reLAKSation 341. Callander McDowell
Just can’t let go: Following on from the news discussed in the last issue of reLAKSation that the Scottish Executive has sent a comprehensive document to the European Commission demanding that the MIP should be retained, the European Salmon Producers Group have announced that they are on the verge of lodging an anti-subsidy case against the Norwegian salmon industry. Fishupdate.com reports that whilst the dumping case was submitted in a bid to expose the fact that salmon were sold below the cost of production, the anti-subsidy case will reveal illegal subsidies from the Norwegian Government to their salmon industry.
According to IntraFish, the EUSPG hopes that this anti-subsidy investigation will help explain why not one Norwegian company went out of business at a time when a number of Scottish farms went bankrupt?
We, at Callander McDowell, think that it is wholly unnecessary to initiate an anti-subsidy investigation to answer this question. It is quite apparent why Scottish farms failed and Norwegian ones did not and it is a reflection on the EUSPG (and the Scottish Executive) that they remain totally blinkered to what happened.
The differing outcome for Norwegian and Scottish farms at that time is down to the simple fact that the Norwegians’ strategy was to produce a commodity product for a market that wanted commodity salmon whereas the Scottish industry were producing a premium product for a market that was only willing to buy salmon at commodity prices. The Scottish industry suffered because they were piling on the costs to produce the highest quality salmon they could but consumers were unable to differentiate these supposed ‘high quality’ salmon from the rest and therefore were unwilling to pay a premium to buy it. The cost structure of Norwegian production reflected the price that they received for their harvest whilst the Scottish cost structure did not. Basically, the Scottish industry was not producing the salmon the market wanted and inevitably, they suffered as a result.
Whilst the EUSPG will argue that this is nonsense, the clear proof of this view can be found with the failure of the Tartan Quality Mark in the UK retail market. It was intended that this mark was to be applied to Scottish salmon sold in British supermarkets as a visual guarantee of its’ high quality however the TQM never made an impression on consumers and is now nowhere to be seen in any of the major retailers. Consumers were simply unwilling to pay a premium price for what they perceived to be the same salmon flesh as that coming from any other salmon.
The independent Scottish industry has consistently refused to adapt to a changing market preferring to hark back to times when Scottish salmon were considered to be something special. We have previously discussed how this image arose from comparison with imported Pacific salmon smoked by London’s immigrant community over a hundred years ago but argue that it cannot be applied to a comparison with identical Atlantic salmon originating from just the other side of the North Sea.
Sadly, the independent Scottish industry is convinced that Norway is to blame for their misfortune and they are prepared to pursue their cause to the bitter end. They refuse to discuss the possibility that the dumping and subsidy complaints are just an excuse for their inability to invest in the appropriate market-led strategies producing the type of salmon that consumers want and are not willing to even consider any other possibility. We, at Callander McDowell, have experienced the wrath against those who are prepared to speak out. For example, this reLAKSation viewsletter was born out of threats to the fish farming press that they desist from publishing such opposing views at the risk of losing industry advertising.
Our argument that the Scottish industry would be better placed to compete against competition, whether from within Scotland or elsewhere appears to be confirmed by the success of one independent farming company, Loch Duart Salmon. Just this week, fishupdate.com reports that this award winning salmon farming company is now branching out from its base in north-west Sutherland and is taking over two sites on the Hebridean island of South Uist that have been rejected by the major companies as being too small. These sites are required for a 30% growth in production to satisfy demand for their salmon. Loch Duart Salmon say that they are keen to get their hands on even more of these small redundant sites, presumably with the aim of boosting production even more?
Wait a minute - Didn’t the comprehensive document that the Scottish Executive sent to the European Commission arguing that there is a danger of dumping, as discussed in the last issue of reLAKSation, specifically state that ‘there won’t be an increase in the consumption of salmon?’ Independently owned Loch Duart Salmon appears to disagree but then this is not the first time that the Scottish Executive and the EUSPG have ignored what is actually happening out in the real world.
IntraFish report that the EUSPG have argued that they brought the dumping case because many farms were being driven out of business by cheap Norwegian imports sold at prices below the cost of production. Yet just after the Scottish Executive had submitted their application for safeguards, the Financial Times published an article about Loch Duart. This stated that “two factors make the expansion unique. One is that Loch Duart is profitable. According to Nick Joy, managing director and one of three owner-managers, the £4.5 million turnover company has made profits in four of the five years since the trio bought it.” This certainly doesn’t sound like a company in trouble.
Loch Duart Salmon is a great success story and all credit to their management who saw an opportunity in the marketplace; exploited it to its full potential and continue to do so. They are the model for all independent salmon farmers in Scotland having shown what can be done with the right attitude and approach to the market. Well done to them.
We suggested earlier that the Scottish industry had focussed wrongly on a premium product but this does not mean that there isn’t a market for Scottish premium salmon. Far from it, sections of the market continue to demand a high quality product for which it is prepared to pay a premium. Loch Duart has successfully exploited this market and there is no reason why other companies could have not done the same. The problem has been the assumption that the ‘Scottish’ label alone could generate the premium. This has not proved to be the case. Consumers want something more for their money as Loch Duart has shown. It’s just a pity that the EUSPG appear to be on a crusade against Norway rather than follow Loch Duart’s example and it’s also a pity that the Scottish Executive have been naive enough to sign up to this misguided campaign against Norway. The time has come for them to let go and direct their efforts to where it most matters – the consumer.
Beefing up the figures: According to the Scotsman, beef producers have seen the ex-farm price of their cattle rise by almost 12 percent since the start of the year. Top grade cattle in Scotland are now making £2.60 per kilo with some achieving £2.70. This is around 40p per kilo higher than in the late months of last year. However, Gavin Hill from the Scottish Agricultural College said that production costs had already risen by 16p per kilo in 2007 and are now another 40p higher than the same time last year. Feed, fertiliser and fuel are all much more expensive than 12 months ago.
Meanwhile the Daily Telegraph reports that pig farmers receive as little as £1.10 per kilo for their animals against a cost of production of £1.37. This equates to a loss of between £25 and £27 per pig even though consumers are paying supermarkets up to £6 per kilo for some cuts of pork.
We, at Callander McDowell, are surprised that such data is so readily available and discussed within the agricultural sector because when it comes to salmon farming cost of production data is akin to a state secret. We know that such data is not so difficult to collate because the Norwegian industry publishes an annual survey of the cost of production for each region and also nationally. Yet when it comes to Scotland, there has always been a reluctance to publish cost data. This is despite clear recognition of the need for such comparative information in the 2003 Strategic Framework document. Even though one of the objectives was to collect this data, it has never been published. The reason is not difficult to understand. The Scottish Executive has retained the data because it does not support the claims that Scottish producers are at a cost disadvantage. Certainly, when the now defunct Scottish Salmon Growers Association commissioned the Scottish Agricultural College to compare the costs in Norway and Scotland back in 1993, the data was unequivocal; Scotland held a cost advantage.
At the time this data was presented at a meeting in Inverness, the then Chief Executive of the SSGA became very agitated, claiming that the data was inaccurate. The SSGA then withdrew their support for further comparisons. Presumably the latest data is also deemed to be inaccurate otherwise there would be no reason to withhold it. After all it could be used to prove to the European Commission that Scotland was being disadvantaged.
The Scottish Executive has written to the European Commission warning that production costs will rise with higher feed prices and that is why there is an increased risk of dumping but unless the actual cost of production is known, how will it be possible to judge whether it will increase.
Although it is fifteen years since the last comparative cost study, both the Scottish Executive and the EUSPG produced some data fro their respective safeguard and dumping submissions. Interestingly, although both covered the same time period, the two sets of figures clearly contradicted each other.
Dumping Safeguard
complaint Euro/kg application £/kg
2001 3.39 2.00
2002 3.63 1.88
2003 3.30 2.18
2004 3.20
Although the two sets of data are presented in different currencies, the safeguard application shows costs falling in 2002, whilst the EUSPG data show them rising. In 2003, the reverse is true. This makes no sense but then nothing about these trade cases has ever made any sense at all!
Eating out?: Food Service Manager for the Marine Stewardship Council, Laura Stewart told IntraFish that there has been an ‘explosion of interest’ in MSC eco-labelled options which is why four top London restaurants have completed the MSC’s traceability audit to prove the fish can be traced right back to the certified sustainable fishery from where it was caught. The four restaurants are the Duke of Cambridge, London’s first organic gastropub in Islington, Konstam at the Prince Albert which recently featured on TV as chef Oliver Rowe tried to source all his produce from inside the M25, London’s orbit motorway, the Spanish restaurant Moro, the Observer Food Monthly restaurant of the year and Moshi Moshi, a conveyor belt sushi restaurant, which sources all of its fresh salmon from Loch Duart. These four, together with Tom’s Place, Tom Aitken’s sustainable fish and chip shop, are the only restaurants in London to be MSC certified.
The ‘Time Out’ guide to eating out in London reviews over 1500 different restaurants and there are many more that are not included. Five London restaurants with MSC certification hardly constitutes an ‘explosion of interest’. It’s not surprising that IntraFish reports that it has been difficult for Londoners to find the MSC eco-label on restaurant menus!