reLAKSation
98.
(In)sensibility?
The Norwegian industry is considering the possibility of freezing up to 30,000
tonnes of salmon with the aim of creating a balance in the market. The aim of
this initiative is to reduce the pressure of prices and encourage them to rise.
Intrafish report that the persistently low prices have rocked the industry to
its very core with the prospect of an avalanche of bankruptcies.
Yet,
however well-intentioned this freezing programme might be, we at Callander
McDowell, can only view it as sheer madness. Even today, the global salmon
industry continues to feel the reverberations of the last attempt at a freezing
programme back in 1991. A repeat of such an initiative today is simply
delaying the inevitable and belated industry shake-up and its ramifications
could last for many years to come.
The
initiative is flawed for two basic reasons: The first is that there is no
guarantee that a sustained price rise can be achieved if these salmon are taken
out of production. Buyers know that these fish will have to be eventually sold
and this salmon mountain will ensure that pressure on prices will be maintained.
In addition, the total volume production is much greater now than in 1991 and
hence removing these salmon to the freezer will not create any real respite.
There will be more salmon coming on behind needing to be sold. Ingvald Loyning
of Skretting, who according to Intrafish is a key figure in these discussions
has suggested that the proposed 30,000 tonne limit is less than the 37,000
tonnes frozen by FOS during 1991 implying that it should not have such a knock
on effect on the industry, but we see little difference irrespective of whether
it is 30,000 or 37,000 tonnes. Even if prices should rise, any benefits will be
negated by the huge costs involved in freezing this salmon, which in 1991 caused
the eventual downfall of the programme. Then, much of the salmon was sold into
non-competitive markets, why not sell it to such markets now and avoid the
costly exercise altogether? Better still, perhaps the industry should have been
developing these non-competitive markets and hence sold the fish at a profit!
The
second reason why the freezing programme is madness is that other European
producers used the 1991 initiative as clear evidence that the Norwegian
authorities were unfairly subsidising the Norwegian industry. This was the
foundation of part of the 1996 dumping and subsidisation complaint which led to
the imposition of the EU salmon agreement, whose subsequent removal has led to
the current problems. This latest initiative had been only publicised a few days
when an unnamed Scottish farmer told Intrafish that Scottish producers would be
watching events closely as the Norwegian Government must be careful not to be
seen to be subsidising the industry. He went on to say that he was sure that the
EU’s DG Trade would take a very dim view if this were to happen. Clearly,
European producers are circling like vultures in the hope that they can try to
use this freeze down as a way of restricting Norwegian imports in to Europe.
There
has been little response in the news services to this initiative, especially
from Norway. However, Intrafish report that Richie Flynn of the Irish salmon
Farmers Association has said that it is the first {sensitive(sic)}sensible
proposal he has heard in the past year. We, at Callander McDowell, should
certainly disagree, we think that it is simply madness! We are equally
unimpressed with calls to pursue other past ideas such as a Salmon Opec or
Producer Organisations. We have discussed, in previous issues of reLAKSation,
why such proposals are not a solution for the problem of low prices. Instead,
the industry must look to the markets for realistic answers. No doubt, we will
have to return to this matter at a later date.
Out
of touch? Last week, Scotland welcomed EU Head of Aquaculture Policy, Dr
Constantin Vamvakas as he officially opened Kinloch Damph’s new Couldran
hatchery. Dr. Vamvakas used the opportunity to applaud the
Scottish industry and its high quality salmon and said that more must be done to
protect it from overseas competition. He said that this might involve
initiatives such as frontier control. He told fishupdate.com that we must now
think European.
These remarks are rather
strange because it is not even a year since Dr. Vamvakas’s department launched
strategy for aquaculture, which included such diverse topics as aquaculture for
women, training and aquaculture feeds, yet made no mention of the use of
protectionist policies to restrict consumer choice. Dr. Vamvakas went on to say
that as a consumer he prefers to buy Scottish or Irish salmon, yet clearly many
European consumers are also happy to buy salmon from other sources. Just because
Dr. Vamvakas says he prefers salmon grown inside the community, should the rest
of Europe be limited to the same choice?
Europe is changing. The
European Community is growing and in future could grow even larger. If Norway or
the Faeroes ever decide to join, will Dr. Vamvakas continue to prefer just
Scottish or Irish produce or will Norwegian salmon be just as acceptable. Dr.
Vamvakas may buy food from within European borders, but consumers are not so
bothered by lines on a map. Instead, they buy food based on value for money and
in the modern global marketplace, origin is not so important.
Dr. Vamvakas believes that
European salmon is of equal if not better quality to that from outside the
community but many consumers have found little difference in quality between
European and imported salmon and certainly appear unwilling to part with more
money to buy higher quality salmon.
It is not surprising that
working within a huge bureaucracy; Dr. Vamvakas should look to bureaucratic
solutions to current industry problems. Yet rather surprisingly, he also told
Intrafish that it was crucial that the salmon industry should remain market-led?
Unfortunately, his understanding of market-led appears rather confused. He said
that this means that production must be kept at a level the market can absorb.
It is rather worrying that the head of aquaculture policy at the European
Commission should hold this view. Market-led means producing what the market
wants. This is totally different to manipulating the level of production to a
perceived view of the market, which will never work. This is because everyone
has a very different view of the size of the market. For example, those who wish
to promote salmon as a high quality, luxury type product, will want to see
production levels cut to a much greater level than those who view salmon as a
commodity product.
The only solution Dr.
Vamvakas can offer is to help fund a generic salmon promotion, however
experience of the past campaigns, show that they failed to boost sustained
salmon consumption. Instead any increase in consumption is the result of the low
prices, which makes salmon an attractive alternative to other more expensive
fish species.
Dr.
Vamvakas takes a very different view. He told Intrafish that he is angered by
what he sees as excessive profit-taking by supermarkets. He believes that
consumers have not reaped the benefits in terms of what producers are doing to
cut costs. However he is wrong. This is why in the UK at least, salmon is now
the most popular fish bought by consumers, exceeding both cod and haddock, once
the traditional consumer purchase. If salmon prices were ‘x’, then Dr.
Vamvakas would be happy to pay ‘x” plus 10% or even ‘x’ plus 50%.
Unfortunately, Dr. Vamvakas fails to appreciate that 10% would not cover many of
the costs involved in taking salmon from remote farms to the consumer. If we use
the current price stated on Intrafish of £1.30/kg,
then 13p added onto this price would be swallowed up long before the salmon
even reached the store. Translating this added 10% into human terms, there would
not be enough to pay for a train or bus ticket for Dr. Vamvakas to travel from
Inverness to England. We don’t even think that there would be enough to travel
to Edinburgh, (unless he could put on a bit of weight).
The price of salmon in
supermarkets is comparable to other fish species, including those, which are
wild caught and do not have a specific production cost for the fishermen. Whilst
supermarkets are not directly cutting the price of salmon, most regularly offer
salmon on some form of promotion which includes ‘buy one get one free’,
which is the equivalent of giving away 100%. This erodes the 100-200% add-on,
which Dr. Vamvakas claims represents excessive profit-taking. He believes that
farmers should get together to form a Producer Organisation to create a stronger
voice to fight against the power of the supermarkets. Yet, if this were a
realistic solution, it would have happened long ago.
Instead, farmers must look
at the market and produce what the market actually wants and they won’t know
this unless they actually look at the markets themselves. Salmon farming is a
commercial venture, not a bureaucratic nightmare.
Hot
dog! We, at Callander McDowell, support all forms of market development
and therefore were delighted to read in Fishupdate.com that four Norwegian
students have developed a healthy junk food alternative in the shape of a salmon
sausage. Using salmon in non-traditional foods is certainly one way to attract
consumers who never eat salmon to give it a try. We look forward to seeing this
product come to market. Meanwhile, we will visit our local Tesco where we can
buy a 300g pack of 6 ‘Healthy Living’ salmon sausages for £2.29 (equivalent
to £7.64/kg).