News analysis
Ÿnsect, a French insect farm, has just raised $125 million in startup capital to mark the biggest agtech funding deal in European history, according to AgFunder News.com.
And half a world away in Alaska anyone should care why?
Chaos theory maybe. A butterfly flaps its wings in New Mexico and causes a hurricane in China.
The hurricane or snowpaclypse or whatever the fallout coming from Ÿnsect, if the company proves as successful as its investors hope, is in this case aimed smack at Alaska’s commercial salmon fishing industry, the oldest segment of the 49th state’s traditional economy and still the state’s second-largest employer even if most of the jobs are highly seasonal and require a lot of imported labor.
As the company name Ÿnsect suggests, Ÿnsect is in the business of farming insects, mealworms to be specific. And what do meal worms have to do with Alaska fisheries?
They are, as AgFunder reports, “ingredients for fish feed” and part of Ÿnsect’s “effort to capture some of the $500 billion animal feed market. The startup is one of 50 insect farming groups that have collectively raised $480 million to-date, according to the International Platform of Insects for Food and Feed (IPIFF), an EU-based association for the industry. In 2018, members of the association produced 6,000 tonnes of insects in 20 countries.”
Insect-based feedstock is the second wave of a fish farming juggernaut that has already taken over global salmon markets and appears destined to make wild salmon an ever smaller player in the marketplace.
Alaskans can comfort themselves all they want with suggestions of how wild fish are “better” than farmed fish, but better without demonstrable differences to the consumer is a hard sell, especially when the competition comes in the form of bigger and bigger businesses with more money to finance their own promotional campaigns.
Tidal wave
Farmed salmon already control the price paid for wild salmon with competition certain to constrain prices in the farmed sector going forward. Once industrial agriculture gets rolling its productivity capabilities are hard to believe.
Alaska wild fish markets are increasingly up against the unstoppable power of technological innovation.
The conclusion was not unreasonable at the time. A global death rate that had been falling steadily since the start of the 1960s ticked upward in 1964, and though it resumed its descent in the years that followed, it seemed only logical that food production couldn’t keep pace with population growth.
As it turned out, however, the Ehrlichs’ prediction was badly wrong. The so-called Green Revolution that began in the 1950s exploded into the 1960s and global agricultural production suddenly began outpacing population growth.
“The developing world witnessed an extraordinary period of food crop productivity growth over the past 50 years, despite increasing land scarcity and rising land values,” Prabhu L. Pingali of the Bill and Melinda Gates Foundation wrote in a history published by the Proceedings of the National Academies of Science of the United States of America in 2012. “Although populations had more than doubled, the production of cereal crops tripled during this period, with only a 30 percent increase in land area cultivated. Dire predictions of a Malthusian famine were belied, and much of the developing world was able to overcome its chronic food deficits.”
In that paper titled “Green Revolution: Impacts, limits, and the path ahead,” Pingali also took a shot at assessing “Green Revolution 2.0.”
“By 2050, global population is projected to increase by about one-third, which will require a 70 percent increase in food production,” he wrote. “Harnessing the best of scientific knowledge and technological breakthroughs is crucial for GR 2.0 as we attempt to reestablish agricultural innovation and production systems to meet today’s complex challenges.”
Pingali didn’t use the words “Blue Revolution,” but there seems be one on the horizon with Atlantic Sapphire’s “Bluehouse” salmon farm soon to come online in Florida, and Nordic Aquafarms planning similar, on-land, recirculating aquaculture systems (RAS) to raise salmon in Maine and California.
Where mealworms undermine the complaint that salmon farms ecourage overfishing of bait fish, RAS systems eliminate complaints that salmon farms could pollute coastal waters, although the Monterey Bay Aquarium Seafood Watch, which had once been leading the fight against farmed salmon, has already concluded a lot of those problems have been resolved.
Farmed salmon now top the Watch’s list of “Best Choice” salmon recommendations.
Future world
Commercial fishing isn’t going the way of market hunting any time soon, but it will slowly head in that direction. Not because of the decimation of the wild resource – science-based management has made it possible to both use and conserve wild resources – but because of market economics.
Unless, of course, wild-fish harvesters evolve their operations.
Technology; it’s all about technology, and Alaska – sad to say – is on the wrong side of the technological curve. Alaska commercial fisheries use outdated gear in outdated ways to harvest fish in wholly inefficient ways.
Most of this is by design and cemented in place by state regulation. It was a wonderful system when the resource was valuable and spreading the harvest among as many fishermen as possible created good-paying jobs for many.
It will become increasingly bad as it creates poor-paying jobs for just about all. Cook Inlet is already home to a salmon fishery unprofitable for most commercial fishermen. That is likely to become the norm in most other fisheries other than the seine fisheries for pink salmon.
Seiners in Southeast Alaska have already managed to put together a permit buyback program that reduced the size of the fleet, thereby ensuring fewer fishermen to share the catch. They thus make up for falling prices per pound with higher volumes.
But going forward, the seiners have more than that going for them. For one thing, they are one of the most efficient Alaska fisheries. For another, they are fishing a species of salmon on which the price has likely bottomed out.
Pink salmon flesh is unlikely to get much more valuable in the future than it is now – unless maybe someone comes up with a salmon patty the world will actually eat in volumes – but pink salmon roe will remain a hugely valuable commodity because it is a product the farmers do not produce now and likely will never be able to produce efficiently.
Efficiency is the issue here. Markets reward efficiency, and efficiency is the name of the game for fish farmers. As the BBC reported only last week, salmon farmers “are turning to lasers, automation and artificial intelligence to boost production and cut costs.”
“How do you know if farmed salmon have had enough to eat?” the story asked. “Well, according to Lingalaks fish farms in Norway, which produce nearly three million salmon each year, the fish make less noise once the feeding frenzy is over.”
Lingalaks believes it can use hydroaucostic listening devices to determine when the fish are satiated and feed that information back to already computerized feeding systems to tell them to turn off the food supply.
It is believed the system could save Norwegian fish farms more than $100 million per year on wasted feed. And if the system works in Norway, there is little doubt it will soon be everywhere.
Adapt or die
Competition is a wonderful thing. It also has a bad habit of playing havoc with existing markets. When exactly was the last time you rented a video from Blockbuster, once a $6 billion a year company that rose to number 366 on the Fortune 500 list of the top U.S. businesses before simply fading away?
For someone in the journalism business, the fishery tech problem hits very close to home. Newspapers, radio and television once owned the information market in this country.
No more.
Their product didn’t change. News is still news. What changed was the method of delivery.
Newspapers, radio and TV were and are costly to produce. The internet is cheap. The internet radically shifted the economics of production at the same time it fragmented the product model.
Old media are now only bit players in a market dominated by various forms of social media. Quora with its often inane questions about nothing – “why is the sky blue?” or maybe even better, “why is there a sky?” – attracts almost as many eyeballs as the New York Times, the top-ranked news site in the country.
Markets are fluid. They flow toward profit. Alaska salmon fisheries are a place where there was money to be made in the past. Salmon farms, on the other hand, represent a place where there is money to be made today.
One can adapt to this or become Blockbuster.
“Aquaculture will be more able to take advantage of technology than wild fisheries,” he said then.
Day by day, it only becomes more obvious he was right. Anyone who has any doubts can simply follow the money. The investment is flowing to farmed fish and the technology that supports them.
Anyone who thinks simple “quality” can compete with this is naive. The biggest restaurant company in the world is McDonald’s. It isn’t selling the world’s best food. It’s selling a relatively tasty product at a relatively low price point.
So are the salmon farmers.