The Finnish case of salmon and salmon trout

Asmo Honkanen, Kaija Saarni, Jari Setälä and Jarno Virtanen

Salmar meeting in Paris21-22.11.2002

Major resultsDeliverable 1 / Survey

• steadily growing markets for salmonides * In 1980’s domestic production of salmon trout

* In 1990’s trade liberation (EU-membership)> growing import of fresh salmon

• salmonides are replacing domestic fisheries products

Deliverable 1 / Survey

• the prices of salmonides tend to integrate* low prices in 1995-96* Salmon agreement 1997: increasing prices 1997-2000

• imported salmon to fresh fish market, salmon trout increasingly used for processing * salmon : better availability, quality and image

* salmon trout: better raw material for processing

Deliverable 1 / Survey

• Concentration in retailing * two biggest retail chains > 2/3 market share

* bigger units > most of the food stuff is sold through bigger units

• Turnover of fish wholesalers and processors is growing

• The number of producers is decreasing

Deliverable 2 and 3 /Survey

• Imported fresh salmon and salmon trout are substitutes, but not perfect ones

* competion in the fresh fish market: the aggregated fresh fish market stayed stable in 1995-1999, but imported salmon replaced salmon trout * salmon trout remained the main raw material for the processing industry* salmon trout price was mainly determined by its own production volume and the price of imported salmon (1995-1999)

Deliverable 2 and 3 / Survey

• Markets for salmon and salmon trout were competitive from producers to wholesalers

• Two kinds of results at the retail level:

* Campaign prices > competitive markets * Normal prices > high margins, more stable prices

• Leading prices: * in the salmon chain export prices > salmon price in Finland is determined by the world market price* in the salmon trout chain: wholesale prices > wholesalers central actors in the salmon trout chain

Deliverable 2 and 3 / Survey

•Price cost margins

* smaller margins for salmon trout than for salmon,

especially at the beginning of the period 1995-1999

* declining margins for salmon

Year 2001

• Global overproduction of salmonides

• The international price of salmon

below MIP

Price ex. processing plant for fresh whole gutted Atlantic salmon, iced, in polyboxes.Gathered by Federation of Norwegian Fishing Industry (FNL) from Norway' s 20 largest

exporters.Reflects approx. 60 per cent of Norwegian salmon volume Source: INTRAFISH

Salmon trout prices dropped in 2001

Real price of imported salmon and domestic salmon trout in 1992-2002 (8)

1,00

2,00

3,00

4,00

5,00

6,00

7,00

8,00

9,00

19

92

-1

19

93

-1

19

94

-1

19

95

-1

19

96

-1

19

97

-1

19

98

-1

19

99

-1

20

00

-1

20

01

-1

20

02

-1

€/k

g

Import price ofsalmon

Producer priceof salmon trout

Import prices of salmon trout

extra-ordinary low

Prices of salmon and salmon trout in 2001-2002 (8)

0,00

1,00

2,00

3,00

4,00

2001-1

2001-3

2001-5

2001-7

2001-9

2001-11

2002-1

2002-3

2002-5

2002-7

Hin

ta, €

/kg

Import price ofsalmon

Producer price ofsalmon trout

Import price ofNorwegian salmontrout

Retail prices at the same level

Retail prices of fresh salmon and salmon trout products

2,00

4,00

6,00

8,00

2001-1

2001-2

2001-3

2001-4

2001-5

2001-6

2001-7

2001-8

2001-9

2001-10

2001-11

2001-12

2002-1

2002-2

2002-3

2002-4

2002-5

2002-6

2002-7

2002-8

€/k

g

Norwegian salmon fillet

Domestic salmon troutfillet

Norwegian salmon troutfillet

Norwegian salmon

Domestic salmon trout

Norwegian salmon trout

Market for fresh salmonides grew by 40 % in 2001

Fresh fish market

0

5000

10000

15000

20000

1993 1995 1997 1999 2001

To

nn

es

Salmon

Salmontrout

Market for processed salmonides grew by 20 % in 2001

Market for processed fish

0

2000

4000

6000

8000

10000

12000

1993 1995 1997 1999 2001

To

nn

es

Salmon

Salmontrout

Autumn 2002:

Anti-dumping complaint concerning imports of large rainbow trout originating in Norway

and Faeroe Isles

Supporters: Fish Farmers associations in

France, Denmark, Sweden and UK

Policy implications of salmon agreement in Finland

• MIP is an inefficient tool, if the world market price is substantially lower than MIP • In Finland, MIP led to import of extra- ordinarily low-priced salmon trout, which is a perfect substitute to Finnish salmon trout• imported salmon trout replaced domestic salmon trout in the fresh fish market

Synthesis: Structural changes in fish industry in Finland

•The trade liberation triggered the concentration in the fish value chain in Finland:

* increased import - growth at wholesale and retail level

* the retail chains put more pressure to fish suppliers: - the retailers demand competitive prices, stable availability, high quality, wide range of products,

logistics facilities - intensified price competition: fresh fish > weekly offers

processed fish > 4 times/year

Structural changesin the wholesale/processing sector

Concentration

* Few big growing companies trade with the retail chains

• The availability and quality of raw materials and products are secured by

- imports- sub-contracts with smaller wholesalers and producers - common investments on processing

Structural changes in the primary production sector

• Imported salmonids puts new standard for domestic production: Especially for availability and quality

Supply of salmonides 1992-2002

-500

0

500

1000

1500

2000

2500

Mil

j. k

g

Salmon troutproductionImport ofsalmonImport ofsalmon troutSalmonfisheriesExport ofsalmonides

Structural changesin the primary production sector

•Rapid concentration of the production sector:

* The licenses limit the production growth* Expansion through buyouts of fish farms in Finland and in Sweden (over 20 % of production)

Five biggest Of the total production

1995 2001

fish farmers 11 % 46 %(Baltic herring trawlers 32 % 66 %)

Structural changes in the fish industry

Concentration, coordination and vertical integration

More professional fish industry

Higher profitability for wholesalers and processors

International competition means new challenges for producers