reLAKSation 509
No explanation: Professor Frank Asche has told Intrafish that he is unable to explain why salmon prices have fallen especially as he had predicted that they would rise to above NOK 50/kg by the end of June. He said that normally if prices rise then demand is expected to fall and that when prices fall, demand increases. This time he believes that the relationship has changed and that the period of high prices was characterised by high demand. Equally as prices have fallen over the past few weeks, so has demand.
We, at Callander McDowell can understand why Professor Asche is at a loss to explain what has happened for neither can we if we believe his observations. However, the reality is that Professor Asche is mistaken and that the relationship between price and demand has in fact not changed at all.
Demand for Norwegian salmon may have increased since Chilean production plunged following their disease outbreak, but demand for salmon worldwide has not. What has happened is that supply has shrunk and that there has been increasing competition to buy what salmon has been available. Only one thing can happen in this situation and that is that prices increased. They kept on increasing as no immediate solution was apparent as to how global demand could be satisfied. Demand itself did not increase. If anything, it fell. The market for salmon for processing certainly shrank as it became uneconomic to process salmon into added value consumer products. More salmon was diverted to the fresh market but even this was insufficient to meet existing demand. As a consequence, prices continued to rise.
Professor Asche has pointed out that now prices have fallen demand has also fallen. This is also not the case. There have been numerous suggestions as to why prices have now collapsed all linked to changes in production and biomass. However, whilst all these suggestions may have contributed to the decline, the definitive reason is simply that salmon has become too expensive for most consumers. Professor Asche’s forecast that salmon prices could even reach NOK 60/kg might have made sense on a production model but it was blindingly apparent to anyone looking at the market that prices were never actually going to reach such heights because it was clear the consumers would never buy salmon at a comparable retail price.
Although spot prices have been high for a considerable time, the increases have been slow to transfer to retail prices. This is because salmon is such an important product for most supermarkets, they were reluctant to increase the price too far because they were only too aware that sales would grind to a halt. Rather surprisingly, we, at Callander McDowell have recorded price increases for some added value products only this week, which demonstrates how long the time lag can be. We have written previously that most retailers have been offering long-term multi-buy discounting on fresh and chilled salmon in order to maintain sales but yet, it was inevitable that there was going to be a point when consumers just found salmon too expensive to buy and this would eventually filter back to the spot market, which is exactly what happened. Prices have fallen because demand has finally shrunk too far and not as Professor Asche suggests; that it is continuing to fall. Far from it, weaker prices will stimulate demand but, this may take some time to reach the retail sector. It won’t help that the summer months are not the period of strongest demand for salmon but the retails have already started to revert back to hard discounting to try to stimulate consumer interest. One retailer this week is offering whole salmon at half price.
We have argued before now that the fundamental error often made when forecasting price changes is the focus on price and biomass, when what really drives the market is consumer demand. This is the difference between a production-led and market-led industry and the continued focus in this way is a clear indication that the salmon industry is still firmly stuck with being production-led. By comparison, those working in the marketplace, such as the French company Ocean Direct, had warned at the end of last year that prices were starting to hit demand.
It is interesting to see that a number of the industry analysts have now downgraded their price predictions to somewhere above NOK 25/kg but who really knows. Finally, one of the financial analysts has been in contact to make us aware that not all have been surprised by the price fall and that their own reports have warned that prices were at risk from the beginning of the year. We apologise for our generalisation.
Dafts (sorry Rafts): If you come across a sign attached to the gate of a field that says ‘Do not enter. Very dangerous bull’, you would likely to be very hesitant about walking into the field even if you couldn’t actually see the said bull. In much the same way, salmon anglers, who have to pay a great deal of money in fees to pursue their sport are unlikely to rush to fish a river which has been the subject of a major debate about whether it contains any salmon or not. It would not be of any surprise if this was the main reason why rod catches of wild salmon have fallen on the West Coast rivers whilst those on the East Coast have risen. Anglers have simply deserted the west coast and transferred to the east instead and as a result, catches of salmon have increased.
By comparison, the Rivers and Fisheries Trusts of Scotland (RAFTS) argue that this clearly shows that salmon farms are having a negative effect on wild salmon populations. We would disagree. In fact, this latest survey from RAFTS, as reported by the Scotsman, was only conducted in response to one conducted by the Scottish Salmon Producers Organisation that found that salmon catches on both coasts had declined in similar ways. The SSPO study included data from netsmen who fish for salmon commercially. RAFTS had argued that this was misleading and hence looked at rod catches only. However, if the total catch was similar on both coasts and only rod catches on the west coast had declined, then the inference must be that fishing by other methods had actually increased thus effectively reducing the number of salmon that rod anglers had to catch. Clearly, whichever way, the data is analysed, salmon farms do not appear to have any influence on wild salmon populations. This is confirmed by the latest data from Canada which has found that some wild salmon runs near salmon farms have been at record levels. Since a lot of the scientific evidence that salmon farms damage wild salmon populations that is used by the Scottish rod angling lobby originates from Canada, their allegations are further weakened.
The publication of the RAFTS report prompted the publication of a couple of related articles in the Observer newspaper, one of which was written by the editor of the paper’s magazine, and keen salmon angler, Ruaridh Nicol. It was a shame that the Observer allowed Mr Nicol the space to expound his rather biased viewpoint as he wrote that:
‘salmon farms destroy wild fish because they are hives of disease and sea-lice. Their fish are ugly, drugged, flaccid and fat with Norwegian genes.’
He then goes on to write that
‘rivers once teemed with many salmon and then we netted, polluted, hunted down their feeding grounds, killed everything we touched, built salmon farms and generally acted like vandalising scum and the salmon disappeared’. As he mentions salmon farms separately and then talks about ‘we’ does he mean salmon anglers?
He adds that the salmon are now back but he fails to acknowledge that whilst many of the practices he berates have long been stopped, farms are still operating and yet the salmon are still coming back. We would sincerely hope that if Mr Nicol is willing to write about farmed salmon in this way, he has proof of his claims and is not just repeating the biased views that are regularly circulated by the anti-salmon farming groups. Perhaps, Mr Nicol wouldn’t like it if there was such cavalier and unfounded criticism circulating about his work.
Threatened oceans: A widely reported new study warns that the world’s oceans are entering an unprecedented decline that could lead to extinction for many species. The report from the International Programme on the State of the Ocean (IPSO) indicated that a combination of factors including overfishing, were creating conditions associated with every previous major extinction of species in the history of the Earth. Many of the impacts are considered to be much worse that the scientists had previously thought and are leading a rapid rate of degeneration.
According to IntraFish, the findings of the report were the result of an International Union for Conservation of Nature (IUCN) sponsored convention earlier in the year. The impression from the widespread press coverage was that this was a major scientific study of the world’s oceans but actually nothing could be further from the truth. The meeting was actually a workshop running from the 11th to 13th April that brought together a select group of world science leaders on oceans stresses and impacts. The 27 participants from 18 organisations in six countries simply reviewed some of the current literature and then drew their own conclusions.
We would suggest that the conclusions were actually a forgone conclusion due to the make-up of the select group that had been assembled. Participants represented supposed independent scientific thought from organisation such as Pew Environment Group, Deep Sea Conservation Coalition, The International Programme on the State of the Sea, IUCN, The Global Campaign for Climate Action, Microsoft Research and most surprisingly the Executive Director of the J M Kaplan Fund.
Even more surprising is that this scientific workshop was represented by a PR company, Communication Inc who it seems are specialists in managing environmental issues. Is this the way of modern science or is it manipulating science for a specific purpose, in this case to promote the environmental cause.
The oceans may be under threat but what certainly doesn’t seem to be threatened is the preponderance of well-funded NGO’s that seem to be out of touch with the real world.