Reports
Response to the EUSPG's submission request for the initiation of a dumping investigation, June 2005
(a) Name and address.
According to their submission document, the complaint has been presented by the EU Salmon Producers Group, who claim to be an organisation representing 22 member companies. However, there is very little evidence to suggest that this representative organisation actually exists.
The EU Salmon Producers Group list their address as 20 Barnton Street, Stirling, FK8 1NE. Telephone 01786 474 718, Fax 01786 451 392. However, these contact details actually belong to a firm of Chartered Accountants called Dickson Middleton. British Telecom directory enquiries confirm that the telephone number and address is theirs, not that of the EUSPG.
According to the Scottish Executive, the EUSPG is a recognised Trade Association however their contact arrangements is ‘care of’, which confirms that the EUSPG have neither an office or dedicated telephone lines. The Scottish Executive’s only contact with the EUSPG appears to be through a different telephone number – 01259 743627.
Whilst the Scottish Executive say that they recognise the EUSPG as a Trade Association, the Executive’s website does not include any links to the EUSPG, even though there are links to all the official salmon industry representative organisation websites.
The EUSPG are not listed in any of the industry trade directories. The Fish Farmer Handbook 2004, the Fish Industry 2004 Yearbook and the Aquaculture Ireland Yearbook 2005 do not to refer to the EUSPG.
Clearly, if the Scottish Executive had not recognised the EUSPG and applied for safeguards on their behalf, the EUSPG would not be considered a working representative organisation.
According to the submission, the Complainant represents 22 producing companies. This statement is both erroneous and misleading. Annex 1 of the submission lists the Complainants
1. Ardvar Salmon
2. Wester Ross Salmon
3. Loch Duart Salmon
4. Orkney Seafarms
5. Atlantic West Salmon
6. West Minch Salmon
7. Sidnish Salmon
8. Ayre Salmon Farms
9. Balta Isle Seafayre
10.Olnafirth Salmon
11.Skelda Salmon
12.Thompson Bros Salmon
13.Uyeasound Salmon
14.Foraness Fish
15.Greenholm
16.Hoove Salmon
17.Islands Salmon
18.North Atlantic Seafarms
19.Manin Bay Salmon
20.Eise Ui Flatharta Teoranta
21.Muir Gheal Teoranta
22.Muirachmhainnai Teoranta
23.Celtic Atlantic Salmon
24.Silver King Seafoods.
This list confirms that there are 24 producing companies, not 22 as stated. This is a basic error. However, the list of farms is also inaccurate because at least one farm does not exist and others are owned by the same people. This might not be an issue except that these farms all produce very small volumes of salmon. There appears to be little rationale for operating in this way, especially as it incurs repeated costs.
The submission was dated 7th September 2004, yet Ardvar Salmon was sold at the end of the previous April and merged with the farm of another EUSPG member. The list includes three farms all operated under the same address belonging to EUSPG member Angus Macmillan. These are Atlantic West, West Minch and Sidnish. These are effectively one farm. The North Fish Group lists three separate farms, which according to the Shetland Salmon farmers Association website are owned by EUSPG member Angus Grains. This means that the list of EUSPG members actually contains 19 producing companies.
The Complainants imply in their submission (Annex 13) that they represent a Community industry, operating under their own trade association, which is distinct from the rest of Scottish production. This is not the case. Several of the complainant companies are members of other industry organisations whose membership includes companies that the Complainants claim are not part of the Community industry.
The membership of Scottish Quality Salmon includes
Ardvar Salmon
Ferguson Salmon
Finfish
Lakeland Unst
Lakeland Marine
Loch Duart
Marine Harvest
Scottish Sea Farms
West Minch Salmon
According to their website Wester Ross Salmon are also members of SQS although they are not included in the SQS list.
Although Ardvar Salmon is now no longer operating and presumably will disappear from the membership list, Angus Morgan, secretary of the EUSPG and chairman of Ardvar Salmon is also a leading board member of SQS.
All the complainant companies from Shetland are members of the Shetland Salmon Farmers Association along with:
Scottish Seafarms,
Lakeland Unst,
Hjatland Seafarms,
Johnson Sea Farms,
Johnson Seawell,
Unst Salmon
Hoganess Salmon,
Wester Sound Salmon
There is no published membership list of the Irish Salmon Growers Association so it is impossible to differentiate between community and non-community producers within this organisation.
Clearly, the complainants cannot be distinguished as a distinct Community industry from the rest of European producers. The Community industry includes all known salmon producers.
(b) Standing of the Community Complainants.
The submission states that the estimated production of farmed salmon in the EU for the year 2003 was 181,000 tonnes of which 162,000 tonnes was farmed in Scotland. The use of this figure is misleading as it suggests that the state of the Scottish industry is much worse than it really is. The submission was dated 7th September 2004, but in June of that year, the Fisheries Research Service, part of the Scottish Executive published production data for Scotland. This shows that Scottish production in 2003 was actually 173,373 tonnes. This document appeared on the FRS website but was subsequently withdrawn. It might be suggested that the EUSPG complained to the Scottish Executive that the figures did not support their submission. The data has yet to be republished.
The submission suggests that 80% of total EU production is produced by companies owned or related to exporters and importers of Norwegian salmon. The remaining 20% is produced by companies that are mainly small, medium sized enterprises based in Scotland, or Ireland and which are independent of exporters and importers of the product concerned. They indicate that the complainant companies produce about 30,000 tonnes, representing about 90% of community production. These figures are misleading.
The complainants suggest that independent producers account for 33,000 tonnes or 20% of production. If their estimate of 181,000 tonnes is accepted, then they actually produce only 18% of Community production. If the Scottish Executive figures were accepted then total EU production would be 192,373 tonnes of salmon. This means that Community production is only 17%. Unfortunately, as the figures provided by the Complainants have been removed from the submission, it is impossible to verify whether the estimates of Community production are correct or not. However, some information is available, especially relating to Shetland.
1. Ardvar Salmon 0t
2. Wester Ross Salmon
3. Loch Duart Salmon 1800t
4. Orkney Seafarms
5. Atlantic West Salmon)
6. West Minch Salmon )
7. Sidnish Salmon )
8. Ayre Salmon Farms 1000t
9. Balta Isle Seafayre 250t
10.Olnafirth Salmon 100t
11.Skelda Salmon 100t
12.Thompson Bros Salmon 100t
13.Uyeasound Salmon 1000t
14.Foraness Fish 100t
15.Greenholm 100t
16.Hoove Salmon 1000t
17.Islands Salmon 500t
18.North Atlantic Seafarms 100t
19.Manin Bay Salmon
20.Eise Ui Flatharta Teoranta
21.Muir Gheal Teoranta
22.Muirachmhainnai Teoranta
23.Celtic Atlantic Salmon
24.Silver King Seafoods.
These figures suggest that the Complainant companies may struggle to produce 30,000 tonnes a year, especially as they claim to produce 90% of the production of the Community industry.
The submission document, as well as excluding those companies that are related to Norwegian production, also lists two other categories. The first are supporters and this lists just one farm. The other category is other EU producers who presumably do not support the complaint. These include the one salmon farm in France and two farms based in Orkney. This implies that the Community salmon industry consists of:
- the Complainants
- those with connections to Norway
- others
However, the companies listed in these categories may not include every salmon farming company in the EU. The Shetland Salmon Farmers Association and Scottish Quality Salmon produce lists of their members but there are some companies who have chosen to belong to neither. For many years, Highlands & Islands Enterprise produced a definitive list of Scottish salmon farms but no longer do so. This means that there is no longer a single reference to every single salmon farming company in Scotland or Ireland.
The Scottish Executive included a list of every salmon farming company operating in Scotland in their application for safeguard measures. Their complete list is as follows: Those companies highlighted in bold are not included in the complainants calculation.
ANNEX 2: SCOTTISH COMPANIES ACTIVELY PRODUCING SALMON
1 A A McMillan
2 A+P Tait
3 Aquafarm Ltd
Aquascot Ltd (now Mainstream Scotland)
Ardvar Salmon Ltd
Atlantic West Salmon Co Ltd
Ayre Salmon Farm Ltd
Balta Island Seafare Ltd
Bressay Salmon Ltd
4 Carloway Seafoods Ltd
5 Collafirth Salmon Ltd
College
Cro Lax Ltd
6 D+J Salmon Ltd
7 Dury Salmon Ltd
8 Ferguson Salmon
9 G Duncan (Salmon) Ltd
10 Glendale Salmon Ltd
11 Gonfirth Salmon Ltd
12 Harris Fish Farming Co Ltd
13 Hebridean Fishery Partnership
14 Hebridean Salmon Co Ltd
15 Heogland Salmon Co
Hoganess Salmon Ltd
Hoove Salmon Ltd
16 Hunter Salmon
17 Isle of Skye Salmon Ltd
18 Isleburgh Seafarms
19 Kerrera Fisheries Ltd
Lakeland Marine Farm Ltd
20 Landcatch Ltd
21 Laxfirth Voe (Salmon) Ltd
22 Lewis Salmon Ltd
23 Lighthouse Highland Ltd
Lighthouse of Scotland Ltd
Loch Duart Ltd
24 Mainland Salmon
Marine Harvest (Scotland) Ltd
25 Millburn Salmon Ltd
26 Mull Salmon Ltd
Murray Seafoods
North Atlantic Salmon Ltd
27 North Uist Fisheries Ltd
28 Ocean Reaper Ltd
Orkney Sea Farms Ltd
29 Orkney Seafoods
30 Papil Salmon Farm Ltd
31 Portree Salmon Farmers Ltd
32 Punds Voe Salmon Ltd
Rysa salmon Farm
Scord salmon (Shetland) Ltd
Scottish Seafarms Ltd
33 Setterness Salmon Farms Ltd
34 Shetland Marine Salmon
35 Shetland Norse Fish Farm Ltd
Skelda Salmon Farms Ltd
Skerries Salmon Ltd
Stolt Seafarm Ltd
36 Sweening Salmon Ltd
Thompson Bros Salmon Ltd
Uyeasound Salmon Co
37 Vementry Salmon
38 Wadbister Salmon Ltd
West Minch Salmon Ltd
Wester Ross Salmon Ltd
Wester Sound Salmon Ltd
Western Isles Seafood Co Ltd
Westray Salmon Ltd
39 Westside Salmon
40 Whalsay Seafarm Ltd
In addition, Irish salmon farms currently operating according to the Aquaculture Ireland 2005 Yearbook include:
41 Atlantic Seafood Producers
42 Clare Island Seafarms
43 Creevin Salmon Farms
44 Cuan Boi Seafarms
45 Cuigeal Teoranta
46 Curraun Fisheries
47 DMCI Golam Teoranta
48 Eany Fish Products
49 Northern Salmon
50 Ocean Farm
51 St Killans Harvest
52 Salmon Nova
It is quite possible that some of these companies are no longer operational and clearly there is at least one error; for example ‘College’ is meaningless. However, the important point is that the Complainants appear to suggest that their 19-24 companies produce 90% of Community production whilst these remaining 52 companies produce only 10% or 3,000 tonnes.
Under WTO rules, the application shall be considered to have been made “by or on behalf of the domestic industry” if it is supported by those domestic producers whose collective output constitutes more than 50 per cent of the total production of the like product produced by that portion of the domestic industry expressing either support for or opposition to the application. However, no investigation shall be initiated when domestic producers expressly supporting the application account for less than 25 per cent of total production of the like product produced by the domestic industry.
As it is clearly difficult to substantiate the exact number of salmon farms operating in the European Community, it would be almost impossible to identify the exact tonnage contributed by each to the total. Such information does exist and is supplied confidentially to respective government agencies. The fact that the Scottish Executive has delayed publication of the 2003 figures demonstrates how these figures are contested. The claim that the EUSPG represent 30,000 tonnes or 90% of Community production is questioned. The omission of 52 farms that clearly do not support this submission brings their claims into doubt. It would not be surprising if the EUSPG do not have the 50% of industry support needed to pursue an ant-dumping case. In terms of number, they are very near the 25% absolute minimum requirement. If this is translated into volume, then it is possible that the EUSPG do not have sufficient industry support to even submit their submission.
The definition of the product concerned as farmed salmon is very vague. According to Taric, the European tariff database, the classification codes used in this regulation cover a variety of different salmon species. These include: Pacific salmon (Oncorhynchus nerka, Oncorhynchus gorbuscha, Oncorhynchus keta, Oncorhynchus tschawytscha, Oncorhynchus kisutch, Oncorhynchus masou and Oncorhynchus rhodurus), Atlantic salmon (Salmo salar) and Danube salmon (Hucho hucho). Yet, under European labelling laws, it is necessary to ensure that all fish are properly labelled to include both the correct scientific name as well as the common name. The use of just the term ‘salmon’ is illegal and yet the Complainants have lumped all farmed salmon together irrespective of whether they are Atlantic salmon or one of the farmed Pacific species. The submission is misleading by not stating that the product concerned is farmed Atlantic salmon (Salmon salar) from Norway.
Norwegian costs of production – constructed Normal Value.
The Complainants have detailed the construction of the Norwegian cost of production in Annex 7. This has limited access because the complainants claim that disclosure would be of significant competitive advantage to a competitor and would have a significantly adverse effect upon the person supplying the information. It is very difficult to understand how a ‘constructed’ value could be construed of being of any competitive advantage. The only way that it would have an adverse effect on the person supplying the information i.e. the Complainants, is that the construction would be open to criticism and shown to be invalid.
The complainants state that the average cost of production in Norway for slaughtered whole fish equivalent during 2003 is NOK 19.52/kg. Whilst the complainants prefer to use a constructed value, actual values are available. Every year, the Norwegian Department of Fisheries publishes annual cost of production data. This shows that the total cost per kilo including slaughtering costs is NOK 19.22. This is actually very close to the Complainants figure. However, the official cost of production data has been recalculated using a larger sample and the actual average cost of production is NOK18.36/kg.
Norwegian and EU producers treat fish in different ways. For example, Norway tends not to trade in whole fish, which means that the Complainants have converted the figures so that it can be presented in the way they would for their own fish. However, gutting costs would normally be including in the slaughtering costs so that by including the conversion of the fish to gutted weights means that the Complainants have included the cost of gutting the fish twice.
The Complainants have taken this figure and deducted NOK 4.45/kg for slaughtered to FOB costs to arrive at a slaughtered gutted price. How the figure of NOK 4.45/kg is calculated remains confidential so it cannot be challenged. However, best estimates would suggest that a true figure would be nearer NOK 0.6/kg.
The Norwegian Seafood Export Council figures for the export price for Norwegian salmon during the first part of 2004, covering part of the period covered by the submission, puts the average selling price for Norwegian fish FOB at NOK 23.35/kg. This compares with NOK 22.73/kg quoted by the Complainants.
The selling price – NOK 23.35/kg
The cost of production – NOK 21.83/kg
(including 15% profit which the Complainants claim is the industry standard)
These figures may be simplistic but without details of the constructed calculation, it is impossible to compare this data with that used by the Complainants. However, there is a major question mark over validity of their calculation. The Complainants argue that 15% normal profit should be added to the cost of production, however, they have actually added 17.5% - NOK 3.44/kg and not 15% which would be NOK 2.96/kg. They have also stated the wrong conversion factors in Annex 3. To allow for gutting, whole fish equivalent should be divided, not multiplied by 90%.
Imports
The Complainants suggest that the Community salmon industry has suffered injury as a result of subsidisation and dumping of farmed salmon into the EU since the mid 1990’s. The Community industry has regularly blamed Norwegian imports for their problems but this link is extremely tenuous. The Complainants say that whilst the market has grown substantially over the last ten years, they believe that they have gained little from that growth. They say that this is because low priced Norwegian imports have led to poor profitability and losses. However, the real reason that Community producers have performed so poorly is simply because they are not producing what the growing market wants. Their focus is on the production of superior quality fish, which they believe warrants a premium price, when what the market really wants is a value for money, everyday meal choice. This is the real issue at the heart of this dumping submission.
In addition, imports have increased because of a shortfall in total fish supply within the EU. Eurostat recently announced that European fish supply has fallen by 17% between 1995 and 2002. This means that the shortfall in European fish supply is greater than ever. Europe cannot meet its own requirement for fish and seafood products. Europe must therefore import more fish to meet consumer demand. Inevitably, our near neighbours must meet this demand. Norway and Iceland are the largest producers in the EEA with increases of 17% and 32% respectively, greater than their own domestic requirements. Europe has imported more and more fish from these two countries to meet the shortfall.
Whilst Norway and Iceland have managed to increase their production, the global trend is that increasing demand has placed more pressure on commercial stocks. It therefore makes sense to utilise supplies of fish from farming, rather than over-fish already threatened stocks. World aquaculture production is about 1.27 million tonnes but with European salmon producers only capable of supplying 180,000t tonnes, salmon imports from Norway make a commercially realistic alternative to wild caught marine species.
This is reflected in the retail outlets, where widely available, value for salmon has replaced traditional marine species such as cod and haddock as a number one choice. Retailers like salmon because it can be supplied in consistent quality, availability and price. As a result, Europe has attracted an increasing volume of imports of farmed salmon from Norway. This is not dumping but rather meeting consumer demand for fish.
Dumping margins
The Complainants state that the salmon farming industry has a long and relatively inflexible production cycle leading to harvesting. This is correct. The production cycle is also complex because of the natural life cycle of salmon. Salmon have a capability of early maturation, usually in their first year at sea. These early maturing fish are known as grilse. From the farmer’s point of view, grilse are a problem. The fish start to put all their energies into reproduction rather than growth and the longer that this is allowed to progress, the poorer the eating quality of the fish. Fortunately, it is easy to identify such grilse because these changes are accompanied by changes in skin colouration that is an indication of a return to fresh water.
When salmon start to grilse, they must be harvested even though they are still relatively small fish. In terms of profitability, it is usually best if farmers can grow salmon as large as possible. The sea cycle of the production process usually last two years, but most of the real growth appears in the last few months. Harvesting fish when they are still small is uneconomic but in the case of grilse, is essential. The relative cost of producing grilse is high, but the returns are low. In economic terms, the farmer would prefer to leave the fish to grow more but he has no choice.
As a result, dumping margins are an inevitable artefact of the combined effects of a complex life cycle, variable growth rates and early maturation. It is for these reasons, that dumping margins have always been found during dumping investigations.
The character of the spot investigations conducted by the Trade Directorate enhances the likelihood of finding these margins. In this current case, the investigation covered a period of 10 months, but the salmon life cycle can last three years. The investigators are only getting a snapshot of what is happening. This maybe perfectly acceptable in other type of trade investigations such as steel, where the production process is extremely short. In the morning, the steel works can have a set of ingredients and by the afternoon can have changed this into the finished steel product. This is very different from what happens in salmon farming.
The almost certain presence of dumping margins in farmed salmon does not mean that such dumping margins will be found in salmon from Norway. Dumping margins will undoubtedly be identified in every salmon farm including those in Scotland. The problem for the Norwegian farmers trying to defend themselves against these accusations is that whilst the investigators sample some Community producers to discover the extent of the supposed injury, they do not look for dumping margins, but we are sure that if they looked, they would find them.
Whilst it may be obvious that dumping margins do exist, it is clearly not obvious that dumping has actually occurred.
Increased volumes
The Complainants suggest that even small increases in the volume of salmon offered to the EU have an immediate and severe effect on prices. This is not true. Prices are usually presented against a time line, however, when presented against volume, it is clear that there is a direct relationship between price and volume.
Such a relationship exists in most industries and is extremely predictable. The real problem is that the Community industry wants to see prices towards the left side of the graph, whilst the market wants them at the right hand side.
Any judgement as to whether Community producers have really suffered injury is impossible whilst the detailed figures are provided on limited access.
Analysis of the situation of the Community Producers
The Complainants state that the information they provide demonstrates that:
1. The Complainants state that following a market collapse in September 2001, considerable losses have been incurred and those loses have increased in Q1 2004. Whilst it is clear that prices did plunge in autumn 2001, they subsequently recovered in spring 2002. They fell again in summer 2003 as a result of the removal of the artificial controls put in place by the salmon agreement, but after a short period of readjustment, the market recovered and has been buoyant ever since. Prices during 2004 remained relatively high, which does not support the claim that losses have increased in the period prior to the submission. Any losses incurred by the complainants can be better subscribed to poor management rather than the effects of dumping. This is because one of the complainants, Loch Duart Salmon, publish an article on their website (www.lochduart.com ) from the Financial Times dated 4th May 2004. This article entitled ‘How greener methods reeled in the profits’ states ‘Even some of the Norwegian- and Dutch-owned multinationals operating in Scottish lochs are selling salmon below the cost of rearing them, according to industry insiders. That makes Loch Duart's tale of expansion the more remarkable.
But two factors make the expansion unique. One is that Loch Duart is profitable. According to Nick Joy, managing director and one of three owner-managers, the £4.5 million turnover company has made profits in four of the five years since the trio bought it’.
2. The complainants state that there was a further collapse in market prices in June 2003. As already stated, this was due to the removal of the salmon agreement. The withdrawal of this artificial barrier in the marketplace meant a period of readjustment was necessary. Prices had recovered by Autumn 2003.
3. The complainants claim that prices in Q1 2004 are at an all time low. Reference to the price graph, taken from the Intrafish website (www.intrafish.com) shows that this is simply untrue. Prices remained above NOK 20/kg for nearly all of the year, dipping below the NOK 20/kg level for two or three week in the autumn as farms harvested to meet demand from smokers for product for Christmas.
4. The complainants state that their costs of production have reduced since 2002. Whilst the Norwegian Department of Fisheries publish cost of production data on an annual basis, Scottish members of the EUSPG have consistently refused to release such information. This even predates the formation of the EUSPG. As long ago as 1992/3, the then Scottish Salmon Growers Association of which Mr Morgan was a dominant member commissioned the Scottish Agricultural College to produce comparative data on the cost of production in Scotland and Norway. The intention was to show that Scottish producers were disadvantaged. However, when the results were released, they actually showed that Scotland had lower production costs than Norway. Since then the Scottish industry has refused to participate in any survey of costs. In 1995, the then UK Parliamentary Scottish Affairs Committee told the Scottish Salmon Growers Association that before submitting any further dumping complaints to Brussels, they should produce cost data. They ignored this advice and did submit a further complaint in 1996 without this supportive data.
In 2001, the Scottish Executive announced a strategic framework for Scottish aquaculture, included in which was the intention to conduct a full survey of Scottish cost data by 2003. Yet by 2003, the survey had not even been commissioned and still has yet to get underway. If Scottish production costs have been falling since 2002, then it is simply a case of ‘better late than never’. The need for lower costs has been apparent since 1989.
5. The complainants suggest that stock levels, employment, utilisation of capacity and capital investment are all reducing as businesses contract. The main intention of these claims is to show that the Scottish industry is contracting as a result of Norwegian imports. However, the Complainants fail to demonstrate this fact.
Stock levels and utilisation of capacity are related. In Annex 13, the Complainants show that capacity utilisation has decreased from 77% to 54% between 2001 and 2004 and they claim that closing stocks have similarly declined underlining the injury in closing stocks indicating a decrease in the quantity of live fish being on grown for harvesting. The data in Annex13 supporting this claim comes from a representative sample of about 30% of Community producers. Whilst they suggest this data may be representative, the source of the data is actually critical. Three of the largest of the Complainant companies have adopted a more ‘sustainable’ approach to farming through either organic or RSPCA (Royal Society for the Prevention of Cruelty to Animals) Freedom Foods label. Both involve a reduction in the stocking rate. The Financial Times article report that whilst Loch Duart have a capacity of well over 3000 tonnes, the farms ethos is to farm well below capacity giving them a production output of between 1500-1800 tonnes. The company also farms at a ratio of 98.5% water to 1.5% fish; about 25% below the industry average. West Minch Salmon has just converted to organic production with a much lower stocking rate. Wester Ross Salmon are also producing salmon under the Freedom Foods label. They also have converted some of their capacity to cod production. It is clear that any decline in stocks or capacity is due to a deliberate decision by these salmon companies to adopt a strategy to do so, not because of any effect of increased imports.
The Complainants suggest that employment has fallen but the figures provided in Annex 13 do not support this claim. The very small decline in numbers between 2001-2003 and 2004 can be accounted for by the merger of Ardvar Salmon and Loch Duart which would have left some duplicated positions.
The Complainants suggest that investment in the industry has declined as a result of increasing Norwegian imports. This claim is misleading. Investment has continued throughout the period highlighted by the complainants, however it has been much more selective as a result of the increased complaints from the EUSPG. No one is going to invest in an industry against a background of increasing reports of over-production, unfair competition and the possibility of trade sanctions. Yet, when companies have a specific plan to take them forward, investment has been forthcoming. This is confirmed in a statement from Shetlands Island Council which appeared in IntraFish.
Loch Duart Salmon received £182,400 to help in the purchase of Ardvar Salmon
Loch Duart Salmon recieved £60,600 to help further develop its own sites
AquaFarm received £200,000 from the Shetland Islands Council
Sunbeam Aquaculture received £50,000 form Lochaber Enterprise to establish a new hatchery to produce 100 tonnes of smolts
Any reduction in investment in salmon farming has been assisted by a EU decision to halt investment through FIFG programmes and instead divert funding to other developing species.
6. The Complainants suggest that increasing loses are as a direct result of reduced market prices. This is not wholly true. Since 1989, industry commentators have predicted a continuing fall in salmon prices in line with expanding production, not just in Norway but also in every producing country. Any loses incurred are the result of the refusal to adapt to changing marketing conditions.
The complainants suggest that their analysis of Norwegian prices demonstrates the magnitude of the fall in market prices since 2002 and details more recent price collapse in prices since mid April 2004, which they suggest is in the region of 15%. The complainants’ analysis in Annex 8 is limited access supposedly because its disclosure may have an adverse effect on the person supplying the information. However there are a number of sources of price information emanating from Norway and these do clearly show the price falls. The IntraFish price graph shows that that whilst there have been some points when prices are low, most of the time, prices fall within a reasonably high price banding.
Similar data is available from FHL. This show that the highest price during 2004 was in week 17 at NOK 24.88/kg. The lowest was in week 45 at NOK 18.29 /kg; decrease of 26%. However, this fall cannot be considered to be damaging because it is part of the natural cycle of demand. Prices usually fall in the run up to Christmas as more farmers try to benefit from a Christmas boost.
The complainants state that in July 2004, the Commission published an information document relating to the safeguard case. This contained a detailed analysis o the situation of Community producers based on companies representing over 85,000 tonnes of production; about 47% of Community production. The complainants state that the situation described in this information document together with their industry specific data contained in Annex 9 accurately reflects the situation of the Community industry.
The data in Annex 9 is restricted but does contain data from the complainant companies, i.e. a Community industry of 30,000 tonnes. Yet, at the same time, the complainant refer to a Commission document relating to the Community industry of
181,000 tonnes. It appears that the Complainants are happy to include the wider Community industry when it suits their case but not to include them when it doesn’t. If the Complainants argue that the Community industry is only 30,000 tonnes in size then they should not be permitted to base their case on a Community industry of 181,000 tonnes. Equally, the safeguard case is a totally separate case to that relating to anti-dumping and the Complainants should restrict their comments to the anti-dumping case.
Injurious effects of dumped imports.
The Complainants state that farmed salmon is essentially a commodity product and domestically produced and imported salmon compete mainly on price. If Norwegian producers had made this statement, it would be true. However, the ‘Scottish’ industry, as in the independent producers who make up the EUSPG, have always maintained that their salmon is superior to any other and merits a premium price. This position can be illustrated with a statement made by Angus Morgan of the EUSPG following the announcement of the introduction of anti-dumping duties. He told seafoodintelligence.com that they would now be in a position to supply consumers in the UK and Europe with what they most prize – Irish and Scottish salmon. It is this difference in perception which actually forms the basis of this anti-dumping case.
Scottish producers maintain that consumers prefer Scottish salmon to any other and that they are prepared to pay more to buy it. However, despite the repeated claim that Scottish salmon is superior, most consumers are unable to differentiate between supposedly superior Scottish salmon and Norwegian commodity salmon. As a result, most consumers are happy to buy whichever salmon they perceive to give the best value for money. Billingsgate fish market lists salmon prices on their website without differentiating the salmon by country of origin. The independent Scottish industry, such as the Complainants, blame the presence of Norwegian salmon in the European market for this inability to persuade consumers to pay a premium for Scottish fish. This is why they have brought this anti-dumping case.
The Complainants argue that Norwegian imports are the price setters. This is a mistake. The price of salmon is actually dictated by the total volume of salmon available, whether it is Norwegian, Scottish, Irish, Icelandic, or Chilean. The Complainants also argue that because of the large volume of Norwegian salmon produced, any undercutting of Scottish prices results in price depression of the Community producers. Yet, the Scottish view is undermined by the simple fact that if Scottish producers expect to sell their fish at a premium, then Norwegian prices will inevitably be lower. Is this undercutting or price differentiation? French consumers are still willing to differentiate between Scottish and Norwegian salmon in terms of price, although the French market is following the example of the UK and this differential is becoming smaller. Prices currently at Paris Rungis market are Euro 4.40 for Scottish and Euro 3.90 for Norwegian. Is the Norwegian price undercutting the Scottish or is the Scottish in receipt of a premium? The reality is that if the Scottish can achieve a premium, as they believe, then the price of Norwegian salmon is actually irrelevant. Consumers will choose whichever salmon they want.
The Complainants argue that the main form of injury resulted from the price undercutting by Norwegian imports. The truth is that any injury is self-inflicted because the independent Scottish producers have failed to persuade consumers to actively select Scottish salmon and more importantly, to pay more for it. Rather than pursue anti-dumping complaints, the Complainants may be better served by developing more market-led strategies, producing what the consumers actually want.
Limited access to Annex 12 means that it is impossible to comment on the undercutting. However, whilst the Complainants suggest that their salmon is being undercut by 39%, they ignore the fact that they also claim to be able to generate a price premium of 25% (see appendix 5e). Certainly, the Scottish industry claim that French consumers are prepared to pay a premium for their Label Rouge salmon. Currently, Scottish salmon is selling at the Paris Rungis market for Euro 4.40/kg which according to the Complainants is only just above their delivered price.
By comparison, Norwegian salmon is selling at Rungis for Euro 3.90/kg which according to the Complainants calculation is at least Euro 0.52/kg above Norwegian delivered price. This makes no sense. Why would French wholesalers be prepared to sell Norwegian salmon for up to Euro1.72/kg above delivered price and yet only Euro 0.05/kg above delivered price above Scottish. The answer is that the Scottish delivered price claimed by the Complainants must be inflated, as are most aspects of their complaint.
The Complainants make a number of statements that suggest that the Community industry is in dire straits, however the evidence does not support this. The industry has become loss making because it continues to focus on the production of products that consumers do not want, or at least are not willing to pay more for. The production of more sustainable products incurs higher costs, such as lower stocking densities, different feed, etc, which are not recouped at sale. This can be seen from the retail price of Loch Duart salmon. The only retail outlet for Loch Duart salmon in the UK is the Loch Fyne restaurant chain who also sell fish from a fresh fish counter. Their price list shows that Loch Duart salmon fillet sells for £8.62/kg. This compares with salmon sold in the supermarket chain Sainsbury’s which sells at £9.99/kg.
Conclusion
The Complainants suggest that the findings of the safeguard investigation had proven that Community producers had suffered injury. If that is the case, why have the Complainants submitted this ant-dumping complaint at all and not allowed the safeguard case to reach its final conclusion.
The Complainants suggest that the magnitude of the losses is unsustainable. They claim that the injury has manifested itself with the receivership of five companies. However, what they do not say is that three of these companies had owners who also operated other salmon farms, which remain in business. At least one of these farms was bought back by its owners and continues to operate. The Complainants also refer to two farms taken over the their feed supplier, however as the Complainants have excluded these farms from this investigation, they are not in a position to state whether they are being wound down or not.