reLAKSation 289. Callander McDowell
Up, up and away: A report from FIS.com suggests that Norwegian salmon exports are increasing faster than anyone has been able to predict. Figures from the Norwegian Seafood Export Council indicate that exports rose by 17.6% in the first three months of the year. The main reason why no-one had predicted such growth was that prices have remained relatively high and at these levels demand would have been expected to fall. FIS say that the current situation is difficult to explain.
We, at Callander McDowell, agree that it is difficult to understand why demand continues to grow despite such strong prices but think that the answer may be because there is no single answer. Instead, there may be a number of contributory factors which cannot be considered in isolation but together can account for the combination of high prices and increasing demand.
We have previously discussed that whilst the overall market may continue to exhibit growth despite the higher prices, our observations of the retail sector suggest that it may not be the case in the traditional European salmon markets. Whilst we do not have any figures to support this view, the general impression is that salmon is not as prevalent on many supermarket shelves as it was when prices were lower. However, this does not necessarily infer that consumers have rejected salmon in favour of cheaper species as might be expected because other fish species have also increased in price. Salmon is clearly still competitive. Some consumers also seem to be willing to pay a higher price for salmon simply to buy into the healthy eating ethos.
Whilst growth may not be as strong in traditional markets such as the UK and France, some newer markets seem more than willing to pay the higher price. Russia continues to be an important market for Norwegian salmon now that exports have resumed following its earlier closure. China is also becoming more important. Seafood International report that the Norwegian Seafood Export Council have targeted China for several years and as a result exports to China have grown from 10,000 tonnes in 2000 to120,000 tonnes last year. Yet, the picture is not clear as it seems that China subsequently re-exported much of this salmon after further processing. We have previously discussed that China may prove to be a difficult market to crack because of the long standing traditions of eating only the freshest fish i.e. fish just out of the water. China may not be the only market to import salmon for further processing. Thailand appears to be building on it expertise on processing tuna and expanding into salmon, although primarily cheaper wild caught species at present.
A report in IntraFish suggests that market growth has been in line with increased biomass in Norwegian waters. Norway has been able to export more salmon because there has been virtually no production growth from either Chile or Canada. IntraFish also suggest that the US market has not been able to obtain sufficient salmon from its traditional suppliers so demand has not been fulfilled, so said Rich Castle director of seafood for the 230 store Giant Eagle supermarket chain. This seems to be borne out from our own observations of the US retail sector which indicate that a number of supermarket chains have been selling Norwegian salmon this Easter.
Interestingly, these supermarkets seem to be charging their customers a slightly higher price than for comparable Chilean salmon although this probably reflects the current state of the European market than any specific difference in the fish.
Of course, the problem in knowing what will happen to the market from now on is that the current situation is unlikely to remain the same. IntraFish spoke to one source who said that the extra biomass in Norway could be advantageous as long as other production countries do not have the same rate of growth and that demand and prices remain at the same level but this is not going to happen, not without something else happening.
FIS.com say that if current price and volumes level are to be sustained then the industry must be supported by extra marketing. They add that NSEC is usually responsible for most of the Norwegian marketing but their typically rigid approach is unlikely to provide the extra support needed by the industry. Given that the Norwegian industry has earned around NOK one billion this year, perhaps, it is time that some of this revenue is invested now to ensure that market growth continues even when the current situation changes. The proposal made earlier this year to place a marketing tax on salmon sales appears to have been forgotten only to be remembered when prices start to fall and when it is too late to act.
What a relief!: Earlier this year, the US National Fisheries Institute (NFI) issued a statement that farmed seafood works as a ‘relief valve’ taking pressure off the world’s wild capture fisheries that cannot produce enough seafood to meet increasing consumer demand around the world. According to seafoodintelligence.com, the UN’s Food & Agricultural Organisation says that for the past twenty five years, worldwide fisheries have provided between 85 and 100 million tonnes of seafood annually. NFI say that aquaculture can fill the gap between what wild capture can provide sustainably and the growing demand for seafood.
Unfortunately, NPI have got it wrong. Aquaculture is much more than a relief valve for wild catch fisheries but an important source of fish and seafood in its own right. With increasing interest in sustainably sourced fish, aquaculture will eventually overtake wild catch fisheries as the primary source of supply. This is borne out by the current figures.
A report from the FAO at the end of last year indicated that farming now supplies nearly half of all fish eaten today. They said that typically 95 million tonnes of fish are caught each year (which is in the range quoted by NFI) however, 30 million tonnes of this catch is not destined for human consumption but is converted into fishmeal, primarily for use in terrestrial farming, leaving 65 million tonnes to be eaten by the world’s consumers. By comparison, farming now supplies 45.5 million tonnes of fish and seafood.
These figures clearly show that farming is much more than a relief value but an important source of fish and seafood. As more and more fish stocks are restricted because of sustainable certification then inevitably the wild catch must shrink. At the same time, increasing demand for fish will encourage more and more farming replacing wild catch fisheries as the primary source of supply.
This week, UK supermarket chain Sainsbury’s has announced that it intends to supply only line caught cod in future but some Icelandic suppliers have already expressed doubts that they can meet current demand. Perhaps instead they should consider expanding their existing range of sustainably farmed cod from both Scotland and Norway as a more viable alternative. In much the same way, other retailers will begin to realise that even the most sustainable fisheries cannot meet existing consumer demand and that some key species should be sourced exclusively from aquaculture.
Farming has the ability to become the dominant supplier of fish and seafood perhaps focusing on a few key species. Wild catch fisheries can supplement this supply with a wide variety of other species harvested in a responsible and sustainable way. NFI are primarily a fisheries organisation and their vision comes from a fishing perspective. This must change as more and more fish come to market from farming, which must be something of a relief to the NFI
déjà vu: IntraFish recount a report from Globefish that its déjà vu all over again for bass and bream producers as a too-large generation of fish once again reaches a market incapable of absorbing them with the inevitable result that prices are once again in decline. Three years ago, bass and bream producers found themselves in the exact same situation having relied too heavily on demand from markets in southern Europe. By 2004 the markets had stabilized and prices began to creep up again. As the industry recovered any idea of diversification was thrust onto the backburner. Unfortunately history then started to repeat itself and from last October prices started to tumble.
According to Javier Ojeda of the Spanish aquaculture group APROMAR the industry is suffering from two key problems. The first is that the traditional markets for bass and bream, Italy and Spain, are more or less saturated. The second is that there is practically no coordination between the two main producers, Greece and Turkey, and their main markets. He said that fish is constantly arriving at the wrong time for the market. Clearly, bass and bream producers are suffering from a problem which affects all too many parts of the aquaculture industry; they are too entrenching in production-led strategies producing what they expect the market to buy, which is not necessarily what the market wants.
Globefish argue that most bass and bream is sold whole and gutted, a format that doesn’t work well in Northern European countries except in niche markets. They say that the industry would need to begin selling more convenient filleted and value added products to successfully improve market penetration. They have a point except rather surprisingly, most bass and bream sold in the UK does appear to be sold as whole and gutted. Only a couple of UK retailers offer bass fillets whether as prepacked or on the fish counter. As most UK consumers completely avoid whole fish, it is a mark of the success of the bass and bream industry to persuade them to buy any fish at all. It may be expected that most bass and bream buyers are from the higher socio-economic groups where the fish are served at dinner parties etc, but actually, both species are available from across the supermarket spectrum.
We, at Callander McDowell, believe that bass and bream farmers could look to both the salmon and trout industries for inspiration. It would seem that they have a lot in common. Bass and bream producers would seem to be suffering from the sort of boom and bust cycles that some attribute to salmon farming with prices peaking and then showing signs of collapse. We have argued before that against a background of declining wild catch fisheries, no aquaculture sector can be exhibiting such cycles instead, it is as we have already mentioned, there is too much dependence on production-led strategies.
The reappearance of this so-called cycle in the sea bass and bream industry may be because these species cannot be transformed into such versatile products as salmon. Salmon are no longer confined to the supermarket fish counter and are used in a whole range of products in the retail sector. By comparison, sea bass appears in only one or two high value products in just a couple of supermarkets at the premium end of retail market and sea bream in none. One reason is because the fillets taken from portion sized fish are small and thin and can dry up quickly when cooked.
Trout farmers used to suffer similar problems but expanded the market by growing much larger fish which produced good single portions similar to those used in many salmon added value products. In the UK market at least, farmed sea bass has to compete against line caught sustainable wild sea bass. It may not be the sustainable credentials which attract the consumer but also that the fish tend to be much larger and chunkier.
Globefish suggest that diversification of markets and products require money, something that the industry is not flush with at the moment. We have heard this story many times before and not just from sea bass producers. When prices were high in 2004 and 2005, the sea bass and bream industry failed to reinvest money in the future and are now suffering the consequences.
This leads us to ponder how much of the current profit resulting from high salmon prices is also being now reinvested in market development?