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Salmon imports put industry in turmoil

Salmon is now a farm animal

Steve Wilhelm Staff Writer

A wave of cheap farmed salmon imported from Chile is cresting this fall, destroying profits for Puget Sound-based fishers and for processors of wild salmon.

Largely because of the farmed salmon glut, the prices that Seattle-based fishers get for sockeye caught from Alaska's Bristol Bay recently hit a 20-year low of 40 cents a pound. And the less-desirable Puget Sound-caught coho salmon are stuck in freezers without a market.

"I think this year will go down as the worst year, profitwise, that our guys have seen since the botulism scare of 1982," said Bob Thorstenson, Seattle-based president of United Fishermen of Alaska. His organization represents most of Alaska's commercial salmon fishers, with Seattle-based fishers accounting for about half the annual catch.

The Chilean product is like supermarket chicken - boneless, skinless, cheap and ready-to-cook - attributes that wild-salmon companies are challenged to meet.

The low salmon prices are hammering profit margins at the large Seattle-based fish processing companies that operate factories here and in Alaska.

"Markets are in tough shape, fish prices are in tough shape, it's not a good situation for anybody in the industry," said Ralph Hoard, executive vice president for Icicle Seafoods Inc. in Seattle.

The least-impacted Seattle processing companies are those that handle the widest variety of seafood, in some cases including distributing imported farmed salmon.

"Low salmon prices are practically putting us out of the business of handling wild fish," said a top executive for one of those companies, who asked to remain unnamed.

Imports of farmed Atlantic salmon, most of it from Chile, surged 20 percent this year as the current crop of salmon reached maturity after their three-year growing cycle, said Chris McDowell, seafood industry analyst for the McDowell Group consulting firm in Juneau. This surge halved salmon market prices, even though the competing wild sockeye harvest is down substantially.

World markets have been flooded with 1.2 million metric tons of Chilean salmon, overwhelming the 800,000 metric tons of wild salmon available.

The upshot is that the value of the sockeye harvest, worth about $450 million in 1992, fell to less than $100 million this year as buyers turned to farmed Chilean salmon. Before farmed salmon, lower supplies of sockeye would have pushed up per-fish prices.

Prized for its deep red flesh, sockeye is traditionally the most valuable single salmon species fished in Alaskan waters, accounting for about two-thirds of the revenue. As one indication of the dropping value of sockeye, the open-market price for a Bristol Bay license, needed to become a commercial fisher, has dropped from $175,000 a few years ago to about $30,000 this year, McDowell said.

Terry Gardiner, president of processor Norquest Seafoods Inc. in Seattle, compares the salmon price wars to the battles faced by many U.S. farmers.

"The story really is almost 100 percent parallel to what has happened to apple growers in Washington and potato growers in Idaho," he said. "New competitors entered the world and grew too much, and American producers found it difficult to compete because of the strong dollar"

His $100 million company won't make any money on salmon processing this year, and Gardiner expects his salmon-related revenue to drop 10 percent to 40 percent.

"I think everybody in our industry, both at the fishing and processing levels, is saying, 'OK, how do we meet this challenge?' " he said.

An obvious first step might seem to be processing Alaskan salmon into the boneless and skinless fish portions that are increasingly favored by American consumers. But that's not so easy because Seattle processors are competing against the low wages and efficiencies of Chilean fish farms.

Icicle Seafoods a few years ago invested heavily in equipment to make salmon burgers, salmon fillets, and salmon steaks with sauces, but has recently been forced to return to the commodity salmon business. "We could not make it work, and ended up losing a fair amount of money," Hoard said.

Ocean Beauty Seafoods Inc., a $420 million Seattle seafood company that sells under its own labels and operates an extensive distribution network, has adapted to the influx of Chilean salmon by adopting it as a product line. Now the company distributes both imported farmed salmon and Alaska salmon it processes at its own facilities, selling them into different markets.

Bill Terhar, Ocean Beauty president and CEO, points out that cheap farmed salmon have fueled a steady increase in world salmon consumption.

"In the bigger picture, we are looking at a market that is expanding, and in a expanding market, you should see more opportunities for your product," he said.

Accepting the idea that farmed salmon are here to stay, marketers of wild salmon are seeking ways to distinguish their product in the eyes of consumers.

In Juneau, the Alaska Seafood Marketing Institute is about to launch a marketing campaign that will for the first time try to educate consumers about the differences between wild and farmed salmon.

"Do people care? Some people care passionately," said ASMI executive director Barbara Belknap. She said surveys indicate consumers are increasingly edgy about the antibiotics, growth hormones and dyes used in salmon farming, and about the farms' impacts on the marine environment.

Closer to home, the Puget Consumers Cooperative chain of food stores is promoting wild salmon, said PCC meat and seafood merchandiser Lee Pate.

"My hope is if we come out with a program, and have literature, that customers won't mind spending a little more on seafood, because they know we're getting it from a sustainable source," he said.

Reach Steve Wilhelm at 206-447-8505 ext. 113 or swilhelm@bizjournals.com.