this is your disconnection notice.

Yesterday, some headlines in various newspapers and media sites highlighted the recent jump in salmon prices. The main reason? — a drop in world supply. The reason for the drop in supply? A major outbreak of disease in Chilean salmon farms — infectious salmon anemia.

Bloomberg.com reported:

World Salmon Supply to Drop Most Since 1990 on Virus

Feb. 24 (Bloomberg) — Global supply of Atlantic salmon will decline the most in two decades this year after a virus decimated output in Chile, bolstering the steepest advance in Norwegian prices since at least 2000.

The harvest will drop 5 percent to 9 percent, the first “significant” decline since 1990, said Joergen Christiansen, a spokesman for Oslo-based Marine Harvest ASA, the world’s largest salmon farmer. Norwegian export prices for fresh salmon rose 14 percent to 34.88 kroner ($5.86) a kilogram (2.2 pounds) this year, according to Statistics Norway.

Salmon output in Chile, the second-biggest source, may slide 38 percent this year, the national industry association said last month. The volume of fish harvested in Chile plunged 65 percent in the fourth quarter, Marine Harvest said Feb. 10. Fish farms in the country have been hurt by outbreaks of infectious salmon anemia.

“The main explanation behind the strong salmon prices is the dramatic supply fall from Chile,” said Aslak Berge, an analyst at First Securities ASA in Oslo. “Given that Atlantic salmon is among the world’s most rapidly growing food industries, the fall has boosted prices.”

Right, so if you are one that subscribes to “supply and demand” theories then there seems to be a connection here. Supply drops, prices rise. If this is the case — could commercial fishermen see a rise in prices for wild-caught salmon in the upcoming season?

Most likely not.

Take a look at wild salmon prices for fishermen in Alaska over the last several years (from G. Knapp and co. – The Great Salmon Run).

As, Knapp and co. point out:

The salmon industry has experienced dramatic change over the past two decades. Two major trends gave rise to many of the issues discussed in this report. The first trend is the rapid and sustained growth in world farmed salmon and salmon trout production, from two percent of world supply in 1980 to 65 percent of world supply in 2004…

This development has fundamentally transformed world salmon markets—not only because of the dramatic growth in total supply, but also because of changes in the kinds of salmon products which are available, the timing of production, market quality standards and organization of the industry.

The curious part about this:

The second trend is a steep decline in the value of North American wild fisheries, as seen in the decline in the value of annual Alaska salmon catches from more than $800 million in the late 1980s to less than $300 million for the period 2000-04 expressed in 2005 dollars…

Most of this decline in value was due to a decline in prices (rather than catches), and much of the decline in prices was due to competition from farmed salmon.

However, it’s not just farmed salmon, as the text that accompanies the above graph points out:

…between 1988 and 2002 there was a steep decline in the real ex-vessel value of Alaska commercial salmon catches (“ex-vessel value” is the value paid to fishermen). British Columbia salmon fishermen have experienced an even more dramatic decline. More than half of this decline was in the value of sockeye salmon catches. The decline in value of sockeye catches resulted from a decline in both sockeye prices and sockeye catches. The modest rebound in value since 2002 has also resulted primarily from an increase in sockeye catches and prices.

I’m a bit confused by all this…

When disease rips through salmon farms in Chile – the world price of farmed salmon goes up. But, when there is a decline in sockeye catches the price went down? And, then when the catch goes up there is a “modest rebound in value”?

Is this not the opposite of the typical supply and demand theory?

Maybe there’s a bit more light provided by G. Knapp and co.:

This role of sockeye salmon is important to emphasize, because until recently almost all Alaska sockeye salmon was either frozen and sold in Japan or canned. Only a very small share was sold in the U.S. fresh and frozen market. Thus much of the decline in sockeye catch value (and the total Alaska catch value) had very little to do with competition between farmed and wild salmon in the U.S. fresh and frozen salmon market—but resulted rather from changes in other markets. (my emphasis)

As pointed out in earlier posts (there is probably no connection…Wal-Mart, MSC, 2011…), there is a worrisome relationship between the Marine Stewardship Council and Wal-Mart.

The Marine Stewardship Council has “eco-certified” Alaskan salmon fisheries and is close to “eco-certifying” British Columbia sockeye fisheries as “well managed and sustainable” — despite the fact that there has been no sockeye fishery on the Fraser River for three years due to conservation concerns.

Wal-Mart has suggested all of their seafood products will be from “sustainable” sources by 2011 — one of their more popular products: frozen “Alaskan sockeye salmon”.(They also sell a lot of farmed salmon)

Yes, Wal-Mart — the basically glorified dollar store, the “low-cost” leader, the sultan of cheap. Do you think Wal-Mart is going to pay top-dollar for “wild” products that they’re going to turn around and try to sell cheap?

Highly doubtful.

If Wal-Mart could figure out a way to have wild Alaskan sockeye salmon “made in China” at the cheapest price — they would.

Added further to this equation — Target, another U.S. low cost seller with over 1700 retail outlets, has committed to no longer selling farmed salmon at of their stores. Gee… this will be a boom for commercial salmon fishermen in Alaska and British Columbia. Two major U.S. low-cost, super-retailers looking to buy wild salmon at the lowest possible price…

Yup — this is your disconnection notice.

There are some serious disconnects here… (look for more in upcoming posts).

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