reLAKSation 61.
Organising
a cartel?: Angus MacMillan, a board member of the Scottish Salmon
Producers Organisation has confirmed to IntraFish that talks are being
progressed in the hope of reaching a “salmon agreement” between the worlds
major salmon-producing nations. However, by speaking to IntraFish, Mr MacMillan
appears to have broken ranks because those involved in preparing any possible
arrangement appear unwilling to speak about it. Apparently, there is some
concern that the EU might perceive these talks to be some form of cartel
activity. This is because any arrangement may involve restricting the supply of
farmed salmon in the hope of forcing prices upwards.
Mr
MacMillan, speaking on a personal basis, said that whilst the talks were
informal, he believed that they should be brought to a halt. This was because
there was a chance that the participants might be found guilty of cartel
activity just because such an arrangement was being talked about. Instead, Mr
MacMillan believes that the problems of the salmon industry should be left to
individual Governments and the European Commission.
This
is not really that surprising, for it is part of the Scottish industry (although
we cannot say that Mr MacMillan is involved), which is behind the attempts to
place restrictions on imported salmon through the possible imposition of high
tariff levels, resulting from the ongoing dumping case. This would effectively
exclude any such imported salmon from the European market, which is the overall
aim of those pursuing the anti-dumping option. Certainly, this would be
preferred by the complainants than any “salmon agreement” such as the one
with Norway. This compromise deal was not perceived as punishment for the
dumping margins identified by the European Commission investigators, but rather
as being an open invitation to continue exporting low priced salmon into the
European market.
In
addition to the imposition of tariffs, some sectors of the Scottish industry are
still determined to establish a network of Producer Organisations within the
European market. Producer Organisations were originally conceived as a way of
allocating set levels of fishing quota to individual fishing boats. This was the
only way that it was thought possible to distribute what is a limited resource.
It is for this sole reason that fishery based Producer Organisations work.
However,
the only common factor between commercial fishing and fish farming is the fish.
Otherwise, fishing and farming are very different, especially in the way they
operate. Just because it is possible to have a viable fishery based Producer
Organisation system does not mean that one operating within the farming sector
will work. It is just a function of the fact that the EU administers fish
farming through the fisheries department rather than agriculture and it so
happens that the fisheries department offer PO’s as an option.
The
reality is that a farming based PO would be nothing more than a glorified cartel
with members trying to maintain prices through limitations on production. It
makes no difference whether the salmon producers seek a specific agreement or a
system of Producer Organisations they are both the same. They are both an excuse
for poor marketing and both disadvantage the consumer. In the long run, they
will also disadvantage the very farmers that they are intended to protect.
Merging
crisis!: Ola Braanaas of Firda Management blames the race to be the
worlds largest aquaculture company and the resulting mergers and acquisitions
for the ongoing crisis within the Norwegian fish farming industry. He told
European Fish Trader that previously high profits have encouraged rapid
expansion at a much faster rate than the continued growth of demand, resulting
in both low market and share prices.
However,
we, at Callander McDowell, believe that Mr Braanaas is mistaken. The recent
spate of mergers and acquisitions are not responsible for over-expansion, or for
forcing prices downwards. Instead, the reverse is true. It is the lower prices,
which are driving companies towards merger and acquisition.
Back
in 1989, the salmon farming industry underwent significant change. It
metamorphosed from a low volume, high margin industry to one of high volumes and
low margins. Since then, the industry has been successful in reducing production
costs to maintain a profit margin, but as prices have continued to fall, it has
never really attempted to enhance the existing margin by adding extra value. To
do this, farming companies need to fully integrate their production so moving
away from the raw material to the production of exactly what the consumer wants
to buy. This can only happen if companies are sufficiently large enough and this
is why we have seen the move towards merger and acquisition.
The
salmon industry continues to follow the example of the broiler industry, which
is dominated by large integrated producers. Some might see this as undesirable,
but as the broiler industry has demonstrated, the consumer has responded to the
huge choice of chicken products, which are available. The same is becoming
increasingly apparent in the salmon sector, which can only be good for the
consumer as well as for the salmon industry.
9/10ths
off!: Selfridges, the major London department store has just opened a new
branch in Manchester. This includes a large food section including a fresh fish
counter, their first outside London. Some of the fish displayed are not
routinely available on local fish supermarket counters, reflecting the store’s
up-market position.
Yet,
the usual high prices of most goods in the store does not seem to be reflected
in the price of the fish sold on the fish counter. Trout is priced at 78p,
salmon at £1.20, halibut at £4.00 and turbot £5.50. Such prices are well
below those of the same fish in their London store.
At
first glance, it may seem that Selfridges fish counter is presenting their
customers with opening offer discounts, but on closer inspection, Selfridges are
actually pricing their fish as £/100g rather than the usual £/kg. This
accounts for the very low prices quotes, however the reality is that prices are
very expensive with turbot offered at, but not necessarily selling at £55/kg.
Could
it be that whilst their London customers will buy fish irrespective of the
price, Selfridges do not expect provincial consumers to be so ready to pay such
high prices. This is why they have labelled the fish at a different weight.
Perhaps, this is indicative that even for specialist fish, there is a price
beyond which consumers will not pay, that is unless they can be persuaded
surreptitiously to do so.