SALMAR Results of the Finnish case study Jari Setälä, Kaija Saarni, Asmo Honkanen and Jarno Virtanen Salmarmeeting in Turku

The Finnish case of salmon and salmon trout

Growing demand for salmonids

Imported salmon replaces domestic salmon trout

Growing demand for salmon

Seasonal supply of salmon trout

Imported fish dominates in summer Average

Salmon: availibility, quality and image Salmon trout: processing

Salmon has bypassed salmon trout in the fresh fish market

The prices of salmonids converge

A single salmon market in Europe

Are salmon and salmon trout in the same market ?

Salmon trout Salmon Producer Exporter Producer Wholesaler Campaign Retailer Wholesaler 5% 9% 14% Importer 56% 15% 20% 15% Vertical co-integration: Salmon trout and salmon value chain in Finland Direction of arrow =Exogenity9% = Margin %15% = Price difference FinlandNorwayFinlandNorway Broken line = not proportional Whole line = proportional

Declining salmon trout margins in the campaign sales

Wholesale margin of salmon higher than salmon trout margin

Concentration of value chain Herfindalindex 1), year 1999: Producers 0,02 (competition) Wholesalers 0,04 (competition) Retail chains0,26 (oligipoly) 1) H-index = sum(market share j ) 2

Conclusions Salmon and salmon trout compete in the same market, but they are not perfect substitutes The markets are competitive from producers to wholesalers The role of salmonids for retailers is twofold: attractive campaign product/profitable business

Conclusions Salmon margins higher than salmon trout margins Wholesalers role is central The price of salmon sold to Finnish market is determined in the world market

SD-models 1.Analysis of salmon margins 2.Analysis of interaction between salmon and salmon trout

1. Salmon model

Annual average margins calculated using production cost data: Margin = Real wholesale prices – calculated production costs Raw material costs: Fresh fillet = 95 % of the total costs Smoked = 87 % Cold-smoked = 85 % Raw pickled = 84 %

Declining margins for fresh salmon products

2. Integrated model

Statistical analysis of elasticities 1)Ln Pst wh = ln Ps wh – ln Qst prod 2)Ln Qs cons = – ln Ps wh ln Pst wh 3)Ln Qs proc = – 1,272 ln S imp ln Qst prod + seasonal dummies 4)Ln Qst proc = – ln Ps imp – ln Pst prod + seasonal dummies 5)Ln Qs imp = – ln Ps imp ln Pst prod Salmon price is an external variable (determined in the world market)

Total market of fresh salmon and salmont trout stable

The model works well, except

The model works well, except 1999

The model works well, except 1999

The model works well, except 1999

Conclusions Aggregated demand of fresh salmon and salmon trout is stable Salmon and salmon trout are competing products In the fresh fish market consumer prefer salmon In the growing market of processed products salmon trout has maintained its market share

Conclusions The flows of salmon and salmon trout into Finnish market are determined by two main variables: 1)The price of imported salmon 2)The quantity of salmon trout production

World market prices fell in 2001

Price fall autumn 2001

Low world market prices

Import rose by 48 % in 2001

News in intrafish New market for fresh Norwegian sea-farmed trout emerging ! European fresh market is challenging Japan. Finland is hungry for Norwegian trout. A six-fold increase in imports means that Finland is taking one third of the fresh trout being sent out from Norway.

Conclusion Oversupply and low world market price of salmon combined with the minimum price led to import of low-priced salmon trout to Finland.