reLAKSation 529
Cutting prices: IntraFish was told by John-Paul McGinley of Morpol that salmon will become increasingly cheaper in the shops. Mr McGinley believes that consumers will see more prices come down with every week that passes. He thinks that there will be a steady decline over a longer period of time unlike that experienced by farmers which occurred quite suddenly. Until now consumer prices have been slow to respond to the cheaper price of salmon at the farm gate. Mr McGinley thinks that this will now change.
We, at Callander McDowell are not so sure. The problem is that many of those who watch the retail market tend to focus on a single aggregated price. This may provide a broad overview but doesn’t really give a true picture of what is happening in the marketplace. In some parts of the European market, the averaged aggregated price for salmon has come down a little over the past few weeks but this is not indicative that prices of salmon have been cut, because it most cases, they haven’t. What this aggregated price shows is an increase in promotional activity. Although this means that salmon is being sold at lower prices it is not the same as cutting the price. The difference is that the promotional activity is set to run for a specific period of time after which the price returns to its previous level. The reality is that prices have largely remained unchanged since the spot price collapsed. In our experience, some prices may have actually gone up, not down.
In the UK, consumers have been subjected to continuous promotional activity even before the spot price collapse. Salmon has been on long term multi-buy promotion in most retail outlets for some-time. This means that consumer’s who buy two, three or four packs, get them cheaper than the listed price. This type of promotion is not restricted to salmon but is commonplace across the protein sector and even with added value ranges.
We suspect that it may be quite some time before we see any permanent cuts in prices. Firstly, because retailers will be watching to see whether the fall in spot market prices is short-term and that any cutting of prices now might mean that they have to be increased again shortly, Secondly, retail prices increased to the level they did in a number of small jumps. It is likely that any price cutting will follow the same pattern and thirdly, food prices are going up in general and thus salmon is not that expensive now compared to some other proteins and especially compared to other fish. Our view is that we will continue to see longer-term promotions in stores than specific cuts in the price of salmon. The advantage of promotions is that they can be switched off ‘at a moments’ notice.
The one factor that might change this view is if the big retailers enter a price war and use salmon as a tool to compete. In the past we have seen the price of salmon change almost daily, as stores play cat and mouse trying to match the price. The problem for the stores now is that consumers no longer believe that savings are genuine and so recent price wars have been increasingly ineffective.
There is no doubt that promotional activity has picked up recently, but there is still a feeling that discounts are half-hearted and do not reflect the reduced spot price. Whether this starts to pick up as Mr McGinley expects remains to be seen? We, at Callander McDowell, will certainly be watching.
Low prices: A number of commentators seem to think that spot prices will begin to recover during 2012 although whether this forecast is based on fact or whether it is just a stab in the dark is unclear. One reason why prices may be expected to recover is that the salmon market is deemed to be cyclical and that any period of low prices will be followed by one of recovery.
We, at Callander McDowell, are not so sure. In any mature market, cyclical behaviour will be expected but the salmon industry has not yet reached maturity and is still progressing through its growth phase where price cycles are less likely to occur. Yet, graphical representation of the price over the years does suggest that there is a cyclical pattern yet closer examination shows that this is not a true cycle but rather the result of when something has gone wrong and prices have consequently surged. Throughout most of the last twenty years the biggest cause of the intervention has been the repeated dumping cases and the implementation of price controls, all be they very weak. The last price surge was the result of disease in Chile which reduced production and forced prices upwards.
If the salmon industry does not get a repeat of either a trade war (unlikely) or a major disease outbreak (hopefully not), then prices could again surge, but otherwise the chances of significant recovery seem slim.
Whilst most commentators hope for a sign of improvements in 2012, the Spanish company Pescanova do not see any relief in the short-term. Their view is that demand for salmon will not increase to meet the forecasted supply until about 2015 and beyond.
The reality is that salmon farming was always going to be a high volume low margin industry in the same way as most terrestrial farming. The aberrations of high prices have led some to believe that higher prices are the norm and times of lower prices are uncharacteristic. This is just not how it is.
The salmon industry is on course for a period of low prices that will encourage further investment in added value and consolidation. The years ahead will therefore be both challenging and exciting for the global salmon industry.
Wild about ISA!: The unfolding story of ISA in wild Pacific salmon is one that can only be read with increasing incredulity. It seems a case of go out and seek and ye shall find – even if it’s not there. It makes little sense that low level ISA had been found in a wild population after a handful of tests whilst regular testing of farmed stock on a large scale has not uncovered even the slightest evidence of the presence of ISA. It’s a story that would be hard to make up let alone be true.
We, at Callander McDowell recently came across a story in the UK newspaper, the Sun that might shed some light on the so-called discovery of ISA in British Columbia. The Sun is owned by the Murdoch family who have been quizzed by a Parliamentary Committee about their behaviour and business judgement with regard to phone hacking. The dubious practices uncovered recently suggest that it’s perhaps right that the story begins in the Sun.
A recent headline declared ‘Fish Foot Spa Virus Bombshell’. Seemingly blood borne virus’s like HIV and hepatitis can be transmitted if fish break the skin of people using the fish foot spas that have become a craze across the country. Clients of the new fish spas submerge their feet into tanks of water containing the numerous small Garra Rufa fish, which graze on the dead skin from the feet. The Health Protection Agency has recommended that water should be changed between treatments and clients feet should be checked for signs of infection before use. Parts of the US and Canada have already banned the spas due to health concerns.
Could it be that top environmentalist campaigner Alexandra Morton has been for a fish pedicure and then subsequently gone sampling for dead wild salmon along the river bank. It wouldn’t take much for her feet to become infected with a virus she collected from a fish spa and then pass it on to wild salmon by paddling in the river water.
Grant
Warkentin
Photos taken of activists Alexandra Morton and Don Staniford collecting samples show a high risk of cross contamination and a determination to be proved right that ISA has infected wild salmon. Ms Morton is intent on showing that salmon farms have brought the infection to wild Canadian salmon. However, the chances that farmed salmon are the source of any infection, let alone ISA are as remote as the infection coming from Ms Morton’s feet following a fish pedicure. This route to infection is clearly a figment of our imagination just as the idea that wild salmon have caught ISA is a figment of hers.