reLAKSation 273. Callander McDowell
Bolting the ‘stable’ door: In reLAKSation no 271, we discussed how the Irish Minister for State, John Browne TD, had lobbied the European Commission to retain the trade measures on imported Norwegian salmon. He had said that his main aim had been to bring some stability to the market. In response, we at Callander McDowell argued that it is only necessary to look at the huge fluctuations in salmon prices during 2006 to see that the salmon market is anything but stable.
Now the Danish industry has blasted the volatile salmon prices saying that they were making it very difficult for processors and their clients. According to IntraFish, prices soared to up to €6.15/kg whilst in the past weeks they have plummeted towards the MIP. They have recently shown a slight recovery but could be moving back down again. If this is stability, then perish the thought of what an unstable market could bring to the industry?
Mr Brown had said that the MIP had helped in bringing stability to the industry. However, this is not the case. The MIP has had no direct effect on the industry because it has not yet being brought to bear. The MIP is a safety net which forces Norwegian farmers to sell at a minimum fixed price if they want to sell in Europe. If they choose to sell outside the European Community then they can sell at whatever price they want. As the salmon price has not fallen as low as the MIP, the Norwegian industry is able to trade freely. The MIP has thus had no effect. What it has brought is uncertainty about the future and this has contributed to the volatility of salmon prices which is the exact opposite of what the salmon industry actually needs.
What is really needed is confidence and growth. Salmon farming should be a vibrant and dynamic industry but for many years it has been shackled by the continuing threat of trade measures. These have been sought by a few blinkered Luddites who have resisted change. They fear that the continued transformation will destroy an already outdated vision of what salmon farming should be.
Mr Browne perfectly illustrates this backward looking view when he said he wants to bring stability to the industry. The fact that he is happy to lobby for stability despite the ongoing volatility of salmon prices just shows that it is not stability at all that he is looking to protect. Stability is a concept that does not apply to farmed produce. All prices go up and down with changing supply and demand. It is a fact of life which all producers have to live with.
So if Mr Browne is mistaken, it is not stability but continuing profitability that the industry so badly needs. We doubt that there will be one single salmon farming company no matter which nationality that would argue otherwise. Everyone is in business to make a profit and salmon companies farm salmon because they believe that this is the best way that they can make a profit.
Unfortunately, and this is the fundamental issue which has divided the industry over the last fifteen years, there seems to be a difference of opinion as to how this can be achieved. Those who seek trade measures from the European Commission are keen to pursue a strategy of low volumes and high margins whilst the rest of the industry has adopted a strategy of higher volumes and lower margins.
Sadly for the minority of the industry who aim to produce a high quality premium product, many consumers have been unable to distinguish sufficient difference between the premium product and that destined for the wider value for money market. As a result, they are reluctant to pay the premium prices demanded for the supposed higher quality product. This means that these farmers fail to achieve the desired margin and as they have a higher cost base, their profitability suffers. This is what has prompted the members of the EUSPG to seek the imposition of trade measures from the EU when really what they should be doing is seeking alternative ways of returning their businesses to profitability. Instead of lobbying for the continued imposition of the MIP, Mr Browne might want to consider alternative ways to help his farmers. After all the MIP is only a safety net which so far hasn’t actually had any direct effect on the industry.
As Scottish producers cannot look to Mr Browne for assistance, they have sought the help of the Scottish Executive instead. Sadly, as the Framework for Aquaculture has proved, Scottish producers cannot except any direct help from the Executive as it is Government policy not to have any role in the commercial decisions of individual businesses. This is why they have gone down the safeguard route.
Despite 15 years of continuing trade dispute, there is still talk of level playing fields and stability. The industry can never progress whilst still shackled by the limitations of such concepts. The time has come to finally close the door on these ideas and look to how the industry can best make a profit.
Had its chips: According to IntraFish, fish and chip shops are now the most popular businesses in the UK. A report from SBS Commercial has found that fish and chip shops have displaced sandwich shops in this position of the type of business subject to most business transactions. According to IntraFish, this is an indication that fish and chips are still in high demand by the British public. Fish and chips may still be popular but the chip shops’ elevation to the top of this list is actually not such good news. Far from indicating the popularity of fish and chips, the top position on this list does not mean that fish and chip shops are the type pf business most people want to own but rather that they are the type of business most owners want to sell.
A report in the Fishupdate newspaper provides a clue as to what is happening. Rising fish prices, rising potato prices and record high gas prices have all contributed towards putting the owners of fish and chip shops under immense pressure, especially as there is increasing customer resistance to paying higher prices for their fish and chip carry out. Reports in the national press have indicated that fish and chip prices have reached £5 but whilst this may be true in London, much cheaper fish and chips can be found out in the provinces.
Rather than face business failure, many owners have sold out, possibly to naive buyers who have not appreciated how difficult business has become. The same cycle occurred with sandwich shops which sprouted up in every town in the last ten years. People thought that all they had to do was make a few sandwiches to rake in the profits however they all too quickly found out how difficult business could be. This is why sandwich shops maintained such a high position as the most traded business for so long. Now they have been displaced and this is perhaps giving an insight to the fact that the fish and chip sector may soon undergo radical change. It is also a reminder that the public do have a price threshold even for something that is perceived to be a national treasure. Nothing is ever sacrosanct when it comes to having to dig deep into the wallet.
SOS: According to the Sun newspaper SOS stands for ‘Scared of Salmon’. This follows the news from Germany that five of 33 brands of salmon bought there were found to be infected with listeria bacteria. One pack was reported to be 100 times over the accepted safety level. The Sun begins its report by saying that Scottish salmon is at the centre of a new health scare, yet the Scotsman points out that of the five samples, two came from Norway, one from Ireland, one from Alaska and the remaining two were of unspecified European origin. This clearly confirms that not only is the problem not from the source of supply but it is not even from farmed salmon. The German microbiologist who performed the lab work said that the problem appears to be in the processing as the contamination has not been found in whole fish, yet when he looked at the slicing machine, he found high levels of contamination.
The Sun quotes Ken Hughes from the SSPO saying that they are aware of concerns about how the product is packed in Germany but the message to consumers in Scotland(?) is that they can continue to eat smoked salmon with confidence. This is backed up by the Food Standards Agency who said that any risk of listeria here is minimal. The Sun is keen to inform its readers that the Scottish salmon industry has just battled back from a cancer scare in 2004 when sales of the fish halved in some UK supermarkets.
Whilst the problem has clearly originated in Germany, it seems that the industry in Scotland is happy to distance itself from the problems there. Sid Patten of the SSPO told the Scotsman that ‘there is absolutely no evidence to suggest that the problem emanated in Scotland’. He also said that ‘Scottish salmon is of the highest possible standard and people can eat it with confidence. Scotland is among the leaders in food processing and packaging and can pride itself in well run food business and people buying from such sources need have no fear.’
However much Mr Patten would like to add his reassurances about the problem, the reality is that any adverse news can have a negative effect on salmon sales both in Germany and in the UK. Mr Patten believes this to be a ‘German’ problem however it may reach closer to home than he thinks. He may have every confidence in well run food businesses but the simple fact is he might not be so confident if he was aware that some of the smoked Scottish salmon sold in UK food retailers is actually smoked in Germany!!!
