The moveable salmon processing plant of the future/Northline Seafoods

The price of progress?

As you read this, work is continuing in Bellingham, Wash., on a $40-million, federally financed, salmon-processing barge some think could revolutionize the Alaska fishing business.

By spring, the “Hannah” is expected to be ready to be towed north to an anchorage in Bristol Bay.

“Our refrigeration system freezes fish whole at temperatures colder than anyone in the industry, increasing both quality and shelf life,” says U.S. Department of Agriculture fianced Northline Seafoods. “With a cargo storage capacity of over 14 million pounds of frozen product, our barge carries Bristol Bay salmon to Western Washington where it can be processed to our customers’ specifications in the fall, winter, and spring.”

Northline CEO Ben Blakey has pitched the operation as a way to eliminate “large, shore-based processing facilities that are operated in brief, expensive seasonal periods. Salmon often spend multiple days in transit before being delivered to the processing facilities. High shipping costs outweigh the market value of salmon byproducts, and facilities may dump up to 30 percent of salmon weight back into the ocean ecosystem as waste.”

The consequences for rural Alaska communities built around salmon fishing and salmon processing would appear huge if Northline’s operation becomes a model for others, and even without it big changes for the communities still surviving as fishing villages appear on the horizon.

Losing property taxes paid on shore-based plants is just the tip of the iceberg. The shoreside plants also require seasonal housing for shore-based workers and year-round maintenance that helps sustain rural communities through the winter.

But these are changing times.

Northline’s experiment comes as Trident Seafoods, the state’s largest salmon processor, has announced plans to sell off about a third of its operations in the 49th state to help raise the capital to “modernize” its other processing operations.

Modernize is another word for automate. Automation is part of what helped Norwegian salmon farmers take over the global salmon business. More than 80 percent of the salmon eaten in the world today comes from salmon farms with Norway the biggest player.

And the Norwegians have taken automation to the extreme.

Maximizing efficiency

Nova Sea, one of the many Norwegian companies involved in farming, is now in the process of building an automated plant wherein a few dozen employees or less will be able to process 100,000 tonnes of salmon per year. That volume is about three-quarters of the unprecedented, record sockeye catch in Bristol Bay in 2022 and more than the average annual catch.

“In addition to keeping the company up with industry’s developments, the new slaughterhouse will also contribute to creating between 10 and 40 new jobs on the small island off the coast of Helgeland in the municipality of Lurøy,” the website WeAreAquaculture reports.

In Bristol Bay now, about 1,500 people per year are needed to provide the human power for the summer slime lines in the local processing plants, Brian Gannon, an employee recruiter for processors, told Dillingham’s KDLG public radio last year.

Leader Creek Fisheries in Naknek, one of those processors, says on its website that it needs about 400 seasonals per year and promises them competitive pay, plus airfare to and from Alaska with “room and board …provided at no cost,” and “all meals and break food..provided by Leader Creek.”

Maintaining the buildings needed to house these workers, stocking the supplies that are required to feed them when they are in Naknek, and both prepping for and winding down the fishing season is what helps keep the community of about 400 people alive year-round.

A 90 percent cut in the size of the summer workforce at the local salmon processing operation would be sure to cause significant, economic fallout. Even more economic chaos would come from the replacement of the plant with a barge that could be anchored offshore – with no need for onshore housing or food service and no property taxes – only to be towed south to the state of Washington for the winter.

Fishing has long been billed as Alaska’s largest employer thanks to the seasonal influx of processing workers from around the world, but there are strong indications the industry is about to lose that status as processors modernize because they really don’t have much choice.

In many ways, simply a continuation of a trend that dates back to the 1920s when, according to an Alaska Department of Fish and Game history, the Territory of Alaska boasted 160 canneries spread along the coast from Ketchikan to Bristol Bay.

Over time, they would slowly but steadily disappear. As of 2019, there were only 60 left, according to a National Park Service analysis that billed “the fishing industry (as) the third largest industry in the state of Alaska, behind the oil industry and tourism.”

The salmon processing industry started shrinking when salmon filets surpassed canned salmon as a consumer-preferred product, and again when processors realized the savings to be had by limiting the handling of fish in Alaska to heading and gutting with the carcasses then frozen and shipped to China, sometimes to be filleted and deboned by slave labor.

There were big advantages to that approach for more than a decade, but when former President Donald Trump in 2018 imposed tariffs on imported Chinese seafood, including reprocessed Alaska salmon, the economics changed.

But then the economics of most businesses are regularly in flux.

Market realities

Once Alaska owned the global salmon market, and 49th-state salmon became an unbelievably valuable commodity. In 1988, the price paid Bay fishermen for sockeye hit $2.35 per pound, the equivalent of about $4.45 in today’s dollars or almost nine times the record low prices being paid Bay fishermen last summer.

A steady increase in prices from the early into the late 1980s was largely driven by the demand for salmon exceeding the supply. Salmon farmers, primarily in Norway and just then beginning to industrialize the net-pen farming of salmon, saw the opening and successfully moved to exploit it.

Farmed salmon comprised 1 percent of global salmon production in 1980 but quickly grew to exceed the level of wild Chinook salmon harvests by 1983, the volume of Chinook and coho harvests combined by 1986, the volume of Chinook and coho plus sockeye harvests by 1990, and the volume of all Alaska salmon harvests by 1991, according to a timeline put together by Alaska economist Gunnar Knapp and colleagues.

The farmers were then just getting started. By 1996, the volume of salmon produced by farmers exceeded not just the Alaska harvest of the fish but the total global harvest of wild-caught salmon. And the bad news for commercial fishermen was that the more the farmers farmed, the better they got at farming.

“After almost 30 years of uninterrupted progress, salmon farming has achieved a very high degree of efficiency. Production costs have been declining continuously in the major-producing nations,” Knapp and colleagues observed in 2007. “Modern, well-run farms can produce salmon today at around $2 per kilogram (the equivalent of about 91 cents per pound), and in some cases even lower.”

Those involved in the Alaska salmon fishing industry were not ignorant of what was going on globally as the 20th Century wound toward an end, but their reaction – as has often been the case in Alaska history – was not to compete but to regulate.

In 1989, commercial fishing interests which have long dictated fishery policy in the 49th state convinced the Alaska Legislature to ban net-pan salmon farming.

Given that Alaska had more coastline suitable for net-pen farming than the rest of the nation combined, the belief was that a ban on net-pen farms in Alaska would slow farmed salmon production enough to maintain prices for wild-caught salmon.

What the plan mainly did, however,  was eliminate potential economic opportunities in rural Alaska, as had a 1970s decision to limit entry to the business of catching fish. But there was one exception.

The state both allowed and supported open-ocean farming of salmon using hatcheries run mainly by private, nonprofit associations controlled by commercial fishermen.

Instead of raising salmon in pens to minimize their interaction with wild cousins, open-ocean farming – or what its advocates prefer to call “ranching” – involved producing salmon in hatcheries, raising them in pens until they were big enough compete with or better their wild cousins at sea, dispatching them to graze the ocean, and then waiting for their return.

Alaska has had limited success in raising high-value Chinook, coho and sockeye in this way, but great success in raising low-value pink salmon, the smallest of the five species of salmon common to Alaska.

The open-ocean farming of pinks in Prince William Sound has kept fishing profitable for 267 seine permit holders, who averaged annual earnings of $325,000 in the 2010s, according to Alaska Commercial Fisheries Entry Commission data, and provided good-paying jobs for hatchery workers.

A 2019 report prepared for the Alaska Seafood Management Institute (ASMI) found that the 3,800 Alaskans involved in managing and raising salmon that year earned about $62,895 per person, nearly double the average $36,787 per person income the U.S. Census reported for the average Alaska worker that year and close to three times the average $22,811 earned by the  21,700 people processing fish in 2019.

Many of those processing jobs were once filled by university students on vacation for the summer, but they are now filled largely by foreign nationals.  This has helped processors hold costs down, but on an annual basis, humans are still more costly than machines.

Money, money, money

The problem that has kept Alaska processors from modernizing more to date than they have done is cost. While machines cut costs in the long run, they are unfortunately expensive in the short run.

WeAreAquaculture reported that Nova Sea was spending NOK 2 billion, the equivalent of about $187 million, to fully automate its new plant.

The company is working with well-known equipment manufacturer Baader, which has developed machines for sorting, gutting, beheading, fileting, skinning and deboning salmon. 

The two companies said they expect Nova Sea’s new plant to redefine “automation in fish processing,” which is already highly automated in Norway. The Scandinavian country has set the standard on this front in the fishing business for a long time, which has helped it become the global, salmon powerhouse it is today.

Of the more than 2.8 million metric tonnes of Atlantic salmon produced in 2022, Norway accounted for about 53 percent, according to the Food and Agriculture Association of the United Nations (FAO).

The Norwegian production of more than 1.5 million tonnes in 2022 was near nine times the combined Alaska catch of slightly more than 172,000 tonnes of sockeye, coho and Chinook, the fish that compete most directly with farmed salmon in the marketplace.

And 2022 saw an unprecedented Bristol Bay sockeye harvest of 60.1 million sockeye, “surpassing the previous record set in 1995 of 44.3 million sockeye salmon by 36 percent,” according to the Alaska Department of Fish and Game, and more than doubling the 20-year-average harvest of 29.4 million of the fish. 

The Bristol Bay sockeye fishery has been a big beneficiary of global warming, but not so much the people who fish it.

Competition with farmed Atlantic salmon cut the price per pound of Alaska sockeye about in half between 1990 and 2000. Since then, pricing has largely been dictated by the price of  farmed fish, at least until last season when Alaska processors went into the summer with freezers still stuffed with unsold volumes of frozen salmon from the record Bay catch in 2022.

Again the law of supply and demand kicked in with supply this time far exceeding market demand. With wholesale salmon sales lagging and cold storages stuffed, Alaska processors had little incentive to pay much for more salmon.

Better to buy low, drop prices on the salmon already in storage to at or below costs to move it, and then, hopefully, with the lower prices upping demand, take the profit on salmon bought at a significantly lower price.

The record low price of 50 cents per pound reflected that reality. Going forward, the good news for the relatively few Alaskans who hold commercial fishing permits is that processors are likely to be able to raise prices if they lower their costs of production.

“Our model creates a high-quality product (and) provides increased economic opportunities for fishermen” is how Northline bills this. “Moving forward, these prototype technologies will change the way Alaskan seafood is processed, stored and traced from the fishing grounds all the way through the supply chain to the customer.”

Time will tell whether those claims prove true, but there is at this time no reason to dismiss them. Northline is likely to be able to pay fishermen more for their catch because of lower production costs, and its faster processing and freezing is likely to produce a better product for consumers given the biggest problem in seafood quality control is stopping decay that begins the minute a fish dies.

The way the system works now – with fishing boats hauling their catches to tenders and tenders delivering huge loads of fish to shore-based processing plants – a study published in Nature Food in December estimated a 10 percent quality loss for wild-caught sockeye salmon.

The study specifically noted the problems inherent to Alaska with a group of researchers from across the country led by David Love from John Hopkins University observing that “in the Alaska sockeye salmon fishery, processors have incentivized fishers to deliver higher-quality fish by paying extra for chilled and bled fish and for using methods that reduce bruising of fish tissue. These practices result in higher-quality fish, which has allowed processors to shift away from selling canned salmon and instead sell fresh or frozen fillets at a higher price point. These shifts also have an unintended consequence (in) that food loss and waste (FLW) is shifted towards the consumer because fresh products have higher rates of FLW than canned products at the retail and consumer levels. One strategy to focus on quality while maintaining lower rates of FLW is to sell frozen fish.”

But that strategy comes with problems, too.

‘Interviewees in the sockeye salmon supply chain in Bristol Bay, Alaska, noted that utilization of byproducts was a challenge, mostly due to the short, intense fishing season and isolated geographic location,” the researchers said. “Sockeye salmon are caught during a few weeks in July, and processors explained that all of their resources, including labor and cold storage, are dedicated to the most valuable parts of the fish. Some sockeye salmon processors convert byproducts into fishmeal and oil, but many others grind and dump byproducts into the sea. Interviewees stated that if the fishery operated more months of the year, plants that would use all of the byproducts would have been built in the area; however, high shipping costs for remote regions such as Alaska remain a challenge.”

The Northline model could well help solve these problems, but the implications for rural communities in Alaska loom large.