News analysis
Unfortunately, what is good news in the short-term could well prove to be bad news in the long-term.
How can this be?
Simple. Alaska is on the wrong side of shifting means of production. It’s in the typewriter business in a computerizing world.
Nordic Aquafarms announced just days ago that it is prepared to invest $400 million in a land-based, recirculating aquaculture system (RAS) to raise salmon in Humboldt, Calif.
The handwriting is clearly on the wall.
Alaska is organizing cattle drives while the rest of the world is building feed lots. The cowboys can tell you how this played out. Industrial agriculture is a tank that rolls over the competition and grinds it up in the treads.
Higher prices and positive prospects for growth will only encourage more farming.
See no evil; hear no evil
Commercial fishermen in Alaska hate to read this and dismiss any discussion of the future of one of the state’s largest industries as some sort of attack by non-commercial fishermen – personal-use dipnetters, subsistence fishermen and anglers engaged in some nefarious plot to increase their 1 to 5 percent share of the harvest of the salmon resource.
If only that was true.
Unfortunately, the real issue is about the fate of a significant segment of the state economy. There are some depressing parallels here with Alaska’s natural gas.
Alaska is sitting on an estimated 45 to 200 trillion cubic feet of natural gas on the North Slope. It is one hell of a resource, and it is at the moment worth almost nothing because the costs of getting it to market exceed the revenue it is likely to produce.
Twenty-five years ago, it looked inevitable that Alaska would witness a gas-fueled economic boom in the same way it had experienced an oil boom in the wake of the Arab oil embargo. It seemed only a matter of time.
“(Author Matt) Simmons wasn’t the only one to think that a natural gas crisis was imminent. In fact, it was widely believed that this would be the case, and companies began to plan and build liquefied natural gas (LNG) import facilities to cope with the expected shortfall. Natural gas prices began to spike ever higher during 2005, and the Henry Hub Gulf Coast Natural Gas Spot Price crossed $15 per million British thermal units (MMBtu) by year-end.”
The federal government began planning for a gas pipeline from Alaska’s North Slope to the Midwest. That was the pipeline of which former Alaska Gov. Sarah Palin in 2008 famously said:
“I fought to bring about the largest private-sector infrastructure project in North American history. And when that deal was struck, we began a nearly $40 billion natural gas pipeline to help lead America to energy independence.
“That pipeline, when the last section is laid and its valves are open, will lead America one step farther away from dependence on dangerous foreign powers that do not have our interests at heart.”
She would never get close to the White House, except to visit, and there would never be a single shovel of dirt turned to start construction on the pipeline.
Oops
What happened?
Markets are what happened. With gas prices skyrocketing, oil and gas producers had a big incentive to find some way to increase production and make money.
Enter human ingenuity.
Legendary oilman George Mitchell, as Rapier writes, combined an old oilfield production technique – fracking – with a new one – horizontal drilling – to spark a revolution.
Technology changed everything.
Drilling horizontal “laterals…5,000 to 10,000 feet in length, and hydraulically fracturing them enabled economic oil and gas production for the first time from shale formations scattered across the U.S.,” Rapier notes.
“From 2005, U.S. natural gas production rose for 10 straight years. The previous production record set in 1973 was obliterated as production grew 50 percent from 2005 to 2015 to reach 27 Tcf. In the process, the U.S. became the world’s largest natural gas producer.”
With supply going up and demand fixed, gas prices went down. It was simple micro-economics. And plummeting gas prices torpedoed the planned natural gas pipeline from Alaska to the Lower 48.
The Federal Office for Alaska Gas Line Projects was eventually shut down. Major oil producers on the North Slope got together with the state to try to figure out an economical way to get gas to tidewater on Cook Inlet to make profitable the shipment of LNG to Asia.
They faced problems and said they wanted to slow the project until markets improved. Former Gov. Bill Walker, who ran on a campaign of “build the gas pipeline,” jumped in and took over. Walker spent four years and tens of million in state money going nowhere.
The pipeline is no closer to reality now than it was 40 years ago because the market isn’t receptive.
Salmon fisheries are better off. It is much easier to ship salmon than natural gas, and Alaska salmon were established in the market before competition arrived. In fact, there was a time when Alaska basically owned the market.
Thanks to that ownership, Bristol Bay sockeye salmon prices peaked at over $2 per pound in 1988. Adjusted for inflation, that would be $4.26 per pound today. Bristol Bay sockeye last year had a base price of $1.26 per pound.
Bristol Bay sockeye are among Alaska’s most valuable salmon. Prices are expected to increase slightly this year based on projections of a 26 million fish harvest – down from a near record 62.3 million last year.
But no one in the fisheries business expects prices to ever again come anywhere near what they were in 1988.
Fish farms
Alaska might have banned fish farms in the state in 1990, thinking it could continue to dominate salmon markets. But all the state really did with that move was create an opportunity for the Norwegians, the Chileans and others.
Salmon farmers did such a great job of raising fish in 2017 that they glutted the market, according to the Food and Agriculture Organization of the United Nations. But despite that down, the projections for salmon markets all point up.
Wild fish, he predicted, will increasingly become a niche product occupying a smaller and smaller niche with its value controlled by the far greater volume of farmed fish.
Alaskans and especially Alaska fishermen have long clung to the notion that the idea “wild is better” will steadily increase the value of the Alaska salmon occupying this niche. Think premium wine versus jug wine.
But this view is debatable and looking increasingly unlikely.
“You’d be hard-pressed to find an organic, sustainable operation that can match the latitude of Superior Fresh,” an RAS operation in Wisconsin.
“‘We have no chemicals, no antibiotics, no pesticides and are non-GMO – even our fish food is certified organic,’ said Kurt Wagaman, general manager of Superior Fresh. ‘To grow what we have on about two-acres under glass, you’d need about 60-acres of conventional land.'”
Fish went on to effuse on how “Superior Fresh raises about one pound of fish for every 1.1 pounds of food that’s put into the system. According to Brandon Gottsacker, president of Superior Fresh, that’s a very efficient feed conversion ratio.
“‘On top of that, we’re using all that nutrient-rich water that the fish pass on to grow an additional 10-pounds of produce,”‘said Gottsacker. ‘That’s 1 pound of input into the system and 10 pounds of healthy organic food out of the system. So that’s flipping the scales with agriculture inputs versus outputs, and it’s pretty special.'”
Alaska started the all-about-quality/all-about-sustainability confrontation with claims wild is inherently better than farmed. The farmers, a much-bigger player in the market, are now flipping that pitch back on Alaska.
As Nordic Farms Commercial Director Marianne Naess told Seafood Source, part of the company’s strategy has always been “to place our facilities close to the markets.
“‘The Humboldt location will enable us to reach more than 50 million people within a 12-hour drive or less, which reduces the cost and environmental impact of transportation while supplying the market with super-fresh, sustainably raised local fish.'”
Locally grown. Environmentally friendly. Affordable or at least comparatively so. Super fresh.
Naess hit all the hot buttons for today’s supermarket customer. It’s obvious the threat to Alaska’s salmon economy are real. It would be foolish to ignore them.
The validity of that warning becomes only more clear by the month from Atlantic Sapphire in Florida to Nordic Farms in California to the Chinese sinking deep water salmon farms offshore in the cooler waters of the Yellow Sea.
“We can’t predict – or maybe even imagine – the changes technological innovation may bring. Self-driving smart fishing gear? Integrated algae-based open ocean aquaculture? Fully-automated seafood processing & distribution?”
But nobody has to imagine anything to recognize what the tech innovations have in common: increased efficiency. Alaska commercial fisheries today are largely designed and/or regulated to be inefficient. Inefficiency is seldom a good survival strategy.
I was a supplier to a local aquaculture attempt designed around using farm fish, tilapia I think in this case, to provide nutrients to plants in essentially a mostly-closed system. Despite there being zero chance of any fish entering local waterways, the “fish farm” ban made the project ultimately nonviable. This was a scaleable and reproducible project that could have worked in the Bush to provide fresh produce and protein and local jobs.
It’s not just salmon that we are talking about.
Here is some recent information on what ocean acidification is doing to some sea critters: https://www.juneauempire.com/news/scientists-southeast-alaska-vulnerable-to-ocean-acidification/
unfortunately for us, fortunately for the farms, RAS farms don’t need to worry about antibiotics or toxic chemicals because they’re closed systems. nothing gets in, such a sea lice of IHN or other pathogens that would require treatment.
and the “dye” is simply astaxanthin, which occurs naturally in plankton, algae, krill and shrimp. thef farmers can feed those things to get varying degrees of red-colored flesh, or they can use artificially produced astaxanthin.
but either way, it’s astaxanthin – the same chemical our fish ingest. well except for those “white kings” and the occasional white pink i’ve encountered.
and their fish don’t consume microplastics. i understand the weight of some Alaska salmon has now been calculated at 2 percent microplastics. i just made that up, but i did so to illustrate the point that it is really easy to spread misinformation.
the red dye scare, or attempt thereto, is misinformation. it’s an attempt to tie salmon farms to Red Dye #2, which caused a panic in the ’70s although there is no RD#2 in use in hatcheries. http://content.time.com/time/specials/packages/article/0,28804,1896348_1896354_1895874,00.html
Oh Craig, you’ve been around so long, chanting and railing against Alaska commercial salmon fishing. As a 42 year long salmon Kodiak fishing family, I invite you to come to Kodiak and visit our family’s operation firsthand..It is so much easier to castigate fellow Alaskans, whom you demonize, from your armchair. Alaska wild salmon is a huge draw here in Humboldt County where I sell about 1300 lbs a year at the Farmers Market,..farmed salmon will never replicate the taste and quality of our wild salmon. People trip over themselves to buy it from a fishing family. No matter what you call farmed salmon, its an industrialized, artificial, mechanical way of producing protein that cannot replicate or replace the vast social, cultural, human and economic importance and aspects of fishing for our wild salmon..ever.
Lacey: I’m glad you found a good market for your fish, and I commend your entrepreneurial spirit.
How the hell you formed the opinion that I was railing against Alaska commercial fishermen or castigating anyone by writing about market realities is beyond me.
As to your observations on industrial agriculture (no matter the form) you are right that it is a mechanical business. And if you are trying to say it ignores social, culture and human issues, you’re also right.
Industrial agriculture is a ruthless commercial machine that seeks to produce the best tasting product at the lowest cost, and that’s the problem. Low costs mess up our markets, and despite what you might believe about your taste and quality, farmed fish have been winning in blind taste tests because they can be raised and handled in totally controlled environments.
That makes me glad to hear you went to direct sales. It is great move for those Alaska fishermen with the business acumen to pull it off. The state should probably be doing more to help support the people who can and want to set up those sorts of operations.
But on the broader scale, in the world in which most of the industry functions, Alaska is facing future problems. Alaska hatcheries with all those pink and chum salmon – which are now showing indications of out-competing sockeye, coho and Chinook in some areas – are looking like they could be our bright spot given their ability to produce roe, a high-value commodity the farmers don’t produce.
Against that backdrop, it is interesting to ponder what Alaska’s fishing future looks like.
Craig, you’ve railed against commercial fishermen for probably 30 years, now. And for most of that time you’ve been calling for it’s (commercial fishing) demise due to farmed fish economics. So far it’s just been so much B S. I suspect that’s still the case.
Fwiw, fisheries management is usually based on controlling the efficiency of the harvesters, while commercial fishers are focused on improving their efficiency. Its an interesting dance!
As a former commercial salmon fisherman I will never buy a farmed salmon. As an investor I am however considering investing in some of these new RAS producers, the upside is huge and the downside…well would be a massive reversal of historic population and socioeconomic trends, in which case my investments will be devalued anyways.
There will always be a place for wild Alaskan salmon. Grassfed beef, free range cattle, free range chicken, Kobe beef, Waygu beef, Iberico ham, champagne, scotch…the list goes on and on, there is no reason to think that a premium product marketed in the correct manner would disappear.
Hey Steve O,
I think that as our oceans become more toxic, the appeal of wild salmon will probably diminish. Hopefully, we can clean up our oceans before they are just a massive dump for the world…
Cheers!
Jack,
You hit the nail right on the head…
Many people are moving to an Organic “plant based” diet for just that EXACT reason…
With fracking and natural gas leaks in the Cook Inlet as well as 58 million gallons of raw sewage flowing out of Anchorage daily, I am not sure I will eat these fish again.
“According to the EPA, only 32 sewage treatment plants out of 21,604 in the U.S., get the waiver. Of those, Anchorage’s is the second largest, trailing only San Diego. Every other wastewater treatment system in the nation meets the Clean Water Act criteria of tertiary treatment, which is about three times more effective.”
https://www.google.com/amp/s/www.adn.com/anchorage/article/will-anchorage-plant-get-another-waiver-dump-waste-cook-inlet/2013/06/19/%3foutputType=amp-type
Steve,
I think Los Anchorage partially treats their sewage, so it isn’t classified as “raw” sewage…but I could be wrong. The tidal flow does a great job of flushing the toilet at the head of the inlet! I wouldn’t catch and eat a wild Alaskan salmon anywhere near Los Anchorage, even if they are just passing through. Many, many Alaskans travel to the Kenai every year to pull salmon out of water that they are advised to wash their hands and shower after touching. They do this while cutting open and exposing the flesh of the meat they will consume. The Kenai sewage treatment plant is at the mouth of the Kenai River, the Soldotna sewage treatment plant discharges directly into the Kenai River. Not exactly the last frontier picture that many think of when they think of delicious, non-shit tainted, Alaskan salmon.
Yet another Medred ‘commercial salmon fishers are dead people walking’ hit piece. Coming here is to read only and most certainly not to think, unless one is living the movie, ‘Groundhog Day’.
Monk, not everyone agrees with your antipathy for Medred. He does a very good job in researching before he publishes. You may not like his conclusions. But instead of making a personal
attack why don’t you make a factual argument and point out where he is mistaken. It would be productive and welcomed. Remember, no one forces you to read his pieces.
Almost as predictable as one of your comments, Monk… Maybe dial back the snark and actually contribute an opinion once in a while. Or not. Whatever.
Cheers!
I was in Bristol Bay in 1969 and worked for Nelbro Packing Co (owned by BC Packers), the actual fish processors were Filipinos, who came from CA, WA & the Philippines. The salmon roe techs were all Japanese, as in all salmon processors in AK, at that time.
Since then, US college students (Hillary Rodham worked the slime line in Valdez, one summer), Eastern Europeans and now (last ten years) Mexican nationals on 6 month work visas, do all the salmon processing in AK.
Trump wants to stop that all. Dump Trump is my new slogan!
How many Alaskans are willing to work 15-16 hour days for $9-10 am hour. We need these workers. Same with Nordic Aquafarms, they will be low paying jobs for majority of workers. Good luck with that in NW California, it ain’t done yet. We will see if it all works out.
Salmon Roe: what does the sport, pu and subsistence fisher do with the eggs, after they have cleaned their bounty? I would venture to guess, majority of it gets thrown into the water. Now that is a waste!
In 2018 majority of AK salmon processors still had Japanese roe techs, processing all the salmon roe, reason why Japanese companies buys 100% of the #1 grade A roe. The rest of the roe gets sold to China, who then illegally ships it to Russia (because of US sanctions). China does care a hoot about regulations, sanctions or US law, all they are concerned about is making money.
Would you purchase any Chinese seafood product? All the chemicals and toxins, they put in their processes seafood, that is imported to US, has made me think again. Their organic certifications are all bogus, and they are still producing synthetic fentanyl, which not so smart Americans ingest in record numbers. The real joke is on us.
Salmon Roe, from AK, is a product, that will only increase in value. The Russians, Japanese & China all want the eggs.
Not enough roe to meet demand, reason why AK salmon are increasing every year. There will always be a market for AK salmon, due to no alternative for salmon roe. Sea urchin, pollock & cod roe do not compare.
The oil plants in Cordova, with 97% recovery rate, has made the high price for salmon ex vessel sustainable.
Another note: Vietnam has become the world leader in farmed shrimp and prawns, mostly imported to US. Their fishing fleets is decimating the ocean of all types of seafood to make into fish feed. Sooner than later, they will run out of fish to catch. China knows this, hence their dive into aquaculture. There is not enough seafood to meet the worldwide demand, it will only get worse.
I am not concerned with AK salmon prices in the future, it looks pretty rosy to me. It is all about the roe and oil.
This article leaves out the fact that sea lice, one of the great hazards of farmed fish in Chile and Washington, decimated two or three years of production of farmed fish. The fishermen of Alaskan wild salmon reaped the benefits of higher prices for salmon during those years. And the ban of farmed fin fish (which we supported and then helped write regulations for shell fish mariculture) was not just for market share. We studied the biological issues with farmed fish in other countries, in their salmon streams and in the ocean pens which broke in storms and scattered Atlantic salmon all up and down the Pacific waters. We also looked at the corporate structures of who owned the salmon farms. Commercial fisheries of salmon in Alaska all went to small Alaskan fishermen who supported the coastal towns of Alaska and still do. For all the written comments about outside fishermen stealing Alaska’s salmon look at the true facts and figures of limited entry permits for Alaska. In nearly every case it is 75% or above owned by Alaskans and supporting our State to this very date. The exception to the is Bristol Bay which has a nearly equal number of Outside fishermen but is still half owned by Alaskans. Look up the true numbers. Big corporations still own fish farms and pay works hourly benefits while salmon permit holders pay by a percentage of the catch, 10 to 12% for each crew member ordinarily which means thousands of young Alaskans have paid their way through college on earnings from salmon fishing. There are more issues going on here than can be explained in one paragraph but it is more complex than simplistic generalizations.
That’s a very nice comment, but factually it is 110 percent wrong on the history.
The state of Alaska study concluded, as did the Washington state study, and the NOAA study (https://www.westcoast.fisheries.noaa.gov/publications/aquaculture/noaa_memo_net_pen_salmon_farming_sept2001.pdf) that biological risks in allowing salmon farming were low.
That risk assessment hasn’t changed. Meanwhile, there is growing evidence that salmon ranching – into which the state jumped with both feet with no studies – could now be harming wild salmon stocks due to issues of density dependence.
Alaska voted to ban salmon farming for pure and simple economic reasons. The belief was that it would limit competition in the market place. And, indeed, there are no Alaska farmed salmon competing in the market.
Unfortunately, however, Norwegian and Chilean salmon have taken over the marketplace, and our ban – as an economic measure – has proven about as successful as the U.S. War on Drugs.
You are right about lice outbreaks. There have been a number of those, and every one has helped raise salmon prices thanks to the simple laws of supply and demand.
Sadly for us, the farmers have learned from every outbreak, and keep coming up with better ways to stop the next outbreak. The problem we face is a technological problem.
Technology begats ever better technology. My first computer was a piece of shit compared to the Dell I’m typing on now. The first salmon farm was a piece of shit compared to those of today and those of today will be shit compared to those of tomorrow.
On land RAS systems, you might note, solve the lice problem once and for all because there is no way for the lice – a wild, living organism regularly found on our salmon – to get into the system.
We have problems.
As to limited entry, you’re half right. The total numbers are as you state them, but if you look at the valuable permits – the permits on which one can actually make a living – the picture is different from what you present.
Fifty-four percent of Bristol Bay drift permits are now owned by non-residents along with 47 percent of Southeast seine permits. Those are high value fisheries. http://www.akleg.gov/basis/get_documents.asp?session=29&docid=64890
And I’d expect that there are a few people in both fibbing about their Alaska residency. Get them properly quantified and the numbers just go up. And on a purely local level, the Bay has lost a lot of permits to urban Alaska.
People moved to where life is easier. Hard to criticize that. I live in Anchorage and damn but life is easy in the city. But the permit shift hurts rural Alaska just as the nonresident harvest hurts all Alaskans.
Nonresident commercial fishermen aren’t like nonresident anglers. The latter come here, leave a lot of money and take home a few fish even if they fill their biggest cooler. The former come here, leave comparatively little money, and take out a lot of salmon.
A lot of salmon.
The last time I looked at the data, the catch distribution remained near what it has been since ’89 when nonresidents first started accounting for more than 50 percent of the annual commercial harvest. https://www.adfg.alaska.gov/static/regulations/regprocess/fisheriesboard/pdfs/2012-2013/bristolbay/cfec-12-04-n.pdf
Follow the money.
Big corporations do own most of the fish farms, no doubt about that. Some of the same corporations also own the Alaska fish processing plants. And there are few fish processing operations in this state not owned by big corporations, although Bob Penney – the ogre of the Kenai – happens be involved in on of the small companies involved in Alaska salmon processing.
I do heartily agree with your observation that the issue is complex. It is complex enough that I have spent a lot of time looking at it and have yet to sort out whether Seattle now has a greater influence over Alaska fisheries than it did before Statehood or a lesser influence, but I’m leaning toward the former.
If you travel around this state, there are a lot of abandoned fish plants or fish plants sites. Those all once employed local Alaskans. Those all once required winter caretakers. Those all once helped support people living in-country. Those are all, by and large, gone.
Thanks for posting.
Craig, have you not kept up with what has happened in WA? Icicle Seafoods sold their Puget Sound fish farms and then the shit hit the fan. One fish farm collapsed last year, releasing over 400K sterile salmon into the water. Tribal fishers harvested them all the way up the Skagit River. As a result WA legislature has banned fish farms in WA waters, they will all go by 2025. The Canadian First Nation has petitioned the Canadian government to remove 10 BC fish farms ASAP, and the rest in next 5 years. These farms are a toxic chemical mess, soon to be gone, reason why Nordic Aquafarms are moving to land based production. We will see if it works.
How about the state management costs turn into the first take cost recovery fishery so that the expense of running these “commercial” fisheries are totally covered, then charge a 10 percent totality on the resource use that goes into the permanent fund.
Or wait, should the state just continue to subsidize the managements of these “commercial” industries.
Chris,
That was my thoughts a few months ago.Its going to require out of the box thinking.And a lot of sacrifice on the part of the various fleets.The sooner the subject i broached(or any other reasonable alternative),the better.
I think we as a species abhore change,but thats life.
Here’s the weird thing: All that overhead to raise a farmed fish yet it is competitive with people who simply net them out of the ocean.
Maybe we should go back to fish-traps to increase harvest efficiencies. A giant co-op.
well, one of the big reasons we got rid of fish traps was their efficiency.
the overhead to raise farmed fish has been coming steadily down because the technology keeps getting more and more efficient. we locked in inefficiency, which will put us at a steadily increasing disadvantage.
salmon convert lower grade food forms to tasty protein more efficiently than chicken or pork, and the next big cost reduction coming down the pipe is likely to be in feed. i’d expect more and more farmed salmon will be eating what trout, grayling and salmon smolts eat: insects.
https://www.feednavigator.com/Article/2018/10/25/Norwegian-salmon-producer-trials-Skretting-s-insect-based-salmon-feed
Another note on farmed salmon efficiency:
The Chileans are number the #2 largest world exporters of farmed Atlantic & Coho salmon. They have fishing fleets harvesting the pink shrimp, which are dried and turned into fish feed. Without that ingredient Chilean salmon would be gray in color. They are currently not fishing in a sustainable fashion, one day the waters of South America will be devoid of all sea life, that is currently harvested to turn into fish feed. Exactly what happened to yellow fin tuna and the sardine fisheries in Southern CA, they were overfished to extinction. Where does the canned Tuna you buy in grocery store come from? SE Pacific, which is also being overfished. Reason why US government and other countries are going full bore on aquaculture. They have too! The only sustainable seafood area in the entire world is Alaska. Thank goodness that sustainability was inserted in our state constitution.
Ask Nordic Aquafarms, what antibiotics, red color dye and other toxic chemicals they plan to use in their land based salmon farms?
No Thank You!