The consequences of overproduction in Prince William Sound/Facebook

Plan to prop up AK commercial fishing

Alaska’s Five-Year Plan for the Production of State Salmon is out with a scheme for the mother of all bailouts of the commercial salmon fishing industry.

Ok, ok. This isn’t the plan’s actual title. The actual title is “Joint Legislative Task Force Evaluating Alaska’s Seafood Industry.”

But if the plan only set some goals, it would so nicely mimic the five-year plans of the failed Union of Soviet Socialist Republics (USSR) that it’s hard to avoid labeling the plan for what it is, a Soviet-style effort to pour government funds into industries that costs more to manage and oversee than they produce in value for the state.

In this case, the Legislature wants to, among other things:

• Expand the regulatory bureaucracy of the Alaska Department of Fish and Game and add more state bureaucracy to a proposed Alaska Department of Agriculture.
• Throw money at the  “planning” that has eaten up tens of millions of dollars in state funds in recent years with few if any results.
• Spend yet more on advertising Alaska fish.
• Help finance housing for the low-paid, non-resident, seasonal workers – a good share of them imported, foreign labor – who now make up 82.8 percent of the fishing industry labor force, according to the state Department of Labor.
• Buy back fishing permits.
• Further subsidize loans for commercial fishermen.
• Subsidize insurance for processors.
• Pay to expand the Responsible Fisheries Management (RFM) certification program, a state-backed alternative to the Marine Stewardship Council (MSC) that has questioned the sustainability of some Alaska fisheries.
• Fund cold storage and further subsidize electricity costs in those parts of rural Alaska with commercial fisheries.
• Expand ports “with an emphasis on loading/unloading efficiency and cold storage integration in high-volume fishing ports with access to multi-modal transportation infrastructure, e.g. airports, railroads and roads. (If you thought the battle over a road to King Salmon was something, just wait for the battle over the railroad to Dillingham.)
• Give the University of Alaska more money to “solve technical and operational challenges in fisheries.”
• And advocate for even more federal fishery disaster relief, more U.S. Department of Agriculture (USDA) purchases of Alaska seafood the market doesn’t want, and a change in “federal vessel construction policies” to provide for cheaper boats Alaska fishermen could finance with subsidized state loans.

Surprisingly – or maybe not – the plan offers no estimate of the cost of all this. Neither does it mention the state’s last big investment in the seafood industry.

That came in the late 1990s when the state first loaned money to finance a state-of-the art fishi processing plant near the Anchorage International Airport, and then, in November 1998, bought that plant for $48 million, the equivalent of $100 million today.

The plant was such a bad investment that it appears someone went to some trouble to bury its history in the tubes. Some serious Google searching is needed to find any history of the operation, but there is this from Alaska Journal of Commerce reporter Tim Bradner in December 1999:

“It’s five months late, but Alaska Seafood International Inc. began commercial production at its $125 million seafood plant in South Anchorage Dec. 13.”

And then there is this from the Alabama Baptist about four years later:

“An Anchorage, Alaska, church is putting a 21st-century twist on Jesus’ example to be ‘fishers of men.’ The state of Alaska has agreed to sell an old fish processing plant to an evangelical church for less than half of what it cost to build the plant.”

The fish processing plant subsequently became the ChangePoint Alaska Church and indoor sports complex. The church turned the sports complex over to a nonprofit that went bankrupt in 2010 at which point the University of Alaska jumped in to help bail it out. The facility functions today as “The Dome” run by Anchorage Sportsplex Inc. 

The ChangePoint Church next door is still going strong in the old, 168,640-square-foot processing plant where it advertises almost 60,000 square feet of warehouse space for rent. The building’s history as a state-of-the-art processing operation designed to produce packaged meals is largely forgotten although the state once had high, high hopes.

“The most positive employment development for Alaska’s seafood industry in years could be the opening of the Alaska Seafood International plant in Anchorage later in 1999,” the Alaska Department of Labor reported May 1999. “The plant will face extreme challenges, but if all goes as planned there could be 450 new manufacturing jobs in the seafood processing industry by the end of 2000.”

A little history

For younger readers educated in American schools that don’t teach history all that well these days, the USSR was something of a totalitarian, Euro-Asian copy of the United States of America made up of 15 Soviet states, the largest of them Russia, and later an assortment of Eastern European nations – Poland, Czechoslovakia, Hungary, East Germany, Romania, Bulgaria and Albania – that the Soviets occupied and took over after World War II.

Ukraine, which many will have heard of since it is much in the news these days, was one of the original and arguably most productive republics in the original USSR. It was once known as the “breadbasket of the USSR” for its production of huge amounts of wheat. 

Ukraine, which had been part of the USSR since its founding in 1922, broke with the USSR after the latter collapsed 34 years ago. For some reading this, that will seem like a long time ago. For others, 1991 was just sort of yesterday.

The North Pacific was in 1991 still the world’s leading producer of salmon with Alaska and the USSR annually vying for the honor of the world’s biggest salmon harvest. Of the approximately 1.25 million tonnes of salmon produced around the world that year, close to 75 percent came from the North Pacific, according to a report published by Gunnar Knapp, the dean of Alaska fishery economists, in 2012.

The dominance of North Pacific salmon would quickly change in the years ahead, however, due to Norwegian entrepreneurs who pioneered the domestication of salmon and made salmon farming – like the farming of beef, pork, chickens and turkeys – a big, big business.

By 2023, Kontali, a Norwegian-based company that analyzes the fishing industry, was reporting a global salmon harvest of 5.2 million tonnes of salmon – almost five times the production of 1991 – of which wild salmon comprised 1.09 million tonnes or about 21 percent with the majority of that –  690,000 tonnes or 63 percent of volume – made up of low-value, pink salmon from Russia and Alaska, as the website Fish Farming Expert reported.

The combined U.S. and then-Russia production of high-value wild salmon – Chinook, sockeye and coho – had by 2023 fallen to less than 10 percent of market volume, establishing an economic parallel between the former USSR and Alaska.

The USSR collapsed in 1991 because of the inability of its products to compete in a globally driven, market economy just as the Alaska fishing business is collapsing now.

Flash forward to the present time with the 2024 Alaska salmon season being billed as a total disaster with fishermen paid only $304 million for their catch of 101.2 million salmon, a decent harvest by the standards of the 1950s, ’60s, ’70s and early ’80s but now the second smallest in the 21st Century.

Meanwhile, the farmed salmon business is booming. The Norwegian Seafood Council reports the farmers in that country exported salmon worth 10.9 billion NOK (about $972 million) in January of this year alone. Sales to the U.S. for January were reported at about $98 million.

In this regard, the Alaska Task Force report did get one thing right:

“The global aquaculture sector continues to increase supply while achieving consistent quality and year-round availability – often at lower cost than Alaska producers.”

Competition

The Norwegian farmers have long competed aggressively with both each other and foreign salmon producers to sell high-quality fish. In Alaska, there has been limited competition between a small number of processors and, in most years, the harvest is dominated by low-quality, low-value pink salmon thanks in part to state-funded salmon hatcheries that were later handed over to the associations of commercial fishermen that now run them.

The state government’s role in subsidizing the hatcheries and the federal government’s role in regularly bailing out both fishermen and processors with disaster aid, along with purchasing surplus salmon via the USDA when processors end up sitting on more frozen Alaska fish than the market wants has only served to make the Alaska salmon fishing business ever more Soviet-like over the years.

As San Jose State University economist Thayer Watkins once observed of the Soviets, “there were many economic problems for the Soviet Stalinist system. One very general problem was the lack of incentives for productivity.”

This failure of Soviet-style business coupled with the vast amounts of money the USSR funneled to its military to try to stay competitive with the U.S. as a “world power” eventually ended, Watkins wrote, to the Soviets calling “off the Cold War. (And) when the justification of an external threat was removed, there was no reason for the Russian public to tolerate the totalitarian regime and the political system fell apart.”

Alaska has now been in a war with global salmon farmers for more than four decades and has lost battle after battle after battle. Instead of accepting this reality and letting markets decide what will or won’t work in the 49th state, however, the industry has been propped up by the state and federal governments.

Misguided decisions

The beginnings of this mess can be traced all the way back to Alaska Statehood when the decision was made to ban fish traps, the most efficient means of harvesting salmon. This was done in the name of creating more Alaska jobs by making the fishery business more inefficient.

The same argument was used for the decisions that followed to restrict the size of boats fishermen could use in some fisheries and limit their gear.  After that came what the state calls “limited entry” which restricted the number of fishing permits in an effort to ensure commercial fishermen could make a year’s salary by working for a few months in summer.

Unfortunately, the politics were such that it was hard to deny permits to fishermen who’d been fishing for years, and as a result many fisheries ended with too many fishermen with permits to share too few fish, which helped lead to a massive state hatchery program to try to increase the number of salmon.

This was how Alaska decided it would compete with the net-pen farmers of Norway, Chile and other countries just beginning to figure out how to make profitable the domestication of salmon by raising them in the beef-industry equivalent of feed lots.

Alaska figured it had a better way. Alaskans figured they could avoid the costs of building farms and paying to feed fish in them by hatching salmon eggs in factories on land, holding them there overwinter or for slightly longer in cages where they could be made bigger and stronger than wild fish, and then turning the hatchery swarm loose to feed at sea.

After this, the idea was that Alaska commercial fishermen would harvest the profits and pay a tax on those profits to fund the hatcheries. That idea quickly proved a bust because the money it costs to run the hatcheries would have required onerous taxes to generate the necessary revenue.

As a result, the statute allowed the hatchery operators to become harvesters as well as salmon breeders, thus turning the hatcheries into true ranchers or what most of America calls “farmers.”

By the time Alaska got into this business, the free-range farming of Pacific salmon had been pioneered and proven by the Japanese who went heavily into large-scale ocean farming not long after World War II. And Alaska’s open-ocean farming, boosted by warming waters that raised the ecological carrying capacity for salmon in the Pacific, proved highly successful as well.

With the aid of hatchery fish, annual Alaska salmon harvests rose to numbers never before imagined. In a state where salmon fishermen and processors were once happy to see catches near 100 million fish per year, harvests reached an average of about 181 million per year for the 2010s. 

Unfortunately, as the size of the salmon catch was steadily increasing, the size and number of high-value salmon was shrinking and the value of the salmon catch was steadily decreasing. By 2023, the value of a salmon harvest of 230.2 million fish was down to $$398.6 million or $2.48 per fish, according to Alaska Department of Fish and Game numbers. 

This was about a third of what every salmon was worth in the 1988 harvest of 99.4 million salmon, and in terms of real dollars – those corrected for inflation – the word catastrophic might be best used to describe the decline in value.

Salmon calculated to be worth $7.50 each at the end of the 1988 season would – when prices are corrected for inflation – have had a comparative worth of $19.27 each at the end of the 2023 season, according to the inflation calculator of the U.S. Bureau of Labor Statistics.

That is almost eight times what the average Alaska salmon circa 2023 was actually worth to a fishermen, and the situation only got worse this year as the pink-driven, harvest yo-yo predictably cut the statewide, all-species catcj to less than half of the 2023 volume.

Part of this decline in value is rooted in the shift of production from high-value Chinook, coho and sockeye salmon to low-value pink and chum salmon, and part is due to the ability of the farmers to produce high-quality Atlantic salmon that today competes with the high-quality Alaska salmon abeled “wild-caught,” given the inability to in many cases label the fish wild because there are so many hatchery fish mixed in with the wild fish in so many fisheries.

To summarize all of this simply, the Alaska salmon fishing industry has since the start of the new millennium been forced to compete in a highly competitive marketplace, and it has been failing as badly as if it were a mainstream, American newspaper.

We’re from the government

Now comes the Alaska Legislature to the rescue because, well, “we’re from the government, and we’re here to help you,” a phrase that has variously been described as a “cynical joke,” an “old joke,” “one of the great myths of all time,” and – from the Washington Post, no less – one of “The Funniest Jokes about Washington,” that Washington being the one home to the country’s legion of politicians and bureaucrats and not the state in the Pacific Northwest.

Alaska government involvement in providing help for business does not have a great track record. In the 1970s, the state spent tens of millions of dollars trying to build an Alaska agricultural industry and failed miserably. In the 1980s, its efforts to start a beer brewing industry went bust as well.

“Generous incentives from the Alaskan government…,lured West Germany’s Radeberger Group to open what it called Prinz Brau Alaska in Anchorage in 1976. Myriad problems soon presented themselves,” beer cicerone Tom Acitelli would later write, adding that in general “it appeared that Alaska’s geographic vastness and isolation from the rest of the nation doomed Prinz Brau – and any further prospects of a homegrown brewery.”

This was not, however, to prove the case. Once government help ended, the brewing business in Alaska took on a life of its own. Marcy Larson, an aspiring Bush pilot, and her husband, Geoff, a chemical engineer and home brewer, decide on something of a whim to start a brewery in Juneau, Alaska’s landlocked capital, in 1986. And with the help of friends, they managed to turn a beer labeled Alaska Amber into a national brand. 

A whole bunch of brewers subsequently followed the lead of the Larsons and by 2017, state economist Neal Fried, would be reporting the state had 35 breweries producing earnings of $239 million which  ranked Alaska “fifth among states for brewery earnings per capita.”

Adjusted for inflation, that $239 million would amount to more than $305 million last year or just slightly more than the $304 million the state says commercial fishermen were paid for their entire, statewide, all-species salmon harvest in 2024.

Alaska brewers succeeded by producing products the market desired. Alaska salmon fisheries are struggling because the demand is low for most of the products the industry produces – pink and chum salmon – and where the demand exists for high-quality salmon, Alaska must compete with those efficiently produced, farmed salmon that famously won a Washington Post-sponsored, blind taste test in 2013 and have continued to win other taste tests since.

Sporked, a website devoted to packaged food,  in October gave its top rating to Trader Joe’s Atlantic Salmon, a frozen product, after fairly noting that “if you’re buying salmon from the fish guy at the grocery store rather than from the freezer aisle, you’re probably buying previously frozen salmon. Unless, of course, you’re going directly to the fish guy’s boat. Or you live in Alaska and you’re the fish guy bringing your own salmon home after snatching it directly out of the river with your bare hands.”

Fresh, farmed salmon is available year-round in some markets and in many top restaurants, but fresh Alaska salmon is highly seasonal and limited almost everywhere. With the farmers once concentrating on sales of higher-value fresh fish,  Alaska once dominated the frozen salmon supply.

But as the production of farmed salmon has continued to steadily climb, the farmers have moved more and more into the frozen salmon business as well as the fresh-fish business. The top four “Best Frozen Salmon Filets” on Sporked’s list were all farmed fish.

When Good Housekeeping blind-tested smoked salmon in October for a story on its best Christmas food and drink, the list was topped by four brands of Scottish smoked salmon. No mention was made of Alaska salmon, which do taste better in the minds of some.

A 2021 study by the University of Copenhagen, however, concluded that a lot of the “taste” of salmon is influenced by preconceived perceptions. In a blind test, researchers there found people decidedly preferred farmed fish, but when told what they were eating before testing, their tastes turned against regularly farmed salmon in favor of organically farmed salmon and, secondly, wild-caught salmon. 

Organically farmed salmon is available only in Europe. To be certified organic there, the fish must be raised in limited-density cages and fed only organic feed. Genetically modified organisms (GM()s) are banned, and the use of pesticides and antibiotics is strictly limited at organically certified farmers

Wild fish, unfortunately, cannot be labeled organic because there is no way to control what they eat, and most of the chemical contamination of fish – whether in farms or the wild – comes from their diet. This is what has made salmon raised in farms with recirculating aquaculture systems (RAS) increasingly attractive to some.

“At Superior Fresh” – a RAS farm in Wisconsin – “salmon are grown on land using freshwater tanks. It is a nearly closed system with 99.9 percent of water treated and recycled within the facility,” according to the National Oceanic and Atmospheric Administration (NOAA) “Fish waste is put to good use through a nutrient recycling process. Using a microbial biome that mineralizes the waste and releases its nutrients, the waste is repurposed and is used to fertilize the leafy greens. In addition to rigorous hygiene practices, a series of filters and disinfectants are employed to keep food clean.

“For every pound of feed fed to salmon, Superior Fresh produces three to four pounds of human food – salmon and greens!” NOAA added/

RAS farmers can also fairly lay claim to be the least contaminated salmon in the market, especially given the rising volume of microplastics being found in both wild and ocean-farmed fish of all types.  The consequences of microplastics in the human diet is at this time unknown, but scares some consumers.

‘The current state of science is limited in its ability to inform regulatory risk assessment,” according to the U.S. Food and Drug Administration, which notes a lack of a standard definition for what qualifies as a microplastic or nanoplastic and the chemical differences in the vast array of plastic materials from which those particles can develop.

The federal agency is continuing to monitor the situation but public concerns is growing.

“Lessons from the field of environmental toxicology raise flags about cancer and reproductive issues. Studies in cell cultures, marine wildlife, and animal models indicate that microplastics can cause oxidative damage, DNA damage, and changes in gene activity, known risks for cancer development,” Harvard Medicine magazine reported in the spring of 2023. “Microplastics have been found in human breast milk and meconium, an infant’s first stool. A few studies in mice have found reproductive effects such as reduced sperm count and quality, ovarian scarring, and metabolic disorders in offspring.”

Tough business

To say the Alaska salmon industry is facing challenges due to competition from farmers and the difficulty in finding a niche that truly makes “wild caught” fish more desirable than any other salmon might be an understatement.

But Sen. Gary Stevens, PhD, the chair of the task force and a former history professor at the University of Alaska before he sold his soul to commercial fishing interests in Kodiak to get elected, is talking nonsense when he writes that the problem in Alaska “is the costly expenses due to production, labor expenses and environmental obligations” hampering an “industry (that) must maintain a high-quality product in competition with foreign producers who do not have to meet the high production standards Alaskans face.”

First off, everyone in the global salmon business has to meet “high-production standards” or their product doesn’t sell. That most of the farmers long ago topped Alaska production standards is well known. And why wouldn’t they beat Alaska standards?

As researchers wrote in the journal “Food” years ago, spoilage in fish starts as soon as fish are killed, “and deterioration occurs very quickly.”  This makes speed paramount in the handling of salmon. Top quality is retained by bleeding, gutting and super-chilling or freezing them as fast as possible. 

The farmers have a massive advantage there. They can move live salmon straight from their cages into a processing plant. Alaska salmon, on the other hand, are caught at sea and hauled to port or a tender where they often stack up awaiting processing.

Alaska fishermen have gotten better in dealing with this. Some now gut and chill their fish at sea because processors pay a premium for such fish. That helps improve quality, but Alaska is still at a disadvantage because of the necessity to process huge volumes of fish in a short time.

Meanwhile, claims by Stevens that Alaska is hampered by  “costly expenses due to production, labor expenses and environmental obligations” is just more nonsense.

The average salary for a “fish packer” in Norway is reported to be 369,553 NOK or about $33,000 per year, which is just slightly above the median salary for those under age 45 in that country, according to the data tracking website Statista.

The Alaska Department of Labor reports the average, non-resident fish packer, who is in that 82.8 percent of people packing fish in the 49th state, earns $11,471 per quarter. This would make them better paid, and thus more costly for fish processors, if they were paid year-round.

But most of them aren’t working year-round. Most of them work the quarter that comprises the three months or so of the fishing season and then go home to Eastern Europe or Central America.

So, in the big picture, processors are paying them considerably less than fish packers get paid in Norway, the world’s far and away largest salmon producer, where environmental regulations are actually more stringent than in Alaska where processors are still dumping huge amounts of waste at sea. 

The Environmental Performance Index, created by Yale University to provide “a quantitative basis for comparing, analyzing, and understanding environmental performance for 180 countries.” puts Norway number 20 on its list of nations with the most stringent environmental regulations. 

The U.S. was down in 45th and that is for the average of all states. When the states are compared to each other, Alaska usually ranks in the lower half. So much for environmental protection costs.

About the only thing Steven is right about is that farmers in Norway, Chile and elsewhere have an advantage in production costs, but this is only because they early on invested in more and better automated fish processing technology than Alaska processors did.

Alaska processors largely opted to reduce the in-state costs of processing of high-value salmon to heading, gutting and freezing it so they could ship the fish to China to be fileted, deboned and packaged by cheap labor, including slave labor, according to a report from The Outlaw Ocean Project. 

This scheme, pioneered by Silver Bay Seafoods in the 2000s, largely went bust when President Donald Trump, in his first term in office, slapped a 10 percent tariff on seafood shipped back from China to the U.S. for sale. 

Alaska processors, instead of investing in automating their plants, subsequently shipped the frozen fish to other parts of Asia in the search of cheap labor to help them compete with salmon farmers who now run som almost fully automated processing plants. That Alaska processors have failed to stay abreast of how the world of manufacturing is changing is not a problem the Alaska Legislature can fix.

All it can do at this point is hand more money to people who have failed. The only way to really and truly fix the Alaska salmon business is to get out of the way and let the market find a solution.

That might not be pretty. Some processors have already failed and more might. Prices paid fishermen for their fish could likely to fall to where they are in line with market demands. Some fishermen might suffer as a result.

But the resource itself remains valuable. Wild fish are free of production costs. Nature feeds them. And if salmon prices drop so low that the Alaska hatcheries can’t make it on the hatchery fish returning from the sea, so be it.

Some of them are already failing despite all the money the state has thrown at them over the years. The commercial fishermen-controlled Cook Inlet Aquaculture Association (CIAA) has become a poster child for how not to run a business.

It has been losing an average of $1.5 million per year for 10 years and is now in debt to the state to the tune of more than $16 million with the state continuing to lend CIAA money to keep it afloat although there appears no scenario under which the group would start making money to pay off the debt.

Meanwhile, Fish and Game is dealing with a mess made in Southeast Alaska by the Northern Southeast Regional Aquaculture Association (NSRAA), another commercial fishermen-run hatchery operation.

Commissioner of Fish and Game Doug Vincent-Lang only days ago released a statement saying that though “the interaction between hatchery chum salmon and wild chum salmon is not definitively known to be the cause of the wild chum salmon declined production levels (in the region)…action to reduce the presence of hatchery chum salmon in the Crawfish Inlet area is appropriate.”

He has ordered a reduction in salmon stocking there and “a review of chum salmon release strategies, release numbers, and release locations” with a report to the commissioner by December 31, 2025, “(on) findings and recommendations regarding what is working well, what is not working well, impacts on wild salmon stocks, and potential improvements to the salmon fishery enhancement program.”

There are some indications the entire hatchery chum program in Southeast, which long ago replaced and destroyed the chum business along the Yukon River in poverty-stricken Central Alaska, has been doing little more than replacing wild chum with hatchery salmon. Why anyone would want to replace salmon nature produces for free with hatchery chum, which cost money to produce and need to be harvested in large numbers by the hatchery to cover its operating costs, is a question asked long ago only to be slapped by the state lawmakers.

After the late Wayne Alex, a commercial fisherman in Juneau, and a group of other commercial fishermen helped organize a lawsuit aimed at preventing the state from taxing fishermen to fund associations such as NSRAA and CIAA, the legislature redefined the tax as an “assessment” and then gave the hatcheries the authority to run so-called “cost-recovery fisheries” as well. 

As a result, fishermen in Southeast, around Kodiak Island, and in Cook Inlet pay a tax on their catch to help fund the hatchery associations that compete with them to harvest “wild-caught” Alaska salmon with the state limiting the competition by ensuring hatchery needs are met before the fishermen fish.

This is the Alaska government at work.