Objective and dynamic pricing
Nofima cooperates with the fishing industry to provide an objective source of information, so that it may be possible to design a new pricing system in the primary market for whitefish.
The work brings together information on everything from biological conditions along the coast and fish migration to the historical pricing of whitefish in Norway, Denmark, Iceland and the UK.
The reason for doing this is that there has been a lot of clamour, at times, around price negotiations between the fishermen’s cooperative sales associations and fish buyers. Over a year, prices can fluctuate quite sharply and make trading risky for the seller and buyer alike. The manner in which the price is determined can also result in long periods when the price the fishermen achieve does not correspond to what the market is willing to pay. This can give significant advantages or major drawbacks, for either the fisheries industry or for the fishermen.
Reflects market developments
The main objective of the project in which Nofima is now participating, is to identify possible indicators and develop a model that is suitable for establishing reference prices that reflect market trends for whitefish.
– A possible new system will contribute to market signals having a faster impact on the price, says Bjørn Inge Bendiksen, a scientist with Nofima.
The project is being carried out in association with the industry itself, represented by The Norwegian Seafood Association, the Norwegian Fishermen’s Association, the Norwegian Fishermen’s Sales Organisation and Surofi.
– This is a joint project. Nofima’s task is to find systematic and objective information that can form the basis for efforts to establish reference prices, says Bendiksen.
As the system is now, much depends on how good a job the various parties manage to do during the price negotiations.
– To develop a reference price that reflects market trends will, inter alia, entail price developments being increasingly understood in terms of market mechanisms, rather than the parties’ ability to predict some very complicated conditions and often unpredictable changes that cannot be influenced or foreseen. It will also help to raise the legitimacy in the pricing by the parties, says the scientist.
A wide range of material
The method to achieve this is to illuminate the price formation in both the Norwegian primary market for primarily cod, haddock and saithe, and other relevant primary markets such as Denmark, Iceland and the UK.
Thereafter, the scientists will illuminate the degree of historical correlation between the different primary markets and they will study the relationship between Norwegian export prices for various whitefish products, and whitefish prices in the primary market.
Based on the objective information that is collected, the cooperating group will be able to consider various reference price models and propose the most suitable model.
The Norwegian Herring Sales Association, for example, uses a method where the turnover for the previous 10 days forms the basis for pricing the next 14 days, and thus quickly absorbs market fluctuations.
– Many elements come into play. So just imagining that prices can be determined in a different way than earlier is in its self a mental exercise, says Bendiksen.
He is keen to stress that it is not given that they will find a better way of setting prices than the one presently being used, but the project will nevertheless give the parties access to much systematic knowledge.
– The work we are doing will simply show whether it is possible to find a systematic, objective and dynamic way of determining the price of fish, says the scientist.
The project will be completed by 31st January next year.