This editorial appeared in Seafoodnews.com on Dec. 31, 2008 -
SEAFOOD.COM NEWS [editorial comment] by John Sackton - Dec 31, 2008 - Originally I was going to avoid writing end of year roundups of key stories. Somehow, it just did not seem as relevant this year -- when so much that was so unexpected has happened.
But yesterday I got a call from Newfoundland, with the caller asking about next year saying “Just how bad do you think things are going to get?” with the assumption that most of the Province’s fisheries would be in for a very difficult time.
I had to say that wasn’t necessarily the case.
And that got me to thinking about the broader seafood industry. 2009 does not have to be such a bad year.
In many ways, our thinking is stampeded by the media and news of the economic collapse of the financial sector. And it is true, that operating credit and capital for loans is harder than ever to come by.
But it is also true that markets, particular seafood markets, go up and down, and we have been here before. There is not a single sector in the seafood industry currently seeing lower prices that has not seen them before. It is only in the light of the general panic that people tend to exaggerate what is happening.
Yes, there is a fall off in demand, and to some extent it is self correcting. The hidden secret in the seafood industry is that lower catch levels often can return as much money as higher catches, if harvesters and processors are geared to take advantage of the right opportunity.
What is no longer possible in this climate is to “fish your way out of the problem.” This means that if prices are low, simply go out and catch or buy more fish so that your overall revenue remains high, even if the per unit price falls sharply.
For years our industry was built to compete in this manner, and we had tremendous overcapacity of boats, processing plants and even brokers and distributors.
Over the past decade or more, the industry has become smaller, more concentrated, with fewer plants, more specialized producers, and in many cases, individual quota shares and buybacks that allow harvesters to either sell out or get more efficient.
The industry is far more attuned to producing a consistent quality product than dealing with boom and bust. In this economic environment, survival means doing what you have always done, just being more efficient.
So, despite a $3.00 lobster boat price in Nova Scotia, or a 30% drop in cod prices in Alaska, the key to survival is to not compensate by glutting the market. The structure of the industry makes this less likely.
At the same time the industry has made vast improvements in communicating with the public over conservation and sustainability, health, and food safety.
The food safety scares get the headlines. But the infrastructure put in place in response --such as the Trace Register system, used for aquaculture certification to track product from farm to plate; and the numerous inspections and lab processes now in place for most major buyers--, is what will eventually solve the problems.
The industry has vastly increased its control over product integrity and safety. This bodes very well for retaining customers, and selling seafood at levels that maintain margins. The reason is that many of the marginal operators - those who import seafood from anonymous Chinese suppliers and then undercut prices, are increasingly cut out of the market because fewer and fewer retailers can afford to buy their products.
As buyers lock in sustainability and certification requirements, they also lock in relationships with the largest and most responsible seafood producers.
The scenario for managing a decline in demand then is not to drastically cut prices, but to adjust supply to maintain market pricing within its traditional levels. Of course this means that some prices will come down, but they don’t have to exceed previous market swings.
This is not to say there are no problems. Overextended companies may very well go bankrupt - as happened with Poseidon Seafoods, and as is predicted for some restaurant chains.
Secondly, despite more publicity and prosecutions, there is still a lot of mislabeled and fraudulent seafood being sold as a different species, or being sold underweight. But NFI’s campaign for economic integrity is slowly bearing fruit as more major companies abide by the NFI member requirements to not sell fraudulent product, even if competitors are doing so.
In looking ahead to 2009, it seems to me the seafood industry is as well positioned as anyone to survive whatever economic storms occur, due to changes and new practices that have been put in place over the past several years. This coming year we will see some of that effort bear fruit.
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