Callander McDowell

reLAKSation no 399

Will it last?: IntraFish reports that the average price of salmon has now risen above NOK40/kg, which, according to Håkon Åsvang of Bravo Seafood, is fantastic news for salmon farmers. It may be good news for farmers but it is not so great for consumers who might find that they will have to pay more if they want to keep eating salmon as part of their regular diet.

Prices have soared on the expectation that global supply will not be able to meet demand due to the reduced Chilean harvest. The unknown question is whether this is just a perception or whether markets will actually be unable to source sufficient salmon to meet demand, especially in the US. We have discussed in previous issues of reLAKSation whether US consumers will buy farmed salmon under any circumstance or whether they may look for cheaper alternatives if prices continue to go upwards. Certainly, there are lots of cheaper alternatives about including pangasius and tilapia. US consumers also have the choice of buying wild Alaskan salmon but so far have been tempted more by cheaper farmed fish. If farmed salmon rise to the same levels as the wild fish, then will consumers opt for the American sourced option?  All wild Pacific salmon is not expensive and more of the lower cost species could be diverted from canning plants to supply the fresh market if the price proved to be competitive.

Whilst farmers are overjoyed by the higher prices, not everyone shares their pleasure. Guus Pastoor of the European Fish Processors Association has said that he is worried by rising prices, since they can make salmon less attractive to processors. Last time prices soared, smokehouses were forced to buy in cheaper species. Observations in the retails sector show that more and more Pacific salmon is being smoked and sold on its sustainable credentials. The market for such products could be readily expanded with cheaper Pacific salmon species if farmed salmon becomes too expensive. Already, some smokers are feeling the effects of the current prices with Alfesca reporting that it plans to consolidate much of their French business, as it has seen profits slide due in part to the high costs associated with farmed salmon and reduced sales.

The last time prices soared, they were buoyed up by demand from Russia. Mr Åsvang has indicated that demand from Russia is currently weak. This is not surprising. The Fishsite refers to a US Gain report on the Russian market that suggests that a recent devaluation of the rouble has made most imported food products out of the reach of the average Russian consumer. Retail prices have risen by up to 20% since the beginning of this year so consumers are opting to buy cheaper domestically produced fish. Chilled salmon is selling in the market at between $13-15/kg (418- 483 roubles/kg) whilst in supermarkets it costs $2-3 more. By comparison, locally produced herring costs around 80-90 roubles/kg and cod 150-200 roubles/kg.

In the main European markets, consumers have yet to really see the effects of increasing salmon prices. This is because they are buffered by the cushion of long term contracts, which ensure that prices on the shelves can remain relative stable. These contracts do not really reflect spot price levels. What happens when contracts come up for renewal is of course another matter. Experience has shown that demand will fall if prices become too high and prices will fall as a consequence.

We, at Callander McDowell, still wonder if the expectation of the marketplace is fuelling the current price rises. We firmly believe that consumers will not buy salmon at any price and as a result there will be a limit to how far prices can continue to rise. The big unknown is just how long will it be before the inevitable downturn begins?

Not on our plates: Compass Group North America has just presented the three year results of its sustainable seafood purchasing policy. According to Seafoodintelligence.com, the company has decreased the purchase of unsustainable seafood by 1.5 million pounds (weight) so that sustainable fish and seafood accounts for 70% of its current purchases. The highlights of these changes include a reduction in ‘unsustainable’ salmon purchases by 192,000lbs whilst increasing its purchases of sustainable (wild) salmon by 49%. This change means that Compass Group North America has stopped buying farmed salmon and switched to wild Pacific fish.

What this Compass Group appear to be saying is that farmed salmon is unsustainable whilst wild Pacific salmon is not. We, at Callander McDowell, are puzzled by this decision, not only because most wild salmon are initially farmed, although the Alaskan’s prefer to sanitize this description by calling them ranched, but also because farmed salmon are so widely available and have become an important part of many markets.

Compass Group North America says that their strategy is based on the recommendations of the Monterey Bay Aquarium who they recognise as the leading science based conservation organisation for the development of sustainable seafood policy. It is no wonder that Monterey Bay Aquarium’s Seafood Watch applauds the Compass Group for their changes since they are endorsing their own views.

The problem with organisations such as the Monterey Bay Aquarium is that their decisions as to what is and what is not, sustainable is based on a blinkered view of the marine environment. Their view is that wild is good (even though over-fishing is the direct result of demand for wild fish) and farmed is bad. In terms of salmon, their Seafood watch recommendation states that ‘Pacific salmon in Alaska are among the most intensively managed species in the world, with excellent monitoring of both the fish populations and the fishery itself. Alaska salmon dominates West Coast salmon in the market. Over the past twenty years, Alaska has landed roughly ten times as much salmon as California, Oregon, and Washington combined.’ What they fail to mention is that the reason that Alaska land ten times as many fish as other parts of the West Coast is because Alaska releases millions of hatchery raised salmon into the rivers which out-compete the true wild fish for food. Without hatcheries, the Alaskan fishery would be in a very different state.

By comparison they say that most salmon are farmed in open pens and cages in coastal waters. Waste from these farms is released directly into the ocean. Parasites and diseases from farmed salmon can spread to wild fish swimming near the farms.
They add that one of the biggest concerns is the amount of food required to raise salmon in farms saying that it takes three pounds of wild fish to grow one pound of farmed salmon. Surprisingly as such a science-based conservation organisation, their science is so out of date and inaccurate. Of course, they fail to mention the amount of food it takes to grow one pound of wild salmon.
 

They do admit that segments of the salmon farming industry are improving their practices, but that the environmental impact is still increasing because production has risen more than 400% in the last decade. They say that in the current market, there is no way to tell which salmon are coming from the more sustainable farms, so they recommend to avoid all farmed salmon and wild-caught salmon be chosen instead.

It may have been once that all salmon was just salmon but a number of retailers have now chosen to actively select the fish they buy reassuring consumers that the fish are produced under the best possible management practices. This just doesn’t apply to farmed salmon but to a range of farmed produce. In Europe, retailers work closely with farmers to ensure that the fish are produced to the highest possible standard. It is absolute nonsense that a company such as Compass Group to base their buying policy on the advice of the Monterey Bay Aquarium that says there is no way to tell which salmon come from sustainable farms. With purchases of 192,000 lbs of fish, Compass Group must not only know which farms their salmon comes from but should be in a position to ensure that the fish are produced to their own standards.

Interestingly, Compass Group UK, the parent company, has not followed their US colleagues lead. Their strategy on sustainable fish is that all fish should be sustainable, whether farmed or wild. All suppliers must provide certification scheme certificates or membership to show that they meet minimum standards. This is perhaps why farmed salmon remains on their menus.

Three years ago, Compass Group North America jumped onto the Monterey Bay Aquarium bandwagon in the hope of taking the high moral ground on sustainability. Perhaps the realisation of the implications of their policy is now beginning to hit home. They have said that the change from farmed to wild salmon was not easy, not only because of the popularity of farmed salmon amongst consumers but more importantly because of the lack of a consenus among conservationists about exactly what sustainability farmed salmon means. Could it be that they should have checked this out before committing to the blinkered recommendations of just one conservation organisation (and one which is more than happy to use marine life for the entertainment of the paying public)?

More organics: Norwegian Fisheries Minister, Helga Pedersen, has said in the new marine strategy that she would like to see an increase in organic aquaculture reports Kyst.no. Consequently, some of the new farming concessions that have been recently released are specifically intended for organic production.

Yet, we, at Callander McDowell, wonder whether this move to increase organic production may be a little belated and that the opportunities to develop the market for organic fish may have now passed by. Helga Pedersen has suggested that increased organic production could be important especially with regard to the US and European market.

The US is still to set standards for organic fish so it is unclear as to the potential of the US market, but in Europe, the market is far from growing and instead appears to be in decline. Last summer, a TNS survey for the Guardian newspaper showed spending had already fallen from £100 m to £81 m and this was before the recession really hit home.  According to the Guardian, consumers were more confused than ever as to whether it was worth paying the higher prices for organic food. One leading agricultural farmer said that organic food was ‘nice to have’ rather than being a ‘need to have’ and as a result consumers were questioning whether they should continue paying the extra for organic produce. As a result, some farmers have turned their land back to conventional farming whilst others who were considering the organic strategy have delayed their plans.

The latest market report from the Soil Association, the leading organic certifier, has clarified the picture of the organic sector. It seems that the organic sector is now dominated by committed organic consumers rather than those for who it was more a fashion. Organic consumers are going back to basics and buying the basic ingredients for home cooking. The focus remains on those products that are essentials rather than a luxury or do not fit the organic profile. Products showing the greatest fall in sales include confectionary (-21%) and bread (-18.2%) (organic consumers prefer to bake their own) and fish (-18.7%).

The percentage of consumers who have chosen not to buy organic fish (62%) is only greater for those who refuse to buy convenience foods and ready meals (64%). The simple fact is most consumers of organic produce do not perceive fish as being organic. The reality is that they would probably prefer to buy wild caught fish instead of those that are farmed organically.

In terms of production, the report states that organic production in Scotland is just 5,500 tonnes, an increase of 12% since 2006, which is about 4% of total salmon production. Organic production is expected to remain unchanged this year. The Soil Association says that prices have ranged from £2.60/kg to £4.50/kg but typically have stayed around the £3.50-£4/kg mark. How any increase in organic production in Norway will affect these prices is unclear, unless the market can be further developed.

One sign that the organic sector is changing is the decision by leading organic yogurt producer Rachel’s Organic is to change its name to Rachel’s. According to the Daily Telegraph, industry experts suspect that the change is being made because many consumers regard organic produce as an expensive luxury they can do without. Rachel’s yogurt will still be organic but the organic message is clearly being played down.

Adam Leyton, editor of the Grocer magazine believes that the company is trying to distinguish itself as a wider brand. He believes that the message they are trying to impart on consumers is ‘don’t buy us simply because we are organic; buy us because our products are great’. We think that the underlying message is one that applies equally well outside the organic sector and is one that all aquaculture producers might well heed.

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