As the Alaska Board of Fisheries meets in Anchorage to discuss the fate of Cook Inlet salmon fisheries, the potentional bombshell that has been but a rumor since fall has finally slid into the light.
“The shakeout has begun: Alaska salmon processors struggle to survive,” the website Intrafish is now reporting. The story below the headline is about the financial troubles of Alaska’s major fish processors and the consolidation that has been the subject of much behind the scenes rumbling for months.
The problem for processors, according to a variety of sources, is that a lot of them paid too much for sockeye and then bought too much with quality suffering during a Bristol Bay heatwave that coincided with a monster catch.
Processors are now reported to be sitting on expensive to operate freezers full of fish while fish buyers are looking to Russian sockeye, which also came back in significant numbers this year but was better handled and is reported to be of higher quality.
Lurking in the background of all of this is the long problematic issue of farmed salmon which now dominate the market and can be handled with kid gloves from pen to table given the ability of farmers to tightly control how many fish are delivered to a processor on any given day and how.
Intrafish’s John Fiorillo writes of the “weakening, frail condition of Alaska’s salmon processing industry” as it tries to deal with this change. But the top “trending story” linked at the bottom of Fiorillo’s Alaska report might say more about the situation than anything.
The top executive in question is Anders Marthinussen, a veteran of the Norwegian fish farming business, who is reported to be joining Pure Norwegian Seafood which “supplies raw material to Balik, a company based in Switzerland, that offers its finished product for NOK 6,000 (/$650) per kilo.”
That translates to about $295 per pound. So much for “wild” Alaska salmon being the market’s premium product. Even the much-hyped, first-of-the-year, Copper River king salmon – the small number of which come and go quickly in late May and early June of every year – have only been attracting prices in the $60 range.
Copper River salmon prices do, however, remain in generally in good shape compared to those of the salmon caught commercially in the Inlet where prices have been doing nothing but going down for years now.
And Inlet fisheries – commercial, sport and personal use – are at the moment the topic before a Board trying to determine allocations between these competing interests. All have stressed their importance to the local, regional and statewide economies.
But given the lack of independent analysis, the economics are the hardest part of the equation for Board members to get their hands around. Still, the future for the Inlet’s commercial fishery does not look bright.
“The absence of the (Inlet) sockeye salmon over 6 pounds has taken Cook Inlet out of the premium market,” the United Cook Inlet Drifters Association complains in a September reported titled “Issues Concerning Salmon Yields in Upper Cook Inlet, Alaska.”
Sockeye have been generally shrinking in size for a decade. Scientists Greg Ruggerone and Jennifer Nielsen have theorized the fish can’t compete well with an explosion of fast-growing pink salmon in the North Pacific Ocean.
Sockeyes spend years at sea maturing before returning lake-based drainages to spawn. Pinks, on the other hand, spend only a year at sea and are genetically programmed to eat like little pigs in order to grow to spawning size in that time.
UCIDA says the average sockeye size is now down by a pound, and “UCI sockeye are competing with the marketplace where 3 to 5 pound and 4 to 6 pound sockeye are plentiful. Cook Inlet has lost the premium market position.”
Were this not enough of a problem, the paper goes on to warn that the large volumes of sockeyes caught in commercial nets in recent Augusts aren’t worth much.
“The August component of the sockeye harvest no longer are graded #1,” the report says; “now it’s mostly #2 and dog-food grades. Annually, the August sockeye component costs the industry in excess of $2 million” in lost revenue.
UCIDA’s answer to these problems of smaller fish worth less money and lower-grade August fish is to fish more earlier, lower the spawning escapement goal for the Kenai River to enlarge the commercial catch, and expand August fisheries for those “dog-food grade” sockeye.
Sport fishing groups at war with commercial fishermen contend the August sockeye fisheries are really nothing but an excuse for gillnetters to go to sea to catch coho (silver) salmon, a highly prized sport fish that returns in much smaller numbers than the sockeyes.
When the Alaska Department of Fish and Game turned drift netters loose in the Inlet on the last day of July 2017, they caught more coho than sockeye and then claimed it was an accident.
Andy Couch, a fishing guide on the then coho-starved Little Susitna River, said at the time that he felt like he’d been kicked in the teeth by state fisheries managers. Couch had sent a letter to then Commissioner of Fish and Game Sam Cotten, a long time commercial fishermen, begging him not to open the north end of the Inlet to protect the coho.
Cotten never responded to the letter and the state followed up with another commercial opening in the area at the start of August when more “dog-food grade” sockeye were available. Cotten is now gone as commissioner, but the Kenai commercial fishermen who swayed him remain an active and powerful group fighting any changes in Inlet salmon management.
The present management scheme, which gives a priority to commercial harvests in July, has already cost the state hundreds of millions of dollars in lost tourism business according to a respected economics firm that studied the issue for the Matanuska-Susitna Borough north of Anchorage.
Mat-Su interests want to shift management more toward sportfishing, but they are up against powerful interests even as a fishing industry built around chasing wild fish struggles to compete with modern agriculture in the form of salmon farms.
“The magnitude of this change, in addition to the variability of Alaska’s wild salmon runs and the overcapacity of the state’s aging processing infrastructure, has long-time processors such as Peter Pan Seafoods, which recently went up for sale, struggling to stay afloat,” Fiorillo wrote.
“There is no doubt that times are tough for many Alaska salmon processors. Some executives say the past season was one of the worst in decades (despite a banner year for the fishermen in Bristol Bay, Alaska’s largest sockeye producing region) and has brought many processors to their knees. Critics blame the current state of affairs on the companies themselves, arguing that they neglected to invest in their plants for decades and now are suffering for it.”
Along with Peter Pan, Ocean Beauty and North Pacific Seafoods are struggling. Cooke Seafoods, which already owns Icicle, is reported to be in negotiations with Ocean Beauty.
A Canadian company that got its start as a salmon farming operation, Cooke bought Petersburg-based Icicle in 2016 hoping to capitalize on the large volumes of relatively cheap wild salmon available in Alaska.
It is now reported to be in discussions to buy Ocean Beauty, apparently believing in part that the managers there are better equipped to manage the shifting Alaska market.
“Most who participate in the sector will tell you a major rationalization and restructuring of the Alaska salmon processing industry is in motion,” Fiorillo reported. “But what is the value of some of the traditional salmon processors such as Ocean Beauty or Peter Pan? Most of them have old plants that lack automation. And it is hard to see where the money will come from to upgrade these plants, given the slim margins and less than stellar profits in recent years.
“One thing most agree on is there is just too much salmon processing capacity in the state.”
Fiorillo’s report could be read to argue it’s time for Alaska to start adapting to a changing world, but change is seldom something that comes easily.