The old Alaska Packers Diamond NN Cannery in South Naknek which provided 500 to 600 jobs in Bristol Bay before its closure in 1982/National Park Service

The history behind rock-bottom salmon prices

With Bristol Bay fishermen fuming over the rock-bottom low prices being paid for wild sockeye salmon this year, maybe it is time to revisit how we got to this point where one of the state’s once-most-valuable resources is trading for peanuts.

To summarize what happened in one word: Greed.

It’s a very human emotion, and both Alaska salmon processors and fishermen share it as do most humans to greater or less degrees.

And greed was running strong in the Bristol Bay fishery in the 1980s. At that time, Alaska pretty much owned the market for high-grade salmon, and processors and fishermen spent their time fighting over who was going to net the biggest chunk of profit.

Despite the high prices for at that time, commercial fishermen were as mad then as they are now. In 1981, fishermen went so far as to file a lawsuit against Bay processors accusing them of price fixing even as sockeye prices were soaring.

The processors won the suit, but most of them subsequently left Alaska either because they struggled financially or had just had enough of the far north’s once lucrative salmon business.

And it was lucrative for a time.

Prices paid commercial fishermen peaked at $2.88 per pound in 1988, which equates to $7.39 per pound in today’s dollars. Prices averaged $1.11 per pound from 1980 to 1991, which equates to roughly $3.14 per pound in today’s dollars.

This bonanza ended long ago.

The average price for the decade that ended in 2020 was, according to the Bristol Bay Regional Seafood Development Association numbers, about $1.28 per pound, which when corrected for inflation amounts to a decadal average of about $1.61 per pound or pretty close to half of what the same fish were worth in the 1980s.

The peak price paid for Bay sockeye in the 2020s, when corrected for inflation, was $1.94 per pound – close to a buck and a quarter less than the average price in the ’80s.

The story was even worse in the 2010s when the peak price, again adjusted for inflation, was $1.49 per pound.

So what happened?

Competition

Alaska fishermen and processors influenced the salmon market in a way they never anticipated.

The now unbelievable price of $7.39 per pound being paid for salmon at the start of the 1980s convinced Norwegian entrepreneurs that there was the potential to make a lot of money raising and selling farmed salmon.

Salmon farming was then a two-bit business with high production costs. When the ’80s began, commercial salmon fishermen – primarily those in Alaska – were producing about four times as much salmon every year as the farmers who’d found it hard to compete economically with salmon grown for free at sea.

“Atlantic salmon farming began on an experimental level in the 1960s and evolved into an industry in Norway in the 1980s and in Chile in the 1990s,” according to a “Salmon Farming Industry Handbook ” published this year by Mowi, Norway’s biggest farmer. 

As late as 1986, however, it was still costing Norwegian farmers more to raise a salmon than they could sell it for, according to data gathered for the World Wildlife Fund (WWF) by American researchers in 2007.

The farmers might at that time have abandoned what looked to be an unrealistic enterprise if not for the then sky-high prices being paid for the finished product.

They looked at the high prices for Alaska sockeye and realized that if they could get production costs down only slightly, they could make money.

They made money in 1986, and then they started making more and more money as they fine-tuned their farming practices.

Between 1986 and 2004, according to the WWF report – “The Great Salmon Run: Competition between wild and farmed salmon” – the farmers cut production costs by more than two-thirds.

Most of these savings came between 1986 and 1996 and as they did, farmers kept upping their production because now there was money to be made.

Alaska in 1990 banned salmon farming, fearing its coastal waters prime for such businesses and worried that if Alaska helped fuel competition by producing even more farmed salmon those fish might drive down the price paid for salmon overall.

On the Alaska economic front, the ban did nothing but foreclose on a potential new business opportunity for a state in need of new business opportunities.

Meanwhile, other nation’s were embracing farming. The Chileans were soon joining the Norwegian as major salmon producers.

The average “annual growth rate of the (Chilean) industry between 1984 and 2004 was 42 percent,” according to the WWF study.

And the Chileans weren’t the only ones getting into the game in a big way. The Scots were there, too, along with the Irish, Canadians, Faroe Islanders and eventually the Kiwis and the Aussies.

“In 1996, salmon aquaculture overcame the salmon fishing industry as the most important supplier of salmon products worldwide,” the WWF study said. ” By 2004, global production of farmed salmon exceeded wild harvests by more than one million
metric tons (per year).”

The market takeover by farmed salmon would likely have happened at some point in time no matter what happened in the Bay. Technology usually wins in the economic marketplace.

But were it not for high prices, the technology would likely to have been much slower to evolve. But high salmon prices undeniably fueled the farming boom.

Farm production has skyrocketed in the last two decades, resulting in the farmers taking over salmon markets even as wild salmon harvests in Alaska and Russia have crept above historic norms thanks to a warming North Pacific Ocean.

Statista, a data tracking website, reported that in 2021 farmed salmon accounted for 79.7 percent of global salmon production, and the trend toward farmed salmon and away from wild salmon is continuing as the farmers become ever more efficient.

This is technology at work. It has driven the course of humanity since homo sapiens first began to grow crops.

Predicting the future

The authors of the WWF report, among them Gunnar Knapp, then of the University of Alaska’s Institute of Social and Economic Research (ISER), saw the 2023 price crash coming almost two decades ago.

“Aquaculture offers great advantages over capture fisheries, such as consistency of supply, year-round availability, greater quality control and the possibility of longer-term contracts,” they wrote.

“In addition, the aquaculture industry is more attentive to and has a greater capacity to respond to market demands. As such, large restaurant chains and supermarkets will increasingly source their salmon from aquaculture.

“Over time, wild salmon is likely to be sold increasingly either in relatively small but growing higher-end niche markets which emphasize the salmon’s ‘wild’ characteristics or in lower-end markets, such as canned fish and frozen portions, for which wild salmon enjoys a cost advantage over farmed salmon.”

Copper River salmon fishermen are now famous for taking advantage of those “higher-end niche” markets. So claimed first-of-the-year, best-of-Alaska Copper River king salmon were worth up to $700 each in 2021,

A small number of these fish sold at high prices made a lot of money for Corodova-based fishermen and processors,  but most Alaska salmon are caught in large numbers and sold at low prices as is now the case in the Bay.

And aside from Copper River, Alaska has not done a very good job of differentiating its high-end niche products from the products sold in those “lower-end markets,” frozen pink salmon filets being a case in point.

Online reviews for Walmart’s “Great Value Frozen Wild Caught Pink Salmon” give the product an average rating of two out of five with 70 percent of the reviewers giving it a one.

Reviews on the Walmart website are headlined “Bad quality,” “Yuck,” “Gross,” and more.

“This was absolutely disgusting,” one reviewer wrote. “I was hoping they’d be firm by the time they’re defrosted but once that happened, it was totally mush. I will not be buying this again.”

The comments are a reflection of the quality control problem about which the WWF report warned almost 20 years ago:

“…Significant quality problems remain in many North American wild salmon fisheries, such as netmarks, external and internal bruising, and softness or mushiness. These problems typically result from lack of careful handling or temperature control after fish are caught.

“While there has been general agreement about the goal of improving quality, there has not been agreement about how to achieve this goal.”

Bay processors have recognized the importance of quality, which is why they are now paying bonuses for fish that are bled and quickly chilled. This improves the firmness of filets. And Bay fishermen, in general,  no longer throw live salmon around like footballs, which leads to bruising.

But there is not much that can be done about netmarking, and what happens in the Bay does not happen everywhere in Alaska where large volumes of salmon are still caught in short periods of time leading to problems in getting them all processed before they warm up and start to turn to mush.

“As the economic difficulties of the Alaska wild salmon industry increase, there is growing awareness of how the management system adds to costs and lowers quality, thereby adding to the difficulties Alaska salmon faces in competing with farmed salmon,” the authors of e WWF report wrote long ago. “At the
same time, there is strong resistance to changes in management, because of the economic and social disruption that such changes might mean.”

For their part, the processors and the fishermen in many Alaska fisheries have worked hard and invested significantly to improve the quality of their catch, but the salmon continue to be managed much the same as they have been managed since Statehood.

And the handling of wild-caught fish will never be as good as that of farmed fish which can go straight from swimming in a net pen into a processing plant where they are killed and almost instantly turned into high-quality filets.

Market consequences

How much the trickle-down effect of low-quality Alaska salmon has on quality Alaska salmon is hard to say, but one cannot help but wonder how the purchase of “disgusting” pink salmon by young, budget-minded consumers might affect their views of Alaska salmon as they age into the economic class shopping those “higher-end niche markets” on which the marketing of wild salmon has focused.

The wine industry, which should be the model here, has generally separated products as to quality by putting higher-quality wine in 750-milliliter bottles and lower-quality wine in jugs.

Alaska salmon was once similarly split between high-quality frozen filets and cans, but the premium paid for filets plus a growing disinterest in canned salmon, has pushed a lot of lower-quality salmon toward filets.

Canning was traditionally the “primary method for quickly preserving a large quantity of salmon in a shelf-stable form,” according to the Alaska Seafood Marketing Institute’s 2023 report on Alaska Seafood Supply Chains, but now about only “a quarter of the Alaska salmon harvest volume” goes into cans.

Canned salmon enjoyed a boom during the height of the pandemic when other seafood and meat supplies were sometimes in short supply, but that boom appears to have ended.

The biggest U.S. buyer of Alaska canned salmon is now the U.S. government, which has been heavily lobbied by the Alaska Congressional delegation to buy more and more fish.

Alaska processors, the ASMI report notes “generally produce talls (14.75 ounce cans), halves (7.5 ounces), and some quarters (3.25 ounces) – with no canning of smaller cans or pouches.”

Those talls are generally sold to institutional buyers or bought by the U.S. Department of Agriculture for use in school lunch programs. The lack of pouch packing in the state has also led to a significant volume of frozen, headed and gutted (H&G) salmon being shipped to Asia.

“The quality of salmon canned from a frozen product is thought
to be lower yet canning in a reprocessing country has other
advantages,” the ASMI rport says. “(But) manufacturers in Thailand can operate year-round and invest in processing equipment to serve emerging market preferences for smaller cans (eg., 80 grams cans increasingly sold in combination with crackers, salad packs, etc.) and pouches that appeal to younger, convenience-driven consumers.

“Canned salmon is (now) the largest category of salmon products exported from Thailand by both volume and value. About half of Thailand’s shelf-stable salmon products has been exported to
the U.S. in recent years.”

Canada and the United Kingdom (UK) are major markets for these product, but  the report warns that in the UK –  “the second largest market for direct export of Alaska canned salmon after Canada” – “an older, yet loyal, demographic of UK consumer… is declining due to aging. Some canned salmon retailers are seeing demand by a younger demographic for individual canned portions for salmon (e.g., 80 gram can size), as is available for tuna.”

U.S. sales of canned salmon are not so good even with the old folk.

“U.S. consumers have a taste for imported seafood,” as the ASMI report puts it, “particularly shrimp, tuna, and farmed salmon, although Alaska pollock, cod, and crab are among the top 10 seafoods consumed in the U.S. in 2020. ”

The report describes “Alaska seafood (as) an iconic brand in the American diet,” but goes on to list the Alaska seafood most preferred by non-Alaska-dwelling Americans as halibut and crab.

Shrimp, followed by salmon, are the seafood most eaten by American consumers in general, and when they turn to salmon it is primarily of the farmed variety from Canada, Chile and Norway on that list.

Canned tuna, it is worth noting, is third on the ASMI top-10 list of the main seafoods consumed by Americans. Canned salmon doesn’t make the list.

Whether American pets are now eating more Alaska salmon than their owners is an unknown, but there have in recent years been big increases in the volume of salmon and salmon waste ground into fish meal destined for dog food, animal feed and fertilizer.

Fish meal production is poorly reported, but a 2017 ASMI report showed salmon meal production nearly tripling between 2012 and 2015 and the upward trend appears to have continued.

The latest ASMI report does not say how much salmon is going into pet food, but the report does devote a section to that market (which indicate it is of some importance) wherein it is observed that “containers of frozen fish meal are shipped by Alaska seafood processors to pet food manufacturers, including in central and northwest U.S.”

Salmon that fed sled dogs vital for travel is Territorial Alaska is now helping to feed Lower 48 companion animals. What is old is new, but then a lot has changed in the Alaska salmon fishing business over the decades and not always for the good.

“The canned salmon processing industry in Alaska peaked in 1936 with over 160 canneries packing 8 million cases (each case contains 48 one-pound cans) of keta, pink, and sockeye salmon,” the ASMI report notes. “In 2020, only five primary processing companies canned salmon in Alaska.”

The state is littered with the sites of deserted canneries and, in some cases, the communities that existed hand-in-hand with those businesses.

And sadly, the communities still linked to the commercial salmon business are stagnating or fading as the technology pioneered by Norwegian processors starts to replace the imported workers who’ve long provided the workforce for processing plants.

Facility and support operations needing to be maintained by year-round residents of remote Alaska communities to provide for the needs of migrant laborers and fishermen in summer are destined to shrink shrunk as the number of needed summer workers goes down.

And it appears there has already been shrinkage.

The Bay fishing community of Naknek, which started the new millennium numbering 678, is now down to 470. South Naknek has fared even worse, shrinking by more than half from 145 year-round residents in 1985 to 67 in the 2020 census. 

Dillingham, a larger community on the north side of the Bay, is in better shape, but its population has still fallen from 2,466 in 2000 to 2,203 as of 2021. 

Meanwhile, the Bristol Bay Borough has dropped from a peak population of 1,580 in 1988 to 838 in 2021. But the fishermen who visit the Bay to fish each summer – most of whom now live elsewhere – still do well if….

If the fish return in large quantities, and if the price for those fish is good. The first if has always been iffy, and the latter is only becoming more so by the year.

There will always be a market for Alaska wild salmon given that the cost of producing those fish is zero. Nature provides for that. But markets set prices, and if the production doesn’t fit what the market wants, prices always go low.

Welcome to the Bristol Bay sockeye fishery circa 2023.