A graph on Kyst.no from SSB/EFF shows the continuous drop in farmed cod prices from week 44 onwards. Previous to that they were around the NOK 33/kg mark but by week 50, prices had fallen to NOK 25.33/kg although IntraFish reported a slight recovery to end the year at NOK 26.68/kg. This compares with NOK 38.26/kg at the same point last year. It also impacts on the annual figure with an average price of NOK 32.74/kg against NOK 38.49/kg for 2007.

Price rises and falls are usually linked with harvest volumes. Certainly volumes are up on last year but they are not that significant that they would cause the price to collapse. In week 51, exports of farmed cod amounted to 215 tonnes against 135 tonnes in the previous year. It is extremely unlikely that such a small difference would account for the rapid fall in prices so some other factor must be have come into play to bring about the current crisis.

We suspect that the root of the crisis is that the cod farming business model may well be flawed. Cod has always been a very popular fish with consumers and demand has always been very high. With a strong market demand, cod would have been a natural candidate species for modern intensive aquaculture, yet it has been only in the last ten years that interest in farming cod began to develop. Previously, the main obstacle to cod farming had been the abundant supplies of wild caught cod that had festooned fish counters everywhere. These plentiful supplies of low cost cod meant that it was simply uneconomic to farm cod.

This view changed just prior to the turn of the century. Increasing demand for cod had decimated stocks in most European waters and as a result the environmental lobby issued dire warnings that cod faced likely extinction unless fishermen stopped fishing for cod and consumers changed their eating habits. It was already well known that many cod consumers were very conservative in their eating habits and stuck with their traditional fare rather than seek more sustainable alternatives. Even now, according to SeaFish, cod is still the fish of choice for many British consumers. This reluctance to switch to other fish, even in the face of a reduced supply, was the green light to begin farming cod.

The experience of farming other marine fish had already shown that the cost of production would be much higher than salmon, but equally, reduced supplies would also mean that prices should be higher too. The economics of cod farming suddenly started to make sense and initiated the gold rush of cod farming.

However, what the cod farming industry did not see coming, and understandably so, was that the dire warnings of an imminent collapse of cod stocks simply failed to materialise. This was due to the interplay of a combination of different factors. Firstly, the environmental lobby got it wrong, although their overstated claims did manage to get the attention of the world’s media, and thus they did achieve part of their aims. Secondly, although the consumers largely ignored the environmental lobby, some of the major fish processing companies did not. They took the sustainable message on board and substituted cod in their products for sustainably certified species such as Alaskan pollock. This had an immediate effect on demand for cod which removed some of the fishing pressure (what it’s done for stocks of sustainably certified fish is a totally different question). In addition, the appearance of sustainably certified Pacific cod in the European market has also reduced overall demand for locally caught fish. Finally, the appearance of other whitefish species in the marketplace has had some effect on demand, although to a much lesser extent than that of other factors.

Together these have contributed to a reduction in demand for cod, which along with changing fishing practices have conserved stocks to the point that they are now stronger than they have been for some time. This is why IntraFish report that the Icelandic fishing industry has called for an increase in their cod quota by 30,000 tonnes. It is also why the EU have decided to increase the quota for the North Sea cod fleet by 30% and why Young’s has lifted its moratorium on buying cod from the North Sea. This all means that wild caught cod are still widely available in many retail markets and unfortunately for cod farmers, they remain at a relatively cheap price to buy.

The major retailers could have been instrumental in helping consumers change to more sustainable species by raising the price of cod on their fish counters or even choosing not to sell it. However, the retailers understand the consumer’s attachment to cod and have not only continued to sell it but also continued to make it affordable. Throughout recent years skin on cod fillet has been typically been sold in the mainstream UK supermarkets for £8.70/kg (NOK 87/kg {it’s not even worth converting to euros at current exchange rates}). This is cheap, although skinless cod loins have gone up in price and are much more costly to buy.

Low cod prices have made it extremely difficult for the cod farming industry, especially as their production costs are so high. Interviewed by IntraFish, market analyst Aslak Berge of First Securities has said the cost of young fish together with biological and health problems, amongst others, have contributed to an increased cost of production. Many farms are still working under capacity meaning that they are yet to benefit from an increased scale of production. The increased availability of wild caught fish means that cod farming companies are going to struggle even more to reduce their costs to be able to match the price of wild caught fish. The economics no longer make as much sense as they once did.

And to top it all, the cod farming industry has now been dealt another blow. Seafood.com report that when fish prices fall then call in the anti-dumping police. They say that the latest venue is Denmark where Danish fishermen have claimed that dumping of farmed cod by Norwegian fish farmers has caused a 20% fall in the price of wild fish. Of course this is all nonsense since as we already suggested, the volumes involved are tiny and are unlikely to have had any effect on the wider marketplace. Seafood.com suggests the Danes look to the collapse of the salt cod market rather than to Norway for the cause of their problems.

Any or all of these factors may have brought about the collapse in the price of farmed cod but we at Callander McDowell think that the real reason can be found elsewhere. Although undoubtedly the presence of plentiful supplies of wild fish in the marketplace does not help the farming cause, we believe that the underlying problem affecting the cod farming industry is the way that farmed cod has been marketed. On her talk to the cod farming conference earlier this year, Karin Olsen of EFF said that whilst their overriding message is Norwegian fresh cod, this includes four different presentations of cod; wild, farmed, ranched and Skrei (see reLAKSation 340 for a discussion of Skrei cod).

Most other aquaculture producers do not have to concern themselves about competition from large supplies of wild fish so it is understandable that the cod farming industry would want to differentiate itself from the wild fish. The main difference seems to be that the fish can be supplied to market much quicker and therefore is much fresher than most wild caught cod.

During the early years of cod farming, producers did manage to obtain a premium price for their fish, probably based on their novelty value. This is the exact opposite of those farmed species that do have a wild caught alternative. Wild sea bass when available does sell at a higher price than farmed. Wild Pacific salmon sells for a higher price than farmed Atlantics (at least in the European market). It is therefore unexpected that farmed cod generates a higher price than wild fish. Of course, as production has increased, this differential has shrunk to the point that prices have fallen and the industry is in crisis.

We, at Callander McDowell, are not surprised that farm gate prices have now plummeted. This is a reflection of what has happened in the UK retail sector. Those supermarkets that have stocked farmed cod on their fish counters launched it at a higher price than that they charged for wild fish. None have managed to sustain that higher price. One or two stopped selling it whilst those that persisted have reduced the price to that of wild fish or even discounted below it. Currently, only one British supermarket is selling farmed cod and that is at the same price as for wild fish.

In France, which Karin Olsen of EFF highlights as the main market for Norwegian farmed cod, the sales strategy is slightly different. From what we have seen, farmed cod and wild cod are interchangeable.

Consumers simply appear unwilling to pay the premium for farmed cod that the industry would like to receive to help offset the high production costs. This reluctance maybe due to their inability to distinguish any difference between wild and farmed cod , just as they are unable to distinguish any real difference between salmon of different origins, and thus are not prepared to pay more for one than the other. However, we, at Callander McDowell, think that there is more to this problem than jus a general unwillingness to pay a premium. We think that consumers are actually being deterred from buying farmed cod by the current market strategy.

It has been suggested that many consumers want to know more about the food they eat. This may be true but the one thing that most don’t want to know is how it was produced, whether wild caught or farmed. This applies equally to all the main proteins such as beef, pork, lamb and chicken. Consumers simply want a portion of flesh that looks the least like the animal from which it came. They certainly don’t want to be reminded that the fish they buy is farmed. It is a legal requirement that fish are labelled with the origin and the method of production so farmed cod from Norway must be labelled as ‘Farmed in Norway’ however most supermarkets use small lettering on the labels to display this information. This is not to deceive but because consumers don’t want this information to be pushed into their faces. However, with farmed cod they have no option. The fact that the fish is farmed is highlighted in the main description.

In itself, this may not be a major problem but the environmental lobby have been consistently arguing about the negative impacts of aquaculture for the last twenty or so years. They may not be correct in their many assertions but mud eventually sticks and aquaculture is still associated with many negative connotations. Norwegian cod farmers may well be proud of their produce and want to broadcast it as much as possible but for many consumers the use of the word ‘Farmed’ on the main descriptor brings to mind such potential negative images, even if they are not true, that they opt to avoid farmed cod choosing wild fish or even other farmed species such as salmon and sea bass, which do not declare their method of production so loudly.

This negative image of aquaculture can be illustrated by the recent comments of Phillippe Morillon, the French MEP who chairs the European Parliamentary Fisheries Committee. The fishsite.com reports of comments made by M. Morillon in an interview last October concerning the protection of cod stocks. He said that aquaculture is often seen as a way of protecting future fish stocks but he argues that many constraints exist. He warns of the huge requirement for fishmeal and potential issues of pollution. He said that fishermen are not farmers but rather they are predators. If the chairman of the EU Parliamentary Fisheries Committee exhibits such aversion towards farmed fish, then can we expect the average consumer to be any different?   

The recent increase in the volume of farmed cod to market has meant that more consumers are exposed to the product and it seems that they are very wary of it. Farmed cod disappeared from British retail outlets earlier this year. This coincided with a convenient break in production. Farmed cod found its way back into the market in a small regional retailer that had never sold farmed cod previously. The fillets were displayed under a label stating ‘Norwegian farmed Cod Fillet’ and a price of £12.00/kg. The fillets were placed on the fish counter next to ‘Cod Fillets’ (Caught in North East Atlantic) also priced at £12.00/kg. The day someone from Callander McDowell visited the counter was attended by a junior member of staff who could only describe the difference between the two fillets as ‘One is caught at sea and the other is farmed’. The following day, only the farmed cod fillets were on display and when asked another member of staff said that the wild fillets had all been sold and the only cod available was the farmed cod until new supplies of wild fish would be delivered the next day. He probed further he said that customers seemingly preferred the wild cod even though they had never bought or tasted the farmed fish and that it wouldn’t cost any more. It would have been interesting to see what would have happened if the farmed cod had been cheaper but then perhaps neither the store nor the farmers would want to offer it at an even lower price (after all they may get accused of dumping!!).

Clearly, if the cod farming industry is to succeed, then it desperately needs a new marketing strategy. This will not be easy since producers still face the threat of increasing supplies of wild fish when ideally, they would rather see such supplies diminish. Whatever they decide, the first step must be to drop the word ‘Farmed’ from the main description of their fish. However proud we are of our industry, this must take a second place to the needs of consumers.