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SALMARResults of the Finnish
case study
Jari Setälä, Kaija Saarni, Asmo Honkanen and Jarno Virtanen
Salmarmeeting in Turku 13.6.2002
The Finnish case of salmon and salmon trout
Growing demand for salmonids
Development of fish markets
0
20
40
60
80
100
81 83 85 87 89 91 93 95 97 99
1 00
0 to
nn
es
Salmon and salmon trout Baltic Herring
Other Fisheries Other import
Imported salmon replaces domestic salmon trout
Development of salmon and salmon trout market
0
5
10
15
20
25
30
78 80 82 84 86 88 90 92 94 96 98 2000
1 0
00
to
nn
es
Salmon trout Salmon landings
Imported salmon Imported salmon trout
Per capita consumption of salmon in Finland (salmon + salmon trout), France, UK and Portugal
0
1
2
3
4
5
75 77 79 81 83 85 87 89 91 93 95 97 99
Co
nsu
mp
tio
n, k
g/p
er
cap
ita
Finland UK France Portugal
Growing demand for salmon
Seasonal supply of salmon trout
0
500
1000
1500
2000
2500
1992-1
1992-5
1992-9
1993-1
1993-5
1993-9
1994-1
1994-5
1994-9
1995-1
1995-5
1995-9
1996-1
1996-5
1996-9
1997-1
1997-5
1997-9
1998-1
1998-5
1998-9
1999-1
1999-5
1999-9
2000-1
2000-5
2000-9
2001-1
2001-5
2001-9
To
nn
es
Import of salmonSalmon trout production
Supply of salmon trout and salmon
Imported fish dominates in summer
Average 1997-2001
Time of import
0 %
10 %
20 %
30 %
40 %
50 %
60 %
70 %
80 %
90 %
100 %
1 2 3 4 5 6 7 8 9 10 11 12
Importedsalmontrout
Importedsalmon
Salmontrout
Salmon: availibility, quality and image Salmon trout: processing
-4 -3 -2 -1 0 1 2 3 4
Competitive advantage of SalmonCompetitive advantage of Salmon trout
Salmon has bypassed salmon trout in the fresh fish market
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
Salmontrout
Salmon Salmontrout
Salmon Salmontrout
Salmon Salmontrout
Salmon
Whole gutted Fresh fillet Hot smoked Cold smoked Other product types
1993 1995 1997 1999Tonnes
The prices of salmonids converge
The development of salmon and salmon trout prices 1980-2001
0
20
40
60
80
100
80 82 84 86 88 90 92 94 96 98 20
Pri
ce,
mk/
kg
Imported salmon
Salmon landings
Salmon trout
A single salmon market in Europe
Salmon prices in Europe 1975-98
0
2
4
6
8
10
12
14
16
18
75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98
Pri
ce, €
/kg
Suomi
Ranska
Norja
Portugali
Iso-Britannia
Are salmon and salmon trout in the same market ?
Real prices of salmon and salmon trout 1992-2001
1,00
2,00
3,00
4,00
5,00
6,00
7,00
8,00
9,00
1992-1 1993-1 1994-1 1995-1 1996-1 1997-1 1998-1 1999-1 2000-1 2001-1
€/kg
Salmon
Salmon trout
Test Price 1 Price 2 Cointeg-ration
Proportio-nality
Trend - perfect price transmission
Exogenous price
Producers salmon trout Importers salmon Yes No Neither
Wholesalers salmon trout Wholesalers salmon Yes No Neither
Horizontal
analysis:
Salmon trout/
Salmon
Wholesalers salmon trout
fillets
Wholesalers salmon
fillets
Yes No Neither
Producers Wholesalers Yes Yes Wholesalers
Producers Wholesalers fillets Yes No Producers salmon
trout
Wholesalers Campaign prices Yes Yes Wholesalers
Vertical
analysis:
Salmon trout
Wholesalers Retailers Yes No Wholesalers
Producers Exporters Yes Yes Exporters
Exporters Importers Yes Yes Neither
Importers Wholesalers Yes Yes Importers
Vertical
analysis:
Salmon
Importers Wholesalers fillets Yes Yes Both
Salmon trout Salmon
Producer
Exporter
Producer
Wholesaler
Campaign
Retailer
Wholesaler
5%
9%
14%
Importer
56%
15%
20%
15%
Vertical co-integration:Salmon trout and salmon value chain in Finland
Direction of arrow =Exogenity 9% = Margin %15% = Price difference
Finland
Norway
Broken line = not proportional
Whole line = proportional
Declining salmon trout margins in the campaign sales
Difference between wholesale and campaign price (x=2,53 €/kg)
0,00
1,00
2,00
3,00
4,00
5,00
6,00
7,00
1995-1 1996-1 1997-1 1998-1 1999-1
Mar
gin
, €/
kg
Difference between margins (Salmon margin - Salmon trout margin)
-20,00 %
-10,00 %
0,00 %
10,00 %
20,00 %
30,00 %
1995 1996 1997 1998 1999
Dif
fere
nc
e in
pe
rce
nt
Wholesale margin of salmon higher than salmon trout margin
Concentration of value chain
Herfindalindex 1) , year 1999:
Producers 0,02 (competition)Wholesalers 0,04 (competition)Retail chains 0,26 (oligipoly)
1) H-index = sum(market share j)2
Conclusions
Salmon and salmon trout compete in the same market, but they are not perfect substitutes
The markets are competitive from producersto wholesalers
The role of salmonids for retailers is twofold: attractive campaign product/profitable business
Conclusions
Salmon margins higher than salmon trout margins
Wholesalers role is central
The price of salmon sold to Finnish marketis determined in the world market
SD-models
1. Analysis of salmon margins
2. Analysis of interaction between salmon and salmon trout
1. Salmon model
SFD Fresh Gutted WH Qty
SFD Frozen Gutted WH Qty
SFD Gutted Stock1 Qty
S F01 Qty
S F02 Qty
SFD Smoked Gutted Proc Qty
SFD Fresh Fillet Proc Qty
SFD Smoked Fillet Proc Qty
SFD Pickled Fillet Proc Qty
SFD Smoked Gutted WH Qty
SFD Fresh Fillet WH Qty
SFD Smoked Fillet WH Qty
SFD Pickled Fillet WH Qty
S F11 Qty
S F14 Qty
S F13 Qty
S F21 Qty
S F22 Qty
S F24 Qty
S F23 Qty
SFD Fresh Gutted Imp Qty
SFD Frozen Gutted Imp Qty
SFD Fresh Gutted Exp Qty
SFD Frozen Gutted Exp Qty
SFD Fresh Gutted Cons
Qty
SFD Fresh Fillet Exp Qty
SFD Smoked Fillet Exp Qty
SFD Pickled Fillet Cons Qty
SFD Smoked Fillet Cons Qty
SFD Fresh Fillet Cons Qty
SFD Smoked Gutted Cons Qty
SFD Smoked Fillet Imp Qty
SFD Fresh Fillet Imp Qty
S Smoked Fillet Waste Qty
S Pickled Fillet Waste Qty
S Fresh Fillet Waste Qty SFD Fresh Landings Qty
<Table S Smoked Gutted COEFF Qty Year> <Table S Smoked Fillet COEFF Qty Year> <Table S Pickled Fillet COEFF Qty Year>
S F12 Qty
Table K1
<Table S Fresh Fillet AverLife Qty>
Table S Smoked Fillet AverLife Qty
k
1. Salmon model
Annual average margins calculated using production cost data:
Margin = Real wholesale prices – calculated production costs
Raw material costs: Fresh fillet = 95 % of the total costsSmoked = 87 % Cold-smoked = 85 %Raw pickled = 84 %
0
10
20
30
40
50
1995 1996 1997 1998 1999Fresh gutted
Fresh fillet
%
0
20
40
60
80
100
120
1995 1996 1997 1998 1999Smoked guttedSmoked filletPickled fillet
%
Declining margins for fresh salmon products
2. Integrated model
Demand for SalmonDifference in
theInventories S
Desired Inventory Level S
Real Inventory Level S
Demand forSalmon to
Fresh Market
Demand forSalmon toProcessing
Global Demandin the Fresh
Market
GlobalDemand in the
ProcessingMarket
+
+-
+ +
Demand for Salmon Trout
Difference inthe Inventories
ST
Desired Inventory Level STReal Inventory Level ST
Demand forSalmon Trout
to FreshMarket
Demand forSalmonTrout to
Processing
+
+
-
+ +
+
+
-
AtractivitySalmonversus
Salmon Trout
+
Price of Salmon
Price of Salmon Trout
-
+
-
+
+
Imports of Salmon
Production ofSalmon Trout
Imports of Salmon Trout
+
+
+
Production rate
Capacity of SalmonTrout Farms
Adjustment Time+
+
+
+
+
+
+
++
Statistical analysis of elasticities
1) Ln Pstwh = 2.009 + 0.717 ln Pswh – 1.181 ln Qstprod
2) Ln Qscons = 9.709 – 2.725 ln Pswh + 1.891 ln Pstwh
3) Ln Qsproc = 5.004 – 1,272 ln Simp + 0.522 ln Qstprod + seasonal dummies
4) Ln Qstproc = 10.313 – 0.533 ln Psimp – 0.875 ln Pstprod + seasonal dummies
5) Ln Qsimp = 5.229 – 2.516 ln Psimp + 2.374 ln Pstprod
Salmon price is an external variable (determined in the world market)
Total market of fresh salmon and salmont trout stable
0
2000
4000
6000
8000
10000
12000
1995 1996 1997 1998 1999
Tonn
es (l
we)
Salmon fresh guttedSalmon Trout fresh guttedTotal fresh gutted consumption
The model works well, except 1999
-95 -97-96 -98 -99
Fresh Salmon for Consumption - Model and Real
800 Tonnes
625
450
275
100 0 9 18 27 36 45 54
Salmon Real RReal Real
Salmon Model
Fresh Salmon for Processing - Model and Real
500 Tonnes
375
250
125
0
0 9 18 27 36 45 54
Salmon Real
Salmon Model
-95 -97-96 -98 -99
The model works well, except 1999
-95 -97-96 -98 -99
Fresh Salmon Trout for Consumption - Model and Real
1,200 Tonnes
925
650
375
100 0 9 18 27 36 45 54
Salmon Trout Real
Salmon Trout Model
The model works well, except 1999
-95 -97-96 -98 -99
Salmon Trout Wholesale Prices – Real and Model 50 Markka
37.5
25
12.5
0 0 9 18 27 36 45 54
Salmon Trout Real Price
Salmon Trout Model Price
The model works well, except 1999
Conclusions
Aggregated demand of fresh salmon and salmon trout is stable
Salmon and salmon trout are competing products
In the fresh fish market consumer prefer salmon
In the growing market of processed products salmon trout has maintained its market share
Conclusions
The flows of salmon and salmon trout into Finnish market are determined by two main variables:
1) The price of imported salmon
2) The quantity of salmon trout production
World market prices fell in 2001
Price fall autumn 2001
0
500
1000
1500
2000
2500
3000
19
92
-1
19
93
-1
19
94
-1
19
95
-1
19
96
-1
19
97
-1
19
98
-1
19
99
-1
20
00
-1
20
01
-1
0,00
5,00
10,00
15,00
20,00
25,00
30,00
Import of salmon
Producer price of salmon trout
Salmon trout production
Development of salmon market in 1992-2001
Low world market prices
Price of salmon and salmon trout 2001
1,00
1,75
2,50
3,25
4,00
20
01
-1
20
01
-2
20
01
-3
20
01
-4
20
01
-5
20
01
-6
20
01
-7
20
01
-8
20
01
-9
20
01
-10
20
01
-11
20
01
-12
€/kg
Imported salmon
Salmon trout
Imported salmontrout
Import rose by 48 % in 2001
Import of salmon and salmon trout 1992-2001
0
2000
4000
6000
8000
10000
12000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Ton
nes
Salmon trout
Salmon
News in intrafish 9.4.2002
New market for fresh Norwegian sea-farmed trout emerging !
European fresh market is challenging Japan. Finland is hungry for Norwegian trout.
A six-fold increase in imports means that Finland is taking one third of the fresh trout being sent out from Norway.
Conclusion
Oversupply and low world market price ofsalmon combined with the minimum price led to import of low-priced salmon trout to Finland.