Frozen H&G sockeye remains by far the most valuable single-species salmon product produced in Alaska, with first wholesale value of nearly $160 million in 2005. Frozen sockeye markets are a subject of keen interest for the Alaska industry, particularly with the rebound in stocks now producing three consecutive years of sockeye harvests in excess of 40 million fish.
Trade press and academic writers alike have exhaustively covered the impacts of farmed salmon market-share and price erosion upon the Japanese market for Alaska sockeye. At this point, the position of Chilean coho as the primary supplier to Japan has been old news for several years.
The more recent and relevant story became apparent with release of the August 2006 NMFS export data in mid-October. That data suggests strongly that the focus of Alaska sockeye producers has shifted away from Japan in 2006, to the domestic and European Union markets.
The export and sales patterns of 2004, 2005 and 2006 are the most relevant for illustrating the changing market destinations for Alaska’s frozen H&G sockeye. Harvest volume is strong in all three years (42-44 million sockeye per year) and production volume of frozen H&G sockeye is fairly similar, ranging from 83-96 million pounds. Moreover, market conditions reflect the modern era, with a long-established and plentiful market supply of farmed salmon and generally positive regard for wild salmon.
Evidence
NMFS salmon export data for 2006 clearly illustrate the shift of Alaska sockeye away from the Japanese market. Through August 2006, frozen sockeye exports to Japan total 12,300 metric tons (27 million pounds) just 33 percent of Alaska’s estimated frozen H&G sockeye production for 2006. This contrasts sharply with 2004 and 2005, when production levels were similar, but Japan had imported 66-69 percent of Alaska frozen H&G sockeye production by the end of August.
Four months remain in the calendar year, but Japan typically receives very little Alaska sockeye after August. Since 1996, Japan has received an average of only 10 percent of its annual U.S. frozen sockeye imports during the September – December period.
Implications
For Alaska producers there are significant implications to the sockeye market shift away from Japan, beyond the Japanese market itself.
Logically, there will be greater volumes going to other major sockeye markets, namely the U.S. and Europe. Those markets have grown dramatically as a result of farmed salmon being widely available so much of the experience of wholesalers and retailers in the U.S. and Europe has been with farmed salmon. Such buyers are more accustomed to the dead-consistent size, color, grade, delivery schedule, and shelf life that are the strong points of farmed salmon.
This creates challenges for Alaska producers, as all those attributes can and do fluctuate substantially with wild
salmon. Domestic and European buyers may be more likely to reject off-grade product rather than adjust the price and divert such product to alternate product-forms, as has long been the practice in Japan. In short, shifting the sockeye focus to U.S. and European markets may reduce options for off-grade sockeye. This may prove to be particularly significant in years of high-volume Bristol Bay production.
Another potential implication of the market shift is that the traditional pace of sockeye shipment and sales may slow, creating potential cost and cash flow issues for Alaska producers as pack loans and frozen storage costs extend further into the sales season, increasing the potential for distress sales at reduced price.
Traditionally, much of the import and sales activity in Japan has occurred in August or shortly thereafter. But in the last three years, the timing of sales has changed significantly.
The Alaska Salmon Price Report tallies sales when product passes outside the processor’s affiliate network. In 2004, frozen H&G sockeye sales volume through August amounted to 65 percent of that year’s frozen H&G sockeye production. The percentage declined to 53 percent for August of 2005 and to 45 percent for August 2006.
At this point it is unclear whether the slowing pace of sales is characteristic of the U.S. and European markets or whether it represents a temporary lag as domestic and European sales volume rises to meet the increased availability of Alaska sockeye in those markets.