptic
clue of the day: Winter approaches and it’s
certainly getting chillier in the UK.
How
much?: According to IntraFish, exports of
Norwegian salmon to the UK have leapt by 160% year on year. This is because of a
reported shortfall in Scottish production as a result of the various
bankruptcies, the lack of finance to pay for smolts and the effect of the
January storm damage. An unnamed source told IntraFish that together these have
led to a 30% reduction in Scottish salmon output this year. To help understand
the effect that this decline in output, IntraFish published a year by year guide
to Scottish production which has been taken from their report ‘The Salmon
Rivals 2005’. Their data is as follows:
2001
138,519 tonnes
2002
126,686
tonnes
2003
151,000 tonnes
2004
135,000 tonnes
2005
110,000 – 120,000 tonnes.
The
problem is that it is unclear whether this data is accurate or not. Certainly,
there is at least one discrepancy between these figures and data that has been
already established. The official government figures for 2002 were 144,589
tonnes and not 126,686 as IntraFish suggests. However, it is not surprising that
this IntraFish data contains errors since there is so much conflicting
information circulating, it is difficult to know which figures to believe. In
the absence of official Scottish Executive data since 2003, the production
figures for Scotland have been the subject of invention and myth.
Prior
to 2004, the Scottish Executive published an annual survey of Scottish salmon
production that was always accepted without question. The Fisheries Research
Services, who collected and collated the data have always provided a reliable
picture of production development in Scotland; that is until they were due to
report on data for 2003. The Scottish Executive suddenly found that they had a
major problem on their hands. They had been asked to support an application for
safeguards on behalf of the European Salmon Producers Group. The ESPG had
provided industry production data and future estimates for inclusion in the
application document. Their view of Scottish production was as follows:
2000
120,000 tonnes
2001
131,000 tonnes
2002
133,000 tonnes
2003
138,000 tonnes (estimate)
2004
110,000 tonnes (estimate)
The
problem for the Scottish Executive was that the Fisheries Research Services data
for 2003 did not support the ESPG’s predictions. Their data produced an much
more optimistic picture of Scottish production:
2003
173,373 tonnes
2004
162,298 tonnes (estimate)
Before
the Scottish Executive realised the inconsistency of the two sets of data, FRS
published the 2003 figures on their website, which is how we know what these
figures are, but shortly afterwards, the Scottish Executive withdrew them
claiming that they required revision. Why FRS should suddenly have made an error
in the way that they interpreted the data is unclear and as the data still has
not been republished, it is impossible to see what changes have been made to the
report.
The
obvious question is what is an accurate figure for Scottish production?
Unfortunately, we at Callander McDowell, cannot provide an answer. We can only
look at what evidence exists and reach our own conclusion as to whether
production levels in Scotland have fallen by nearly 70,000 tonnes over the last
couple of years.
It
has been suggested many times that the Scottish industry is dominated by
companies under foreign ownership. Those farms remaining under independent
ownership are supposed to account for about 20% of production. Using the 2003
FRS figures as a base line, this equates to about 35,000 tonnes. In their
dumping submission, the ESPG claim to represent about 90% of independent
Scottish production or about 30,000 tonnes. Foreign owned companies or those
under the control of foreign interests must therefore account for about 140,000
tonnes. We may be totally wrong, but as yet we, at Callander McDowell, have not
read any press reports or new stories that foreign owned companies have gone
bankrupt or lack the finance to put any new smolts to sea. We can only conclude
that the contribution made by foreign owned companies to total Scottish
production remains uninterrupted.
We
have referred previously to an article in the Glasgow Herald in which an unnamed
source from the independent sector argued that if they didn’t get help, then
they would be all bankrupt by the end of October. We have not read any news to
indicate that this has happened and therefore a significant proportion of the
independent sector remains viable as it has done through 2004 and 2005. Those
farms that have suffered bankruptcy appear to be restricted to Shetland and most
produced only very small harvests. Against this background, it is difficult to
see exactly who is responsible for this reported huge fall in production.
Whilst
we don’t doubt that there has been some decline in Scottish production as even
the FRS forecast predicted, the market has remained buoyant. Prices have risen,
prompted by the imposition of a dumping tariff, but only marginally. This has
been insufficient to significantly deter consumers from buying salmon.
Certainly, the supermarket shelves have continued to stock salmon in visibly
large volumes confirming that not only are supplies being maintained, but that
consumers are continuing to buy farmed salmon. If this salmon is not being
supplied by Scottish producers, then it must be coming from elsewhere and as
IntraFish reports, imports from Norway have increased this year. They report
that Norwegian exports are up by as much as 160% on last year but their sources
are unable to put an exact figure on the increase. One hundred and sixty percent
could be many thousands of tonnes but equally, it could be just a few hundred.
In fact, the Norwegian Office of Statistics can provide an exact figure. Up to
week 40, Norwegian exports to the UK amounted to 22,046 tonnes. This compares
with 8,524 tonnes for the same period in 2004; an increase of only 13,552
tonnes. Clearly, these imports cover the first three quarters of the year and
the last quarter is one of the highest demand for salmon but the difference
between 13,552 tonnes of imports and a shortfall of 70,000 tonnes in Scotland
appears to be too large a divide to bridge. Added to this, exports of Scottish
salmon, which had stood at about 20,000 tonnes, have fallen sharply with the
result that a comparable volume has been absorbed into the local market.
The
reality is that even if every independently owned farm in Scotland had stopped
producing, Scottish production would never fall as low as 110,000 tonnes a year.
This low forecast is intended solely to persuade Brussels that the independent
Scottish industry is continuing to suffer the effects of Norwegian imports and
is justification for the imposition of stringent measures against Norway.
Surely, the time has come to allow the Fisheries Research Service to publish
Scottish production data on the basis of what has actually been produced rather
than use it as a political tool to underwrite the continuous fight in Brussels.
Cheap
as Chile: Speaking whilst on a visit to
Chile, Struan Stevenson MEP told fishupdate.com that Scottish salmon producers
cannot hope to beat Chile in the production of low-cost salmon. Instead, he
urged Scottish salmon producers to aim for the top end of the quality salmon
market including high quality smoked salmon and ‘value added products’. We,
at Callander McDowell, would certainly agree.
It
has been clearly apparent that most consumers are unable to differentiate
between one piece of salmon flesh and another, especially in relation to country
of origin. It is therefore extremely difficult to persuade consumers that salmon
flesh from Scotland is very different from any other and that it merits paying a
premium price.
By
comparison, value added products look different and through the use of
sophisticated packaging can justify a higher price.
We
have always argued that Scottish producers would experience difficulties if they
have to compete in the spot market against salmon from Chile and Norway. The
value added market offers many more opportunities to regain lost margin. Mr
Stevenson talks a lot of sense which the Scottish industry should well heed.
However,
we believe that it is not enough to promote the Scottish brand when considering
added value. Certainly, the Scottish whisky industry has focused on local origin
and the salmon industry should do the same. Some processors have already picked
up on local areas to promote their products. Isle of Skye, Orkney, Shetland are
just some examples but the industry could capitalise on many more. The local
identity may be one way to create a special image which consumers can buy into.