Survival of the fishers

By Hugh Stringleman

Thursday 8th April 2004

When the two biggest operators in the country's fourth-largest export business talk about merging, something must be fishy about the state of the industry.

Listed fishing company Sanford and sector leader Sealord Group, a private company, are in merger talks, in an attempt to rationalise the New Zealand industry and become more competitive internationally.

A merger would create a company that would have revenue of nearly half the net 2003 export receipts for the whole industry capture fisheries and aquaculture combined.

The merged entity would dominate the industry in fish quotas, trawlers, sales figures, employees and mussel farms.

It would have a serious world ranking for size by turnover or market capitalisation, operating in the 4.5 million square kilometres of New Zealand's large exclusive economic zone (EEZ), and adjacent deep-sea zones in the Pacific, Atlantic and Southern oceans.

Both companies own or have an interest in New Zealand's eight biggest factory trawlers, of 2000 to 3000 tonnes, which catch, primary-process and then freeze while at sea.

When not required in New Zealand waters, these ships can often be found near South America, picking Antarctic toothfish, or in Asian waters chasing skipjack tuna.

Sanford has investments and joint ventures in Canada, South America and southern Africa.

Both Sanford and Sealord are major players in the aquaculture industry, growing and marketing Pacific oysters and greenshell mussels.

The growth of these two companies, and others in the New Zealand industry, has been a success story since the EEZ was proclaimed in 1977.

Before then, as Statistics New Zealand said in the 2000 New Zealand Official Yearbook, fisheries management had consisted of ad hoc licensing of inshore fisheries.

"Fishing in New Zealand was basically a cottage industry, without the capacity to exploit deep-sea resources. Foreign vessels from Japan, the Soviet Union, Taiwan and South Korea had been exploiting these resources since 1965 ... and the government desired to regulate to ensure that there were enough fish left when New Zealand managed to develop a deep-sea fishing industry."

New Zealand is now held up as the best example of sustainable management of 50 quota species, plus the unique farmed greenshell mussel, sometimes called the only true indigenous protein export.

The 180,000-tonne New Zealand hoki fishery the country's largest and worth about $500 million a year was the first major one for whitefish in the world to gain certified sustainability from the Marine Stewardship Council.

New Zealanders now catch or harvest the majority of the country's exported seafood, which accounts for 90% of the total production. The industry employs 26,000 people and is estimated to contribute $3.5 billion to GDP.

But when its recent history was reviewed for the 2000 Yearbook, it was said that plans in the mid-1990s to build an export industry worth $2 billion a year had been abandoned as unrealistic.

Export earnings for 2004 may fall to only $1 billion they were $1.36 billion in 2001 and Sealord and Sanford are working on survival strategies.

Sanford is celebrating 100 years of incorporation this year, amid concerns about the viability of fish exporting in the future.

"A New Zealand dollar climbing towards 70USc makes it almost impossible for the industry to be profitable," Sanford managing director Eric Barratt told the company's annual meeting in February.

Sanford had declared an increased profit of $47 million for the 13 months ended September 30, 2003, but three-quarters of that came from foreign exchange hedging activities.

When the merger talks were announced, both companies complained of the high New Zealand dollar, high operating costs, particularly diesel, lower-than-expected catches of hoki (the largest export species) and difficult market conditions for greenshell mussels.

Trawlers are laid up around the coast and prices for most seafood types are at best stable on world markets.

In the first quarter of this financial year sales for Sanford fell 20% and it closed a six-person processing plant in Oamaru.

While not able to comment specifically on the talks with Sealord, Mr Barratt said New Zealand waters were not highly productive compared with those around countries like Japan and Korea.

"That is one reason we work with companies in other countries, where they appreciate our experience and technology," he said.

"New Zealand is doing the best in the world at managing its resource. The companies pay for most of the research and monitoring, agree to the quotas and then take on the responsibility of making sure we have the vessels to fish the quotas.

"Over 70% of fish production within our EEZ is caught by New Zealand-owned and crewed boats."

Internationally, traded fish is a $90-billion business more than the trade of grains, meats, or beverages, according to the United Nations Food and Agriculture Organization (FAO).

Global production from capture fisheries and aquaculture is 15% of total animal protein supplies, enough to feed each person on the planet 16kg of seafood a year.

What is called inland production (aquaculture and river fishing) accounts for 33 million tonnes and marine production (fish capture plus sea cages) is 100 million tonnes.

China accounts for a third of total world seafood production and 70% of world aquaculture, having grown rapidly from less than 10% of both measures in 1985. China also has 70% of the capture fish in the northwest Pacific, the world's largest fishing zone, having expanded its share threefold in the past 30 years.

The Pacific northwest (23 million tonnes) and the southeast (16 million tonnes) provide 40% of the world's catch. The southwest Pacific, controlled by New Zealand and Australia, and the southern ocean don't rate a mention in FAO's list of 10 most productive fishing zones not surprising when the total production in New Zealand's EEZ, which covers a major part of the southwestern Pacific, is just 600,000-700,000 tonnes a year.

Not only is China catching much more fish and producing most of the farmed fish, its northern ports of Dalian and Qingdao are the world's largest centres of fish reprocessing.

The cheap labour attracts frozen and semi-processed stocks from around the world for thawing and filleting before they are refrozen and shipped to major markets.

Norwegian and Russian boats, to name just two fishing nations, gut and dehead the catch of cod, pollock or hake before they are frozen and sent halfway around the world for the Chinese filleting.

The price pressure on many players is only too clear. The average income of a Chinese filleter is $US100 a month and the freight cost of fish fillets can be as low as $80 a tonne to Europe or $150 a tonne to the US East Coast.

But the biggest long-term threat to prices and returns from capture fisheries comes from aquaculture.

Just 4% of world fish production in the 1970s, aquaculture is now 30% and projected to grow to 50% by 2008.

Capture fisheries are not expanding, and production is static around 90-100 million tonnes.

"Half the main stocks or fish species groups are fully exploited and therefore producing catches that have reached, or are very close to, their maximum sustainable limits," the FAO's 2002 State of World Fisheries and Aquaculture report says. Another 20% of stocks is considered over-exploited and 10% significantly depleted or recovering from depletion.

Warning signs of fish population collapse are being widely reported and traditional fishing communities in many northern hemisphere countries are declining.

Total catches of haddock, redfish and cod from the northwest and southeast Atlantic have levelled out and remained stable for the past five to 10 years, at about half of the total maximums reached 30 years ago.

Aquaculture provides more stable, if not greater, returns on investment and is sustainable and much less demanding on fuel and fishing manpower.

Production can be planned all year round, dependent on grain supplies, protein meals and reliable spawning techniques. Prime species are now being farmed, such as salmon, snapper (or sea bream), tuna and even cod.

Alaskan fishers of wild stocks, who accounted for half the worldwide supply of salmon in the 1980s, now contribute only 13%.

Some 70% of the world market is farmed salmon, from Chile and British Columbia, at prices under half of the traditional wild Alaskan salmon. Ten years ago Alaskans could pay up to $250,000 for a commercial fishing permit, which now sells for $32,000.

Alaskan fishing interests are fighting back, contending that farms pollute waters and fish genetics, and are using the tags "healthy" and "sustainable" in all their promotions.

But consumers and further processors often prefer the farmed fish, like catfish, carp, tilapia, oysters and prawns. The flesh is often whiter and sweeter and invariably a little cheaper.

As with land-based farming, traditional fishing industries often receive government subsidies, estimated at 20% of the commercial value of the worldwide catch. Japan and the European Union are the major subsidisers.

Mr Barratt said New Zealand companies had a keen interest in the outcome of the WTO Doha round, with much to gain from the decoupling or elimination of subsidies.

Market access issues and subsidy effects are estimated to cost the New Zealand industry $100 million a year.

Mr Barratt said the industry was anxiously awaiting the lifting of the aquaculture moratorium and the passing of new fisheries legislation later this year.

While established operators like Sanfords have been able to expand recently on the basis of consents gained before the moratorium, it is obvious that aquaculture has a huge future in New Zealand.

MAJOR PLAYERS: Four Sanford freezer trawlers leave Port Chalmers accompanied by a freezer longliner. Sanford and Sealord both own or have an interest in New Zealand's eight biggest factory trawlers. When not required in New Zealand waters, these ships can often be found near South America, picking Antarctic toothfish, or in Asian waters chasing skipjack tuna

Comments from our readers

No comments yet