reLAKSation 38.
Mass appeal: Ever since salmon prices first collapsed in 1989, we at Callander McDowell have argued that lower prices would stimulate market demand with the possibility of generating mass market appeal.
Unfortunately, this view has not been widely accept ed by the salmon industry, which has fought to retain the market image of salmon as a high priced, luxury food. This is despite the continued fall in price and growing consumer demand. We were therefore pleased to read in Intrafish that Hiroyuki Hosoda, director of Mitsui Chile's Food Department that he now holds a similar view.
Mr Hosoda said that whilst the current low price could herald the beginning of mass-market appeal, it could also mean an end of salmon as an exclusive product. However, there is no reason why this should happen, provided that the salmon industry started to adopt a twin stream marketing strategy. This would separate salmon as a luxury food from salmon the commodity product.
Although Mr Hosoda does not think that current price levels are sustainable, he also believes that increased demand would make continued low prices more viable.
At the risk of repeating ourselves too many times, low priced salmon is what the market clearly wants and this is the message to which the salmon industry must respond.
Learning from experience!: Last September, we discussed the impending crisis in the sea bass and bream industries. According to IntraFish, tension is now mounting within the French industry as prices continue to fall. But is this any thing of a surprise?
The salmon industry has clearly demonstrated that there is a direct relationship between production volume and price. As production increases, prices decrease and vice versa. Although this is a two-way relationship, once prices have fallen, it is difficult to force them back up. This requires a dramatic cut in volume but few farmers are willing to cut back their individual production expecting others to do it instead. This is because if prices do not rise, they may find that their cash flow is reduced even further.
The experience of the salmon industry has shown that once prices fall, a scapegoat is readily sought. The Norwegian and Chilean salmon industries have usually been the main targets for salmon producers. In the case of sea bream and bass, the blame is being attributed to the Greek industry.
French farmers have accused the Greeks of selling their fish under the cost of production and they have asked the EU Commission to intervene. However, the salmon industry has shown that artificially interfering with the market does not work. Solutions must instead be sought elsewhere.
This is because unlike the salmon industry, bream and bass farmers do not have the flexibility to significantly reduce their production costs to match market prices.
This is yet another example where the answer lies in the market. The focus must be moved away from production to further development of the marketplace. If not, the bream and bass industry will become self-regulating as individual businesses are unable to compete and close down. This will eventually limit the amount of fish coming to market and stop the recent price slide.
Relocation - the new buzz word!: Alan Wilson, the Scottish Minister with responsibility for aquaculture recently gave evidence to the Scottish Parliament's Transport & Environment Committee. He said that he might be prepared to explore the possibility of relocation of fish farms in certain circumstances. He stressed that this would be a major undertaking for individual companies, which would require the full co-operation of regulatory bodies and possibly public sector investment.
Mr Wilson was giving evidence to the inquiry, prompted by the petition PE96, which brought into question the impact of sea cage farming and the regulatory failure to both recognise and prevent damage to Scotland's natural heritage and other interests dependent on the integrity of Scottish coastal waters.
One of the petitioner's intentions is to try to persuade Government that those farms located in areas, which may be subjected to environmental damage, should be relocated elsewhere. This is why Mr Wilson was prompted to make his statement to the committee.
Salmon farmers are now faced with a dilemma. Many established their farms long before the environmentalists began their persistent lobbying. Sea lochs were selected as potential sites for fledgling farms because they afforded shelter and protection from the worst of the elements.
The problem for farmers is that relocation is not really a solution. Most potential inshore sites have already been utilised or will never be granted permission for salmon farming. The only other option is to move offshore.
Unfortunately, current technology is not really sufficiently advanced to develop more exposed sites away from those areas about which the environmentalists are most concerned. In addition, the whole farming methodology would require a total rethink.
The underlying problem for the salmon industry is that the UK does not have any national strategy for aquaculture and therefore it is left to the industry itself to resolve any problems, even when the problems are forced onto the industry by others.
The lack of a national strategy means that there has been no attempt to develop any long-term objectives or establish the pathways to attain these aims. Had such a strategy been put in place, it would have quickly become apparent that for the last decade, salmon farming had undergone significant change and that these changes would have necessitated a review of the way in which salmon should be produced.
The 1989 price collapse heralded the most significant change to affect the salmon farming industry. Almost overnight, salmon evolved from a low volume, high margin luxury product to one of high volume and low margin s. This change forced farmers to further expand production in an attempt to maximise their margins and to remain competitive.
Much to the surprise of many farmers, falling prices have stimulated market demand and as a result, production has continued to grow. Most farms have expanded around existing sites but sooner or later, these inshore sites will no longer be viable for large-scale commercial salmon farming. As a result, farmers will be forced to seek alternative facilities. However, the lack of a national aquaculture strategy has meant that little consideration has been given to any such alternatives.
It has been suggested that large-scale farms might move offshore and some cage manufacturers have responded by developing new equipment that is designed to withstand the rigours of more exposed sites. Yet, farmers are hesitant about moving to such offshore sites. This is because they are perceived as being difficult to manage and therefore not ideal for salmon production.
Intrafish has highlighted the views of one farmer, who sees relocation to offshore sites as not being a feasible option. Perhaps, had the industry had the support of a national aquaculture strategy, then subsequent research to demonstrate the benefits of offshore sites might have allayed the fears of these farmers about such a move.
Yet, a national aquaculture strategy might have identified other options. One such is to adopt an open sea approach to farming. This would involve a more significant move out of the coastal area and into the open sea.
The main objection to this type of farming is that it is almost impossible to carry out routine day to day management because of the large distances from onshore bases to potential open sea sites. However, there may be a way in which this objection might be overcome.
Currently, the North Sea is home to about 1,500 oil and gas platforms, most of which will have to be decommissioned over the next couple of decades. Devoid of the specialist oil and gas equipment, these platforms would make ideal operational bases for open sea salmon farms.
Day to day procedures could be minimised by operating at low stocking densities and following an all in, all out management policy. Harvesting could be contracted out to the existing fishing industry, whose vessels are used to dealing with a large catch. This would help local fisheries communities whose livelihood is already threatened by the huge cuts in fishing quotas. Such contracts would also help fishermen supplement their already diminishing income.
Of course, the salmon farming industry will argue that the costs of this open sea approach will far exceed their ability to pay. However, the oil and gas industry has already estimated that it will cost them over ECU 1,000 million a year to decommission the platforms. Some of this money could perhaps be better channelled into a second user programme, from which they could also benefit.
This approach to farming is probably far beyond the capability of the existing salmon industry. However, a combined effort between both industrial sector supported by Government initiatives should at least investigate the possibilities.
As the oil and gas decommissioning programme is also a major concern of the environmental lobby as demonstrated by the Brent Spar experience, perhaps, a move to the open sea might even meet with their approval.