Losing values on variable quality
Portugal is the main market for Norwegian salted cod. But we are losing values based on variable quality. If Norwegian salted cod was of the same standard as that from Iceland in 2011, the export value to Portugal would have been NOK 120-130 million higher. This would have meant NOK 4.50 per kilo more from the fisherman.
Nofima scientists Morten Heide and Edgar Henriksen provide this example in a new report: “Variable quality in the value chain – how does quality influence profitability?” In 2011, the Icelandic quality in Portugal was paid Euro 1.06 per kilo more than the Norwegian quality.
The scientists have conducted interviews with industrial actors and exporters in the white fish industry, which they compared this with earlier work and official statistics. The conclusion is that despite rich stocks of exceptionally well managed cod stocks in coastal waters, the fish that is landed is of extremely variable quality.
“A significant part of the raw material from the coastal fleet is poorly bled and has gaping and damage from rough handling. These quality errors transmit to the end products and lead to poorer efficiency and higher production costs, lower yield, a lower paid product mix, lower prices for the end products, more complaints and a poorer reputation,” wrote the scientists.
The report refers to earlier studies that point out the fact that the gear types net and Danish seine score lowest in relation to quality.
“Large Danish seine catches in particular are perceived as creating the biggest problem when it comes to raw material quality. The fishery industry emphasizes that production errors can also occur that reduces the produce quality.”
What are the Icelanders doing?
What are the Icelanders doing to get more consistent quality and better prices in the market?
“We have looked at this in an earlier study. In Norway the net fishery has solid traditions. That was also the case previously in Iceland. But things happened in connection with the introduction of tradable quotas in Iceland that provided growth in the longline fishery at the expense of the net fishery,” says Nofima Scientist Edgar Henriksen.
“The large fishing vessel owners bought up the coastal quotas to such an extent that there was a counter reaction. The coastal fleet argued that hook-caught fish provided better quality. Consequently, the authorities connected the reallocation with hook-based gear types. In practice these rights were bought up by small autoline vessels that account for around 35 percent of the annual cod catch,” says Henriksen.
“Only trawling is larger with around 45 percent, while the net fishery is under 20 percent. The Danish seine fleet comprises of relatively small vessels that are in the main owned by industrial companies that give clear instructions about quality. In general we have a perception that both the fishermen and industry in Iceland have taken to heart that the market for fish is not on the quayside but instead out among the customers in international supermarkets,” he says.
Double the price for quality
“In the market for fresh fish, it is normal to receive one and a half to double the price for cod of the qualities “shiny packed cod” and “skrei” in relation to the price for industrial raw material.”
Calculations from fillet production demonstrate that quality in part constitutes the difference between profitable and unprofitable production,” says the scientists.
“Calculations we have obtained show that the difference between raw material that is free of quality defects and a batch with 40 percent “red” fillet may be as high as 23 percent. In addition, the production costs for raw material of poor quality are higher.”
The report gives examples of how some actors manage to achieve a better price in the market for high quality. This demands good communication with the fishermen, a good understanding of the market and a long-term approach. In order to increase the value of products of high quality, it is necessary to develop more market segments with a high willingness to pay, secure a good flow of raw materials and have a level of continuity that makes it possible to be able to supply over time.
Morten Heide and Edgar Henriksen point to the fact that there are complex reasons as to why such a large proportion of the coastal fleet’s catch is landed with reduced quality.
Fluctuations in spawning migrations and feeding migrations give from the outset a variation in the quality of the fish. Consequently, during certain periods there will be a requirement for gentler handling of the fish.
“There is a need for a good dialogue between the fisherman and buyer and it is clear that individual actors have both a responsibility and an opportunity to influence the quality in a positive direction. Nevertheless, over a long period large quantities of cod with obvious quality deficiencies have been landed from the coastal fleet.”
“There is therefore reason to believe that a systematic error in the whole industry segment (coastal fishermen and the white fish industry) is producing the obvious loss of values. Consequently, there is good reason to study whether and, if so, how the price system, fishery regulations and gradual reduction of public quality control has resulted in the major loss of incomes for the industry as well as the country.”
The report “Variable quality in the value chain – how does quality influence profitability?” is part of the Norwegian Seafood Research Fund (FHF) Cod programme.