reLAKSation 271. Callander McDowell
????? : Last month, Sid Patten of the Scottish Salmon Producers Organisation told Seafoodintelligence.com that whilst production of Scottish salmon started to decline in 2004, UK demand for salmon has enjoyed an unprecedented increase. To redress this apparent imbalance, Mr Patten has said that production is forecasted to steadily increase from 2007. However, he was unable to put a figure on this projected growth despite representing 95% of the Scottish industry. The expectation was that production in 2005 would be about 136,000 tonnes (as forecasted in the 2004 FRS annual survey) falling to about 130,000 tonnes in 2006.
Mr Patten is not the only one to give an upbeat forecast for Scottish production. This week Kontali have suggested that the Scottish salmon industry is now growing at a faster rate than anywhere else. IntraFish report that Kontali put Scottish growth at 7%, a figure based on expected production of 121,000 tonnes in 2005 although 7% of 120-130,000 tonnes is not really comparable to 5% of 600,000 tonnes in Norway. Kontali now forecast that Scottish production in 2006 will be 130,000 tonnes.
With only a handful of weeks to go until 2007, we can now access the official Scottish production figures for 2005. Seafoodintelligence.com report that the Fisheries Research Services have finally published the long awaited 2005 production survey although in the context of a such unprecedented demand for salmon, it all now seems rather irrelevant.
In 2005 salmon production in Scotland fell by 18% to 129,588 tonnes, higher than Kontali forecast but lower than that given by FRS based on farmers’ returns. Production in 2006 is expected to rise to 137,018, well above that predicted by both Kontali and the Scottish Salmon Producers Organisation.
Other data of interest from the survey relates to the number of companies now operating in Scotland. It is well known that the industry is undergoing consolidation, which means that there will be less companies operating. In 2005, the number of companies in production has shrunk to 40 of which 14 are responsible for 86% of production. The other 26 produced about 18,000 tonnes. The fall in number is due to the predictable consolidation but at the same time, we have always been puzzled why some operators have felt the need to trade as two or three different companies. Harsher trading conditions have now made this practice less attractive and could be part of the reason why there are now less farming companies.
Finally, the discussion in a previous reLAKSation about Orkney has directed attention to the regional production figures. Perhaps not unexpectedly, production in Orkney has fallen, as has production in both Shetland and the Western Islands. Whilst there has undoubtedly been some contraction of the industry, the survey does not identify conversion to organic production which is carried out at much lower stocking densities and therefore lower harvest volumes. The overall picture is therefore a little clouded. Certainly, the survey is not all gloom and doom in 2005. Production in South West Scotland rose by 10,000 tonnes to 33,000 tonnes although the forecast for this region in 2006 is downwards whilst elsewhere production is set to increase with the exception of Orkney.
The real significance of this survey is that if Sid Patten is correct and the UK is showing unprecedented growth in demand, then Scottish producers will clearly struggle to supply this demand. This means that Britain will continue to import more and more salmon from overseas which could have been supplied from Scotland. A minority of producers will continue to blame Norway for this imbalance but the simple fact is Scottish producers have been too busy focusing on the production of premium quality salmon to notice that most consumers simply want something that is good to eat at a value for money price.
Level best: According to Seafoodintelligence.com, the Irish Minister of State, John Browne TD, updated the National Aquaculture Forum of his latest efforts to persuade the EU to retain the trade defence measures on farmed salmon. He said that his main aim has been to bring some stability to the market and to help Irish producers to compete on a level playing field with imports from outside the EU. He added that the anti-dumping measures were helping in this regards.
We, at Callander McDowell do not agree. The one thing that the anti-dumping issue has not brought to the market is stability. It is only needs a quick look at the price movements through 2006 to see that the year began with prices at €3/kg rising to nearly €6/kg in June before falling back to around the €3/kg mark at present. This huge rise and fall is not a sign of stability but is just as destructive as the fall and subsequent rise which took place over 2003/2004 which was blamed on Norwegian imports.
The industry may have welcomed the price rise but the clear consequence of the higher price is a massive fall in demand. This was not immediately apparent as the supermarkets and other retailers cushioned consumers from higher prices. However, consumers are not yet benefiting from the more recent lower prices because the cushion is still in place and it will be some time before the effects start to filter through to the consumer. Our current observations of the retail sector suggest that salmon is not the main feature of the Christmas markets that it once used to be. Farmed Atlantic salmon has been priced out of the market.
Mr Browne also wants to see a level playing field. This is a concept which makes absolutely no sense. He wants Irish producers to have the access to the same markets in the same way as the Norwegians but as they are seemingly producing two very different products, how can they compete on the same level? Irish producers, like some of their Scottish counterparts, have focussed on the production of quality salmon under strict guidelines to the highest standards. The only reason to do this is to gain some advantage in the market place over the competition. This means that they believe that the playing field is tilted in their favour and thus, cannot be level.
As we have discussed many times previously, the majority of consumers are happy to accept high quality salmon but when faced with the choice between that and imported salmon tend to select their purchase on price. This is because they are largely unable to perceive any difference between the two.
Mr Browne’s representations to Europe have been prompted by news that the Commission is under pressure to suspend the anti-dumping measures. High prices throughout most of 2006 have suggested that claims of Norwegian dumping have been misleading. The anti-dumping committee could discuss this during its meetings in December and January. Any decision is unlikely to be reached solely on the merits of the salmon case alone but rather as part of some political trading over shoe imports from China.
However, if no decision is forthcoming, Norway could seek a review. The problem with this option is that prices are now hovering about the MIP level and if they were to fall, below the MIP the likelihood of a favourable review would be uncertain.
We, at Callander McDowell are in no doubt. Whether it be the suspension of these measures through the anti-dumping committee or by review, the quicker the better. The one thing that these measures do not bring to the salmon farming industry is the stability that Mr Browne seeks. These measures only bring uncertainty and it is this uncertainty which is so destructive.
Even if the MIP is allowed to run the full five year term, stability will not return to the industry. This current dumping case arose following the opening up of the market after the EU salmon agreement had run its course. Inevitably, the market became further destabilised as it was released from its shackles. It is also inevitable that the same will happen once the current measures are repealed whether it is now or in four more years. However, any instability will be short term and provided that there is no further interference, the market will return to an even keel or at least as near as possible. The alternative is that the minority of salmon producers will need to be subjected to almost continuous protection, which would be sheer madness.
The only way to bring stability to the salmon industry is to allow it to develop without interference, whether it is trade or politically motivated.
Wild about salmon: Sainsbury’s the British supermarket chain, has been running a promotion on salmon this week. Packs of salmon fillets have been prominently displayed on the gondola end of one aisle. The offer enables customers to save £5 if they buy two packs of salmon fillets normally priced at £5.99 each. This is equivalent to buying the second pack at a price of 99p.
This should not seem anything special since Sainsbury’s have regularly promoted salmon in this way, along with other promotional deals. What is different about this promotion is that the salmon is actually wild pacific salmon. This is the first time that we have seen it promoted in the same way as farmed Atlantic salmon from Scotland and Norway and we believe that it is a worrying development. It represents the beginning of acceptance of wild pacific salmon into the mainstream salmon consumption.
Although pacific salmon has been sold in cans for many years in the UK, the appearance of ‘fresh’ pacific salmon on the supermarket fish counter has been a relatively recent development. It appealed to a small niche market of consumers who were concerned about issues of sustainability and the environment. However with the establishment of the Marine Stewardship Council and negative publicity about farming, these issues became more mainstream and as a result the top end supermarkets gave more prominence to wild pacific salmon and started to stock it as chilled prepacks. On isolated occasions, these supermarkets encouraged their customers to try wild pacific salmon by knocking a bit off the price. Now Sainsbury’s have elevated wild pacific salmon’s position by promoting it on the most prominent of positions in the supermarket.
Salmon farmers should be concerned. Whilst they seem to be more bothered as to accusations of dumping and minimum import prices, the reality is that wild pacific salmon is gradually encroaching on their market. Salmon farmers may have a good story to tell about omega-3 fatty acids and other health benefits but so do the purveyors of wild salmon as well as the issue of sustainability as endorsed by the Marine Stewardship Council.
However, it is not just the fresh market that is under threat. The high (fair) price of Atlantic salmon has meant that cheaper Pink and Keta salmon is being increasing substituted in many added value dishes often justified by the added endorsement from the MSC.
The salmon industry is under attack from both ends of the market. Now IntraFish report that the Alaska Seafood Marketing Institute has received $5.1 million from the US Department of Agriculture to support their efforts to promote American food products around the world including wild pacific salmon. This adds to there al;ready significant marketing budget. By comparison, the salmon farming industry spends nothing. It is no wonder that wild pacific salmon is becoming so mainstream in the UK retail market.