reLAKSation 85.
Unhappy
holidays: According to Intrafish, salmon sales are likely to show a
negative price trend in the run up to Easter. Certainly, prices indicators on
the Intrafish website are not showing any increase as we approach the Easter
holiday. This is not unexpected. The widespread availability of farmed salmon
has meant that the traditional sales peaks at Christmas and Easter have slowly
begun to disappear. It is inevitable that salmon prices will eventually become
uniform throughout the year.
The
next issue of reLAKSation will include a summary of salmon prices found in UK
supermarkets over the Easter period as an indicator of the overall price trends.
However, we, at Callander McDowell, expect salmon prices to remain low. Our
usual price surveys have already identified some of the cheapest salmon ever
sold through British supermarkets, some 8% lower than the lowest prices over
last Christmas. Although some sections of the Scottish industry have claimed
that cheap imports are to blame for low prices, this cheapest ever salmon is in
fact from Scotland. Morrisons are currently selling Scottish TQM salmon for as
little £2.95/kg, a discount of 25% over their usual price.
Last
Christmas, we identified Scottish TQM salmon selling for £2.99/kg (see
reLAKSation no 72), however, this was only in a limited number of Safeway
stores, with most selling the same salmon at £3.99/kg. Morrisons’ low price
is across all stores. We will need to wait until next week to see how other
supermarkets respond to this low price.
Too
big!!: A lot of Scottish salmon is just too big. A fish distributor, Alan
Green of M&J Seafoods told Intrafish that Scottish salmon farmers are paying
the price for leaving fish in the water in a desperate attempt to maximise
returns. They are producing fish, which are just too big for processors to
handle.
The
hard reality of salmon farming is that much of the cost of production is taken
up by the early stages. Once the fish are in the sea, it does make economic
sense to grow the fish as large as possible in order to maximise returns. The
problem for salmon farmers is that this is very much a production-led response
for it completely ignores the needs of the marketplace. The reason that smaller
fish are so popular is that when they are processed, they make ideal sized
portions. By comparison, portions cut from these larger fish are extremely
unattractive and retailers are more likely to reject them, rather than offer
them to their customers. Certainly the experiences of British visitors to Spain,
where larger Norwegian fish have tended to be more prevalent, have produced
adverse comment.
This
simply confirms that salmon farmers, who are following a production strategy for
3-4 kg, cannot suddenly change plan midstream and expect a profitable outcome.
This is one of the reasons why the industry needs to change to a much more
market led strategy in which the fish are produced for a specific market
requirement. For example, whilst 7kg plus fish may not make good portions, they
may be ideal for secondary processing into added value products, where the
salmon may end up into chunks or other varied sized pieces.
The
salmon industry continues to suffer low prices because all fish compete with
each other in the same market. Farmers might try to grow larger fish to maximise
the return, but these are still competing with smaller fish produced elsewhere.
The result is these fish are now at an even greater disadvantage. This
illustrates the need for more differentiation at specific targeted markets. How
long will it be before producers start to recognise that the current
production-led strategies can offer no immediate relief?
Public
debate: A group of journalist representing several national newspapers
were recently treated to Shetland hospitality and the positive face of fish
farming. The upshot was that the ‘Independent’ carried the story about the
first cod to be harvested from a commercial farm in Shetland. The paper
interviewed, Kenny McCaffrey, the Editor of ‘Fish Farming International’,
who said that ‘cod farming has a good future, the main reason being that the
British fishing industry can’t catch enough cod to supply the British
processing industry’.
These
comments prompted Pieter Tesch, Assistant Editor of Fish Farming
International’s sister publication, Fishing News to write to the paper to say
that the UK fishing industry has never been able to supply enough cod for its
processing industry and for the last 100 years, British cod has been
supplemented by imports. He said that contrary to persistent reports UK cod
stocks are not in decline and still supply more than 70% of UK consumed cod.
Whilst
these views are indeed contradictory, they are both also correct, but perhaps
both are misleading.
We,
at Callander McDowell, have previously suggested that there is another
contradiction about the supply of cod to the marketplace. Despite widespread
claims that cod stocks are under threat, cod, in one form or another, is
regularly discounted by the major stores. In his letter, Pieter Tesch also
highlighted that whitefish prices have been quite depressed recently and air
freighted cod from Iceland was cheaper than farmed salmon. He suggests that this
is clear there is sufficient supply of wild fish to meet consumer demand and
therefore it makes little economic sense to farm cod.
Whilst
this assessment of cod stocks may be correct, Mr Tesch has overlooked one
significant factor. UK cod stocks may be sufficient to meet consumer demand, but
at the same time, consumer demand for cod has declined. This is because
shrinking supplies have previously pushed up prices, deterring many consumers
from buying cod. Consumers have instead looked for cheaper alternatives and
found that their demand can be satisfied by farmed salmon. As a result salmon
now competes with cod as Britain’s most popular fish. This increased
consumption has relieved much of the pressure on cod stocks leaving enough wild
caught fish to meet this diminished demand.
Does
this bring into question whether there is a good future for farmed cod? The
answer will ultimately depend on whether cod can be farmed sufficiently cheaply
to meet a wider demand. At present, the small volume produced can command a
higher price because it is still novel, but as production rises, it is uncertain
whether farmed cod can compete against wild caught fish. It will ultimately
depend on the state of wild stocks in the years to come.