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Wild salmon

As Alaska moves toward higher-value products, the West Coast braces for another lost season

The popularity of king salmon continues to drive up
    prices. This year, demand was perpetuated by the near shutdown
    of the West Coast salmon fishery. - Photo courtesy of ASMI
By Steven Hedlund
November 01, 2006

Not so long ago, Alaska's salmon industry was in the dumps. Fishermen were struggling to make ends meet, and processors were folding their operations or being gobbled up by their competitors.

But over the past three years, the industry has pulled itself out of a hole by producing more salmon products of higher value, a trend that became apparent this year.

Alaska salmon processors are shifting sockeye production from frozen H&G fish to fresh and frozen fillets and pink production from canned to frozen H&G fish.

Meanwhile, demand for fresh fish, especially kings, goes through the roof during the state's summer salmon fishery, thanks to regional marketing programs that tout the five Pacific species - king (chinook), sockeye (red), pink, coho (silver) and chum (keta) - and the numerous rivers from which they originate.

Demand for fresh Alaska kings was also perpetuated this year by the near shutdown of the Oregon and northern California fisheries to protect Klamath River kings.

"Over the past three years, we've seen growing demand for, and strengthening prices of, Alaska salmon in general," says Chris McDowell, seafood industry analyst for The McDowell Group in Juneau, Alaska.

Wholesale prices of all five species were up 14 to 35 percent this year, he notes.

Part of the reason is that this year's Alaska salmon catch was expected to fall shy of 140 million fish, down 82 million fish from 2005's record harvest and down 27 million fish from the 10-year average. (The Alaska Department of Fish and Game was due to release preliminary 2006 landings on Oct. 31.)

But the biggest reason that salmon prices are climbing is the move toward higher-value products.

Make way for fillets

Alaska processors are shipping less frozen H&G sockeye to Japan and more sockeye fillets to the Lower 48 and Europe. Historically, Japan has absorbed the bulk of Alaska's sockeye harvest.

"Alaska is constantly adding fillet lines throughout the state, especially for sockeye," says McDowell. "It's not that Japan is backing off."

Alaska processors are trying to boost the sockeye market and prices by targeting the Lower 48 and Europe, where fillets, the preferred product form, fetch higher prices, he explains. The challenge is satisfying U.S. and European buyers who are accustomed to the consistent size and grade of farmed Atlantic salmon fillets.

Through August, Japan had imported only one-third, or about 27 million pounds, of Alaska's sockeye production, compared to 69 percent in 2005 and 66 percent in 2004, says McDowell. (Japan receives the bulk of its Alaska sockeye from January to August.)

Production of sockeye fillets reached 10 million pounds for the first time in 1996. Now it totals about 30 million pounds, says McDowell.

As demand for sockeye fillets continues to strengthen, so do prices. At wholesale, fresh sockeye fillets averaged $5.48 between May and August, up from $4.18 last season, while frozen fillets averaged $4.32 this season, up from $3.31 last season, reports the Alaska Department of Revenue (ADR).

Fresh H&G sockeye averaged $3.13 this season, up from $2.65 last season, while frozen H&G averaged $1.86, down from $2.10.

Urner Barry Publications of Toms River, N.J., quoted frozen H&G sockeye at $2.30 to $2.50 for 4-6s, $2.10 to $2.25 for 2-4s and $2.50 to $2.75 for 6-9s in mid-October.

Sockeye, the financial backbone of the industry, is by far Alaska's most valuable salmon fishery, with an ex-vessel value of $193.7 million in 2005.

The Bristol Bay sockeye harvest, the state's biggest sockeye fishery, yielded 28.8 million fish in 2006, up from 24.5 million fish in 2005 and up from the 10-year average of 22.7 million fish. Fishermen received an average of 55 cents a pound for their catch this season, down from 60 cents last season.

Canning the can

Alaska processors are also canning less pink salmon and producing more frozen H&G pinks, which they're exporting to Europe or to China, where it's reprocessed and either consumed in Asia or shipped back to the United States.

Part of the reason for the shift away from canning is that frozen H&G pinks fetch higher prices.

"The processing sector is investing in creating innovative, time-friendly salmon products," says Laura Fleming, communications director for the Alaska Seafood Marketing Institute. "For years we've been talking about adding value [to Alaska salmon]. Now it's really happening.

"Finally," she notes, "we're making huge strides toward being a market-driven business, not a supply-driven business."

Also contributing to the interest in frozen pinks are canned-pink prices, which tanked in 2003, bottoming out at $34 a case.

Traditionally, about three-quarters of Alaska's pink production is canned. This year, only 55 percent was canned, the lowest percentage ever.

"That's a major change," says McDowell.

As a result, canned-pink production and inventories are as low as they've been in years, says Mc­Dowell. The canned-pink pack totaled 1.8 million cases in 2006, down from 3.5 million cases in 2005.

That's because this year's pink harvest totaled a disappointing 69.6 million fish, down 38.4 million fish from the preseason projection and down 91.6 million fish from last year's record catch.

"There was an oversupply of pinks," says McDowell. "It was one record harvest after another. The 2005 harvest was a 100-year record."

But those days are over for now. As of Sept. 1, canned-pink inventories totaled just 2.6 million cases (48-tall equivalent), down from 4.1 million cases a year ago.

There's a 23 percent difference between canned-pink inventories and the five-year September-to-August sales average of 3.2 million pounds.

What's more, British Columbia's canned-pink pack came to just 39,000 cases in 2006, 11 percent of the 308,000-case five-year average.

Due to the supply shortage, prices of canned pinks are on the rise.

"Prices won't shoot through the roof," says McDowell, "but it's clear they're going up."

Higher prices are expected to curb demand for canned pinks, which means sales from September 2006 to August 2007 may not reach the 3.2-million-pound five-year average, notes McDowell.

He pegged the average ex-vessel price of pinks at 14 cents a pound this season, up from 12 cents last 
season.

At wholesale, fresh H&G pinks averaged 66 cents this season, up from 58 cents last season, while frozen H&G averaged 78 cents, up from 62 cents, according to the ADR. Canned pinks commanded about $41 a case this season.

However, "we anticipate a large pink harvest in 2007," says McDowell.

King of the castle

The pink and sockeye harvests may be Alaska's largest salmon fisheries, but that doesn't mean they receive the most media attention.

Thanks to the efforts of regional marketing programs, king salmon from the Copper, Kuskokwim, Yukon and other rivers is prized by food writers, retailers, chefs and consumers nationwide for its high fat content and pronounced, buttery, rich taste.

But the species represents less than 10 percent of Alaska's total salmon catch in terms of ex-vessel value ($24.4 million in 2005) and only about 1 percent in terms of volume (10.7 million pounds in 2005).

Chinook prices continue to soar. At wholesale, fresh king fillets averaged a whopping $7.64 at wholesale this season, up from $5.61 last season, while frozen fillets averaged $5.44, up from $4.86, according to the ADR. Fresh H&G kings averaged $5.56 this season, up from $4.36 last season, while frozen H&G averaged $3.14, up from $2.49.

Some retailers tagged fresh king fillets from the Copper River harvest, the unofficial start of Alaska's summer salmon fishery, in the high-$30 range when it opened in mid-May. Other retailers and chefs backed off and waited until the fishery progressed and prices fell.

Joe Monteiro, executive chef and general manager of A Fish Called Avalon in Miami Beach, is a huge fan of king salmon, which he menus regularly as a special at his trendy 200-seat Miami Beach restaurant. It's one of his best sellers when it's on the menu.

"We sell the hell out of it every time," says Monteiro. "But sometimes prices are a problem."

Monteiro was dishing out about $20 a pound for fresh whole kings at times this summer. He was paying about $14 for them last month. Monteiro charges about $28 for an 8- to 9-ounce portion of king salmon.

West Coast disaster

It didn't help that the Pacific Fisheries Management Council voted in April to severely restrict salmon fishing off 700 miles of Oregon and northern California coastline to protect Klamath River kings, which are struggling due to loss of habitat to irrigation withdrawals, dams, logging and mining.

Fisheries managers are required to ensure that at least 35,000 kings return to the Klamath to spawn each year to keep the population stable, but only 25,000 fish were expected to make the journey this year.

Other salmon populations are healthy, but there's no way for fishermen to distinguish between salmon from different rivers when targeting the fish in the ocean.

The council cut the threshold to 21,000 kings to allow for some fishing around the California-Oregon border. The fishery, which runs from April to October, was essentially closed from May to July, when the catch typically peaks.

As a result, West Coast king landings through August, which totaled only about 114,500 fish, were down 365,500 fish from 2005 and 659,500 fish from 2004.

Tim Caluya, co-owner of Tim's Seafood in Kirkland, Wash., was dishing out about $5 a pound more for Oregon and California kings this year.

At his retail outlet, Caluya marked fresh whole kings at $12.99 for 7- to 11-pound fish, $13.99 for 11-18s and $14.99 for 18s-and-up, up from $7.99, $8.99 and $9.99, respectively, last year.

"Prices are way up," says David Goldenberg, CEO of the California Salmon Council, a quasi-state salmon-marketing agency. "Some buyers are backing off and others are taking it."

The West Coast chinook fishery finally picked up in early August, but it didn't last. Initially, trollers received about $4.50 a pound for kings. But by late August, landings were lagging, and ex-vessel prices climbed to $5, which translated to $7 at wholesale. The harvest picked up again on Sept. 1, when the fishery near Fort Bragg, Calif., opened and the 4,000-king limit was exceeded, but ex-vessel prices held firm at $5.

"There were only two to three weeks that fishermen were actually able to catch their limit of 75 fish per week," says Goldenberg. "The industry is really hurting."

In August, U.S. Commerce Secre­tary Carlos Gutierrez declared the West Coast salmon fishery a failure, which opened the door for federal aid to fishermen.

The Oregon legislature has so far approved $1 million in emergency funds to fishermen. But a bill in the California legislature that would provide $25 million in grants and interest-free loans to fishermen is being held up.

However, low-interest loans are available to California, Oregon and Washington fishermen and processors through the federal Small Business Administration, if they qualify.

Bill Carvalho, owner of Carvalho Fisheries in Eureka, Calif., applied for a SBW low-interest loan, but was denied. King salmon used to represent 15 to 20 percent of his sales.

"I filled out paperwork showing my [chinook] sales dropped from $2 million in 2004 to zero in 2006, but my credit was too good and I didn't qualify," he says. "Hardly anyone is qualifying for the loans."

Carvalho was forced to lay off several of his employees in the office and processing plant this year.

"I used to buy hundreds of thousands of pounds" of kings, he says. "I bought two fish this year, and I ate both of them."

Some retailers and chefs are purchasing kings directly from fishermen on the docks and bypassing the middleman to keep retail and menu prices down, notes Carvalho.

Carvalho is processing more albacore tuna this year to compensate for the lack of kings, but albacore supplies are up worldwide and prices are down as a result.

"There's really nothing you can turn to replace a fish that you've spent years building a market for," he explains.

But Carvalho doesn't think the market for Oregon and California kings will disappear if and when the fishery returns.

"Salmon is a highly valued food, and will continue to be," he says. "But some infrastructure may go away, and that'd [drive up chinook prices] because there'd be less 
competition."

"It may be three years before we see the fishery return to where it was," adds Goldenberg. "It's a habitat issue, not a fish population issue, and buyers understand that. I don't think at this point in time that the market will be lost forever."

Associate Editor Steven Hedlund can be e-mailed at shedlund@divcom.com

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