reLAKSation 354. Callander McDowell
Happy Sunday: IntraFish reports that the Norwegian Seafood Federation’s Trond Davidsen is happy to see the end of the MIP when it is dropped this Sunday (today). He said that this is the final nail in the coffin for the salmon dispute with the EU.
Meanwhile, Egil Ove Sundheim from the Norwegian Seafood Export Council said that the final collapse of the MIP represents a great victory for Norwegian salmon, both in a symbolic sense and in providing more stability and predictability for sellers. He added that although the industry is celebrating, it is also worth remembering that it has not come without a heavy price as the process of getting the MIP removed has been extremely expensive and time consuming for everyone concerned.
Although we, at Callander McDowell, are glad to see the end of the MIP, we do not see it as a victory (except for common sense) but rather the end of a period of pointless in-fighting when the industry should have really been developing the salmon market. We certainly do not see this as cause for celebration because there are no winners. Everyone involved has been a loser.
The MIP resulted from a case brought by a few independent Scottish producers, supported by some of their Irish colleagues who claimed that they were suffering from the presence of cheap imported salmon in the European market, allegedly dumped by Norway. However, this case was never about dumping. Instead it was really a debate about what sort of industry salmon farming should be. The independent growers aspired to the production of premium salmon aimed at a luxury niche market, whilst the Norwegians were perceived to want commodity production satisfying the mass consumer market. The problem for Scottish producers was that the market couldn’t really ascertain any difference between their salmon and that produced in volume and thus were unwilling to pay the extra premium to buy it. Rather than consider how to better market their salmon, they blamed Norway for their own failures.
Even the independent sector now recognises their deficiencies as we discussed in the last issue of reLAKSation with Nick Joy of Loch Duart Salmon admitting that perhaps the Scottish industry had been guilty of marketing its salmon badly. Scottish producers also claimed that they were disadvantaged because they were not participating on a level playing field as Scottish producers were much more heavily regulated than their Norwegian counterparts. This is certainly true but the solution is to be found with their own regulators not the imposition of trade measures.
Irish farmers also make similar claims for their own Government. More recently, they have accused the Irish authorities of dragging their feet over approvals for hundreds of licence applications which it is hoped would make the Irish industry more competitive. This too is a matter for the Irish Government not the EU’s trade directorate.
Meanwhile, Norwegian authorities have allowed the dispute over the MIP to drag on for nearly two decades. They could have quashed the various complaints from the outset but have repeatedly failed to do so. They have consistently focussed on the wrong issues and allowed the complaints to escalate to reach the point where the European Commission has been free to impose the MIP without serious challenge. Too much time has been allocated to legal matters rather than address the fundamental issues. The latest complaint in 2004 could have been prevented right from the beginning but it appears that the Norwegian authorities were then just not ready for action.
To be fair to the Norwegians, they were not helped by having to deal with a trade directorate that was already convinced Norway was guilty of dumping even before the investigation got underway. However, it does seem that after twenty years, DG Trade had become fed up with the salmon issue as it took up far too much of its time and thus helped it through its final demise.
No, this was not a victory just a totally unnecessary debacle. This is a happy Sunday because it represents a new beginning in which we hope the salmon industry becomes even more focussed on producing what the market wants. This is a new opportunity. We can only hope that it is grabbed with both hands.
We wish everyone a Happy Sunday.
Twenty five percent: The Daily Record has found that consumers are now paying twenty one percent more for staple foods compared with a year ago. This is based on a typical basket of twenty four items such as bread, milk and eggs. The price rise is blamed on rising world commodity prices. Researchers found that consumers spending £100 a week on food will have to pay out an extra £1092 a year.
Shoppers in supermarkets belonging to Sainsbury’s are reported to have borne the largest increase with prices rising by 25.7% compared with July 2007. Key price changes include:
1 kg Basmati rice £1.89 - 100% rise
500g fusilli pasta 79p – 113% rise
907g garden peas £1.79 – 115.7% rise
250g cheddar cheese £1.62 -33.9% rise
500g beef mince £2.20 – 57.1% rise
The largest rises are linked, directly or indirectly, to wheat and dairy products, however, it is not all bad news. Those consumers with a sweet tooth are paying 11.2% less for sugar than they did a year ago and salmon prices remain unchanged, even though the salmon is now responsibly sourced and Freedom Food accredited Scottish salmon, which a year ago, it wasn’t.
Sainsbury’s offer a choice of chilled prepacked salmon ranging from the value version, priced at £6.98/kg, to the premium ‘Taste the Difference’ salmon at £13.30/kg. These prices are exactly the same as a year ago. In fact, it is necessary to go back to March 2007 to see any change and that followed eight months of higher prices as a result of the disruption to the market caused by the imposition of the MIP. It was only prior to August 2006 that Sainsbury’s salmon prices were lower than the current price.
The big question is whether retail salmon prices will start to follow the staple foods found in the typical shopping basket. The message from the retail sector is very mixed with some products actually rising in price whilst others are being offered on discount. Last week, Asda had cut the price of salmon fillet from their fish counter to £4/kg. This week, the best deal is almost double that but in prepacks which tend to be more expensive anyway. Meanwhile, typical prices appear stable. With analysts predicting both rises and falls in the spot price, the future looks uncertain but we wouldn’t be surprised to see retail prices remaining where they are, at least for the time being.
Jury’s out: IntraFish recently asked the question whether buyers are really paying more for farmed cod? The conclusion was that it was impossible to conclude anything. This is because the statistics are not detailed enough to draw any conclusion and the volumes of farmed cod sold are miniscule compared to its wild counterparts that comparison is impossible. In addition, Bjorn-Eirik Stabell from NSEC, points out that farmed and wild cod are generally offered at different times of the year. This means that prices could more reflect demand than whether the fish is wild or farmed.
The uncertainty is clear as Jorgon Borthen from Norsk Sjomatsenter suggests that any difference in price is due to the fact that farmed cod producers can offer long term contracts to retail chains and can supply product fresh all year round. He says that this is why farmed cod can generate a premium of NOK 2-3kg, although he points out that the figure used to be higher.
We, at Callander McDowell are not yet convinced by this argument since we have not seen any farmed cod in any supermarket continuously. In fact, farmed cod appears to be struggling to find a niche in any supermarket because the higher cost of production means that retail prices must be higher than that charged for wild fish. Shoppers, seeing this difference, have simply bought the cheaper wild fish and as a result, farmed cod has not made much of an impact in the retail sector.
In the UK, demand for cod is actually falling. Data from AC Nielsen/Seafish indicates sales of cod have fallen by 12.3% since last year. However, this data is misleading since it covers all presentations of cod including fresh, chilled and frozen and most importantly of coated products. In our opinion, it is this product group that has seen the greatest fall in sales but this is not due specifically to consumer decisions to stop buying cod but rather a change in the range of products offered to consumers. Many cod products have been replaced with Alaskan pollock which is perceived to be the sustainable choice in the face of threats to cod stocks.
Yet although there is a move to persuade consumers to eat less cod and more pollock, most supermarkets continue to discount coated cod, especially those produced by Bird’s Eye who are supposed to be leading the sustainability debate.
Fish counters and chilled counters still seem to have plenty of cod on offer and at competitive prices so we would imagine that consumers continue to buy cod unabated. The AC Nielsen/Seafish data indicates that whilst cod sales are falling, those of tilapia are rising suggesting that consumers might be converting to such sustainable species. Yet with tilapia fillet costing £13.59/kg on one fish counter and cod only £8.70/kg, it seems likely that only the most environmentally minded consumers will be forgoing their cod in favour of tilapia, especially with the credit crunch forcing consumers to watch their pennies.
The AC Nielsen/Seafish data suggests that cod prices have risen by an average 8% compared to last year, yet prices on the supermarket shelf have not followed, except for perhaps the most expensive cuts such as loin.
The question is what will happen to prices and demand when farmed cod starts to appear in much larger volumes? We believe that the pressure will be on to match or even beat wild cod prices. It is unlikely that farmed cod will be able to command the premium that cod farming companies expect. Certainly, if cod production is compared with any other farmed fish, increasing volume has forced prices down. With cod, there is the added complication of wild fish availability. This will also maintain the pressure on prices.
The salmon industry has maintained margins by dramatic cost cutting and the cod industry will have to follow suit even though they have many more obstacles to overcome.
Henrik Vikjaer Andersen of Cod Farmers told IntraFish that he is in no doubt that the market will pay more for farmed cod. He said that this is because he can deliver a good quality fish with a better flesh yield. This may be sufficient now to generate a couple of extra NOK/kg but once competition increases with increased volumes, this may not be enough to keep buyers happy to pay that extra margin. It will take something else to persuade buyers to part with more cash for farmed cod.
When the cod farming industry starts to deliver significant volumes of farmed cod to market on a regular basis, then we will know whether the market will really be prepared to pay more for farmed cod. Until then, the jury is out.