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Fisheries Rationalization

This is an article I wrote some time back pondering the problems that faced the Alaska seafood industry and its user groups in 2000…

September, 2000

Several decades ago my Legislative colleague Senator Clem Tillion commented on the state of the Alaska fisheries, “Bankruptcy is the epsom salt of the capitalist system.” This quote has been bubbling up from my subconscious in recent years as another marshal sale for a Bering Sea crabbers is advertised, a real estate broker calls begging to sell a fish processing plant in Astoria, Kenai, Kodiak or Dillingham and the Fishermen’s Journal publishes listings of prices halved for Bristol Bay drift permits.

Dramatic change swept through the salmon industry in the Pacific Northwest a hundred years ago. Massive bankruptcies and cannery closures provided the opportunity for a new company to form called the Alaska Packers Association. At one time APA controlled 80 % of the canned salmon pack in the Pacific Northwest. Consolidation and rationalization are not modern concepts. The economic pain of those who lost investments and jobs is long forgotten.

The current Bristol Bay Salmon industry provides a good example of the unrationalized seafood industry and today’s economic conditions in many fisheries. The number of processors has quickly constracted with only eight buyers this season, a third of a few years ago. Some quit; some took a dose of epsom salt and the smart ones sold while they could. Fishers have watched each winter as their investments in vessels and permits have declined. Some fishers paid $ 200,000 to $ 300,000 for permits only to see them fall to $ 45,000 in value this winter. For the first time in decades the number of drift and set net fishers in the Bay will decline this summer. Highly valued deckhand positions a decade ago go unfilled or are eliminated to cut costs. In nearby Togiak the herring gillnet fleet sliced itself in half in a single year to rationalize.

Today those segments of the seafood industry in our corner of the planet that are not rationalized to provide competitive cost products in the global seafood market are in trouble. The traditional salmon, herring and crab industries are enduring a series of market, production and regulatory changes with commensurate brutal financial impacts. Three major changes have impacted the seafood industry.

First, the strong US dollar has reduced the value of exports of seafood. The majority of our seafood is exported causing across the board product value declines. The corollary is that our foreign seafood competitors can also import their products to the US market either more cheaply or pocket expanded profits. Second, aquaculture for salmon and many other products has dramatically expanded in the last two decades. In many cases the race to build more farms has resulted in the expansion of product volumes in excess of consumer demands and prices have declined. Third, regulatory change most visibly driven by Greenpeace and the Stellar Sea Lion issue has restricted catches and increased costs for the seafood industry.

These changes demand that our industry change our cost structure if we desire to compete and sell our products in the world market place. We should not feel unique. The American agriculture industry and other resource industries are impacted by the same global economic forces. In Eastern Washington beautiful fruit orchards are being plowed under to make way for Chinese orchards. In Idaho potato producers stare at large inventories that cannot compete against potatoes produced by Canadians across the border with devalued currency. Agricultural subsidies by the US government are the primary survival mechanism for American farmers according to recent national studies.

Rationalization by design is an option for the seafood industry. In the last decade Canada has worked to significantly change how fishermen and processors do business so that the industry could survive and return to health. In Alaska the pollock industry has been radically altered by the American Fisheries Act creating a much healthier bottomfish sector. The IFQ system dramatically altered the economic viability of halibut and blackcod fishermen in both the US and Canada and eliminated the derby fishing downward economic spiral of past decades.

All of these rationalizations were controversial. There were winners and losers at the time those changes were implemented. All of these changes were brought about because the industry members faced a more horrible alternative……the epsom salt treatment administered over a protracted period of economic malaise.

It is about pain. We fear change because of the unknown features of change and the pain it might bring. When the pain of our current economic downturn increases and tips the scales and appears to be less than the pain of the unknown, we will finally dive into the pool. How much pain does our industry need to experience before we are ready to navigate the unknown waters of our future?

Change will not be easy. The seafood industry is fragmented. We are populated by thousands of fishermen, many different fisheries and myriad processors. We are sprawled over thousands of miles of coastline with complex and diverse regulations and histories. We are an industry of fierce competitors, buccaneer egos and self-made individualists.

But, change has been accomplished before in our industry without epsom salt or an Alaska Packer Consolidation and it provides us a model.

In the 1970’s leaders of fishermen and processors presented plans and ideas supported by a consensus of the industry. Out of this efforts in Alaska came the Limited Entry System, the Alaska Seafood Marketing Association, the Alaska salmon hatchery program along with the federal creation of the Magnuson-Stevens Act and the 200-mile limit. These and many other changes and programs assisted the industry in a rising tide of expansion and economic prosperity. Later the IFQ and American Fisheries Act followed proving our industry can gain consensus, government support for change and implement new programs creating broad based economic reform.

At this juncture leaders are needed to step up representing the various segments of the industry. A forum needs to be established to have serious discussions and a goal established to develop a broad based consensus for change. Without a broad base of consensus any plans for change are dead on arrival. Government leaders are not going to step in and sort out an industry consensus.

The traditional salmon, herring and crab fisheries of Alaska have sustained economic decline for fishermen, employees and processors. The choice is ours. If we chose not to seek dialogue and consensus for a plan to return our industry to better health, the shelves are always full of epsom salt. Which will it be?