Difference between revisions of "Deliverable 3.4"

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= Deliverable D3.4 - Report on evaluation of industry dynamics opportunities and threats to industry =
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= Report on evaluation of industry dynamics opportunities and threats to industry =
  
 
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In this report, evaluation of industry dynamics opportunities and threats to
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In this report, evaluation of industry dynamics opportunities and threats to industry, we are focusing on value chain dynamic for certain industries and species. The framework used is a bit different for caught species (cod and herring) and farmed species (salmonoids, sea bream & bass and pangasius). The industry dynamics is more value chain focused for the caught species, while individual companies are also the focus for the farmed species. The main results for the caught species reviled very interesting structural difference and functionality of the value chains for cod between Norway, Iceland and Newfoundland. Previous studies have argued that the superior harvesting and marketing strategies of the Icelandic industry may be rooted in factor conditions that are difficult to duplicate and a rigid institutional framework in Norway and partly the social resource structure of the Newfoundland industry, where market conditions have very limited consideration in terms of the structure or management of the industry.
industry, we are focusing on value chain dynamic for certain industries and
 
species. The framework used is a bit different for caught species (cod and
 
herring) and farmed species (salmonoids, sea bream & bass and pangasius). The
 
industry dynamics is more value chain focused for the caught species, while
 
individual companies are also the focus for the farmed species.
 
The main results for the caught species reviled very interesting structural
 
difference and functionality of the value chains for cod between Norway, Iceland
 
and Newfoundland. Previous studies have argued that the superior harvesting
 
and marketing strategies of the Icelandic industry may be rooted in factor
 
conditions that are difficult to duplicate and a rigid institutional framework in
 
Norway and partly the social resource structure of the Newfoundland industry,
 
where market conditions have very limited consideration in terms of the structure
 
or management of the industry.
 
  
The vertically integrated companies in Iceland where the processor owns its own
+
The vertically integrated companies in Iceland where the processor owns its own fishing vessels. Unlike the push supply chain system followed by the Norwegian and partly the Newfoundland companies where they must process the fish that they receive, the Icelandic processors places orders to its fishing vessels based on the customer orders and quota status, thus following a pull supply chain system. The Icelandic processors are able to sends orders to the vessels for how much fish of each main spices is wanted, where to catch and to land so they have the desired size and quality of raw material needed for fulfilling customer orders. This structural difference is also affecting the product mix that the countries are going for.
fishing vessels. Unlike the push supply chain system followed by the Norwegian
 
and partly the Newfoundland companies where they must process the fish that
 
they receive, the Icelandic processors places orders to its fishing vessels based
 
on the customer orders and quota status, thus following a pull supply chain
 
system. The Icelandic processors are able to sends orders to the vessels for how
 
much fish of each main spices is wanted, where to catch and to land so they have
 
the desired size and quality of raw material needed for fulfilling customer orders.
 
This structural difference is also affecting the product mix that the countries are
 
going for.
 
  
It is also very interesting to see the difference in structure and functionality of the
+
It is also very interesting to see the difference in structure and functionality of the value chains between Norway, Iceland, Denmark and Newfoundland for herring. The structure of the industries is different as seen in the degree of vertical integration and the limits that government’s put on the industries. It is though surprising how homogeneous the industry is between those nations. The nature of pelagic species that is, seasonality and high catch volumes in short periods, makes the product global commodity for further processing from one season to the next. The main markets are Business to Business (B2B)
value chains between Norway, Iceland, Denmark and Newfoundland for herring.
 
The structure of the industries is different as seen in the degree of vertical
 
integration and the limits that government’s put on the industries. It is though
 
surprising how homogeneous the industry is between those nations. The nature
 
of pelagic species that is, seasonality and high catch volumes in short periods,
 
makes the product global commodity for further processing from one season to
 
the next. The main markets are Business to Business (B2B)
 
  
The first noticeable difference observed, apart from the structure, is the price
+
The first noticeable difference observed, apart from the structure, is the price settling mechanism. On one hand it is the Norwegian system that builds on minimum price and auction market which is the same that is used to determine the Danish price. In Iceland the price is decided by the Official Bureau of Ex- Vessel Fish Prices. he Norwegian price is in many cases double that of the price in Iceland. The price obviously affects the profitability of the industry as the Norwegian fishing is benefiting from high price but the processing sector is suffering from low profitability. On the other hand, the processing sector in Iceland is doing well as well as the profitability of the fishing is healthy. It can be claimed that the overall profitability is higher in Iceland due to the freedom of strategically positioning yourself in the value chain and being vertical integrated or not, without external limitation as those that can been seen in Norway, Denmark and Newfoundland
settling mechanism. On one hand it is the Norwegian system that builds on
 
minimum price and auction market which is the same that is used to determine
 
the Danish price. In Iceland the price is decided by the Official Bureau of Ex-
 
Vessel Fish Prices. he Norwegian price is in many cases double that of the price
 
in Iceland. The price obviously affects the profitability of the industry as the
 
Norwegian fishing is benefiting from high price but the processing sector is
 
suffering from low profitability. On the other hand, the processing sector in
 
Iceland is doing well as well as the profitability of the fishing is healthy. It can be
 
claimed that the overall profitability is higher in Iceland due to the freedom of
 
strategically positioning yourself in the value chain and being vertical integrated
 
or not, without external limitation as those that can been seen in Norway,
 
Denmark and Newfoundland
 
  
Aquaculture is the primary source of salmonid supply globally. The different
+
Aquaculture is the primary source of salmonid supply globally. The different salmonid species available on the market are substitutable to a considerable extent due to their pink flesh colour and similar properties. However, different dynamics in the broader competitive environment, and in the particular circumstances of national sectors, in which the businesses comprising these industries are embedded, have determined different developmental trajectories for the very same industries. These dynamics include the changing nature of consumer demand characteristics, production technology, national regulatory regimes, international trade, industry structure, availability of natural resources. Discussed in this chapter are the cases of farmed Atlantic salmon and rainbow trout in major producer countries and the role key external influences have played in shaping different developmental outcomes. The interaction of selected salmonid producer firms with their distinct competitive environments is illustrated through firm-level case studies of strategic positioning.
salmonid species available on the market are substitutable to a considerable
 
extent due to their pink flesh colour and similar properties. However, different
 
dynamics in the broader competitive environment, and in the particular
 
circumstances of national sectors, in which the businesses comprising these
 
industries are embedded, have determined different developmental trajectories
 
for the very same industries. These dynamics include the changing nature of
 
consumer demand characteristics, production technology, national regulatory
 
regimes, international trade, industry structure, availability of natural resources.
 
Discussed in this chapter are the cases of farmed Atlantic salmon and rainbow
 
trout in major producer countries and the role key external influences have
 
played in shaping different developmental outcomes. The interaction of selected
 
salmonid producer firms with their distinct competitive environments is illustrated
 
through firm-level case studies of strategic positioning.
 
  
The output of most salmonid aquaculture, and Atlantic salmon in particular, is
+
The output of most salmonid aquaculture, and Atlantic salmon in particular, is highly commoditised i.e. there is little differentiation between farms and competition is based purely on price. These products, mostly head-on gutted fresh fish, serve as raw material for further processing. In that situation, large enterprises which can reduce costs of production economies of scale and offer the lowest price, would have competitive advantage.
highly commoditised i.e. there is little differentiation between farms and
 
competition is based purely on price. These products, mostly head-on gutted
 
fresh fish, serve as raw material for further processing. In that situation, large
 
enterprises which can reduce costs of production economies of scale and offer
 
the lowest price, would have competitive advantage.
 
  
Seabass and seabream are the most important species for the aquaculture of fish
+
Seabass and seabream are the most important species for the aquaculture of fish in Spain, being one of the most important markets in Europe. The production and the market is highly concentrated and economies of scale may improve the competitiveness of the sector. The integration of production and the stable international trade allows to increase the share of the price value. The pangasius industry in Viet Nam has grown quickly over the last two decades to become one of the main food exports from the country and a major contributor to the Vietnamese economy. Pangasius products, mainly frozen fillets, are currently exported all over the world, with the largest markets being the EU, the USA, and more recently China. The success in market penetration of pangasius products can be attributed to their mild taste, lack of bones, and most importantly their low price compared to other, more traditional whitefish products, for which it acts as a low-cost substitute.
in Spain, being one of the most important markets in Europe. The production and
 
the market is highly concentrated and economies of scale may improve the
 
competitiveness of the sector. The integration of production and the stable
 
international trade allows to increase the share of the price value.
 
The pangasius industry in Viet Nam has grown quickly over the last two decades
 
to become one of the main food exports from the country and a major contributor
 
to the Vietnamese economy. Pangasius products, mainly frozen fillets, are
 
currently exported all over the world, with the largest markets being the EU, the
 
USA, and more recently China. The success in market penetration of pangasius
 
products can be attributed to their mild taste, lack of bones, and most
 
importantly their low price compared to other, more traditional whitefish
 
products, for which it acts as a low-cost substitute.
 
  
The production node in the pangasius’s value chain was initially highly
+
The production node in the pangasius’s value chain was initially highly fragmented, composed of many small-scale family owned enterprises and middle-scale processor-exporters. However, the industry is undergoing a rapid a rapid consolidation and increasingly being served by large-scale vertically integrated enterprises, encompassing all stages of the value chain. The reasons for that can be found in the improvement in seed production methods, control of fish health and disease problems, feed and nutrition and market requirements.
fragmented, composed of many small-scale family owned enterprises and
 
middle-scale processor-exporters. However, the industry is undergoing a rapid a
 
rapid consolidation and increasingly being served by large-scale vertically
 
integrated enterprises, encompassing all stages of the value chain. The reasons
 
for that can be found in the improvement in seed production methods, control of
 
fish health and disease problems, feed and nutrition and market requirements.
 
  
 
== Atlantic cod ==
 
== Atlantic cod ==
Line 107: Line 31:
 
=== Summary ===
 
=== Summary ===
  
It is very interesting to see the difference in structure and functionality of the
+
It is very interesting to see the difference in structure and functionality of the value chains between Norway, Iceland and Newfoundland. Previous studies have argued that the superior harvesting and marketing strategies of the Icelandic industry may be rooted in factor conditions that are difficult to duplicate and a rigid institutional framework in Norway and partly the social resource structure of the Newfoundland industry, where market conditions have very limited consideration in terms of the structure or management of the industry.
value chains between Norway, Iceland and Newfoundland. Previous studies have
 
argued that the superior harvesting and marketing strategies of the Icelandic
 
industry may be rooted in factor conditions that are difficult to duplicate and a
 
rigid institutional framework in Norway and partly the social resource structure of
 
the Newfoundland industry, where market conditions have very limited
 
consideration in terms of the structure or management of the industry.
 
  
The vertically integrated companies in Iceland where the processor owns its own
+
The vertically integrated companies in Iceland where the processor owns its own fishing vessels. Unlike the push supply chain system followed by the Norwegian and partly the Newfoundland companies where they must process the fish that they receive, the Icelandic processors places orders to its fishing vessels based on the customer orders and quota status, thus following a pull supply chain system. The Icelandic processors are able to sends orders to the vessels for how much fish of each main spices is wanted, where to catch and to land so they have the desired size and quality of raw material needed for fulfilling customer orders.
fishing vessels. Unlike the push supply chain system followed by the Norwegian
 
and partly the Newfoundland companies where they must process the fish that
 
they receive, the Icelandic processors places orders to its fishing vessels based
 
on the customer orders and quota status, thus following a pull supply chain
 
system. The Icelandic processors are able to sends orders to the vessels for how
 
much fish of each main spices is wanted, where to catch and to land so they have
 
the desired size and quality of raw material needed for fulfilling customer orders.
 
  
This structural difference is also affecting the product mix that the countries are
+
This structural difference is also affecting the product mix that the countries are going for. Iceland is therefore placing more and more emphasis on fresh fillets and pieces, while the other countries are going for more traditional products, like salted, dried and frozen products. Due to the vertical integration in Iceland, the production plans are developed based on customer orders and then a plan is made for fishing, while in Norway and Newfoundland, the production plans is usually developed after receiving the fish at the processing plant as the information about volumes of specifies caught and quality is not available beforehand.
going for. Iceland is therefore placing more and more emphasis on fresh fillets
 
and pieces, while the other countries are going for more traditional products, like
 
salted, dried and frozen products. Due to the vertical integration in Iceland, the
 
production plans are developed based on customer orders and then a plan is
 
made for fishing, while in Norway and Newfoundland, the production plans is
 
usually developed after receiving the fish at the processing plant as the
 
information about volumes of specifies caught and quality is not available
 
beforehand.
 
  
 
=== Global Market review ===
 
=== Global Market review ===
  
According to a book by Mark Kurlansky; ”Cod - A Biography of the Fish that
+
According to a book by Mark Kurlansky; ”Cod - A Biography of the Fish that Changed the World”. Cod was the reason Europeans set sail across the Atlantic, and it is the only reason they could. What did the Vikings eat in icy Greenland and on the five expeditions to America recorded in the Icelandic sagas? Cod, dried in the frosty air. What was the staple of the medieval diet? Cod again, sold salted by the Basques. As it turns out, cod has sparked wars, shaped international political discourse, impacted diverse cultures, markets, and the environment.
Changed the World”. Cod was the reason Europeans set sail across the Atlantic,
 
and it is the only reason they could. What did the Vikings eat in icy Greenland
 
and on the five expeditions to America recorded in the Icelandic sagas? Cod,
 
dried in the frosty air. What was the staple of the medieval diet? Cod again, sold
 
salted by the Basques. As it turns out, cod has sparked wars, shaped
 
international political discourse, impacted diverse cultures, markets, and the
 
environment.
 
  
Cod importance has dwindled, but it is still of major importance to Iceland and
+
Cod importance has dwindled, but it is still of major importance to Iceland and Norway and growing importance in Newfoundland and therefore it is important to look at industry and market dynamics, opportunities and threats in the value chain of cod for these countries.
Norway and growing importance in Newfoundland and therefore it is important to
 
look at industry and market dynamics, opportunities and threats in the value
 
chain of cod for these countries.
 
  
 
==== Main producers ====
 
==== Main producers ====
  
Atlantic cod is only one of many species entering the global supply chain for
+
Atlantic cod is only one of many species entering the global supply chain for whitefish, which can be viewed as substitutes. Amongst them, we find Alaska pollock, hake, saithe, Pacific cod, haddock, hoki and Atlantic redfish. Altogether, the global supply of these species in 2015 was about 6,937 million tonnes, according to FAO. The largest species by far is Alaska Pollock, for which the catch in 2015 added up to 3.3 billion tonnes – 48 per cent of the total whitefish supply – for which US and Russia are the largest actors.
whitefish, which can be viewed as substitutes. Amongst them, we find Alaska
 
pollock, hake, saithe, Pacific cod, haddock, hoki and Atlantic redfish. Altogether,
 
the global supply of these species in 2015 was about 6,937 million tonnes,
 
according to FAO. The largest species by far is Alaska Pollock, for which the catch
 
in 2015 added up to 3.3 billion tonnes – 48 per cent of the total whitefish supply –
 
for which US and Russia are the largest actors.
 
  
Atlantic cod was the second largest species in the global whitefish supply in 2015,
+
Atlantic cod was the second largest species in the global whitefish supply in 2015, responsible for 1,304 million tonnes, or 19 per cent of the total. The main actors in this catch of Atlantic cod in 2015 was Norway, Russia, Iceland and the EU with 11% of the catches as can been seen in figure 1. The main actors among the EU countries are Denmark, UK, Germany and Poland. The main suppliers since the turn of the century are shown in Figure 2.
responsible for 1,304 million tonnes, or 19 per cent of the total. The main
 
actors in this catch of Atlantic cod in 2015 was Norway,
 
Russia, Iceland and the EU with 11% of the catches as can been seen in figure 1.
 
The main actors among the EU countries are Denmark, UK, Germany and Poland.
 
The main suppliers since the turn of the century are shown in Figure 2.
 
  
[[File:D34_fig_1.png|center|Figure 1]]
+
[[File:D34 fig 1.png|center|Figure 1]] ''Figure 1. Main actors catching Atlantic cod in 2015 according to FAO''
''Figure 1. Main actors catching Atlantic cod in 2015 according to FAO''
 
  
[[File:D34_fig_2.png|center|Figure 2]]
+
[[File:D34 fig 2.png|center|Figure 2]] ''Figure 2. Supply of Atlantic cod from the North Atlantic waters, by country, 1000 tonnes, 2000–2018. Source: FAO and (*) Groundfish Forum''
''Figure 2. Supply of Atlantic cod from the North Atlantic waters, by country, 1000 tonnes, 2000–2018. Source: FAO and (*) Groundfish Forum''
 
  
FIgure 2 shows a relatively stable distribution of cod catches until the increase in
+
FIgure 2 shows a relatively stable distribution of cod catches until the increase in the quotas for Northeast Atlantic cod about 2009, where Norway and Russia increased their share. Moreover, it shows that the catch of US/CAN fell until the end of this period, when it rose again, and that Greenland catches have increased over the period. As can been seen in Figure 2, The International Council for the Exploration of the Sea (ICES) has recommended a 20 percent cut in the Barents Sea cod quota for 2018. However, the Joint Russian Federation- Norwegian Fisheries Commission in October 2017 agreed on the 2018 quotas, which include a 13 percent cut in the Barents Sea cod quota to 775.000 tonnes (FAO).
the quotas for Northeast Atlantic cod about 2009, where Norway and Russia increased their share.
 
Moreover, it shows that the catch of US/CAN fell until the end of this period, when it rose again, and that
 
Greenland catches have increased over the period.
 
As can been seen in Figure 2, The International Council
 
for the Exploration of the Sea (ICES) has recommended a 20 percent cut in the
 
Barents Sea cod quota for 2018. However, the Joint Russian Federation-
 
Norwegian Fisheries Commission in October 2017 agreed on the 2018 quotas,
 
which include a 13 percent cut in the Barents Sea cod quota to 775.000 tonnes
 
(FAO).
 
  
 
==== Main markets ====
 
==== Main markets ====
  
The EU is by far the largest market for cod products in the world. Cod is
+
The EU is by far the largest market for cod products in the world. Cod is processed in different format to fulfil the needs and customs of different markets. There is a big consumption of fresh and frozen product in EU, especially in UK and France. The tradition of drying fish to preserve it dates back to Viking times, but the process of salting fish began in the 15th century, when the Iberian fishermen were sailing to and from Newfoundland. Cod that had been preserved in salt would last the length of the journey. Clipfish/saltfish or bacalao is also popular in Catholic countries, thanks to a tradition that dates back to the middle ages when the pope ordered Catholics to eat fish instead of meat during Lent. Therefore have Iceland and Norway exported bacalao for centuries to Catholics around the world, especially to Spain and Portugal. There are also number of other traditional markets, like Nigeria for dried fish parts and heads. USA was also a big market for cod products, and it has been growing again in recent years, especially for fresh cod.
processed in different format to fulfil the needs and customs of different markets.
 
There is a big consumption of fresh and frozen product in EU, especially in UK and
 
France. The tradition of drying fish to preserve it dates back to Viking times, but
 
the process of salting fish began in the 15th century, when the Iberian fishermen
 
were sailing to and from Newfoundland. Cod that had been preserved in salt
 
would last the length of the journey. Clipfish/saltfish or bacalao is also popular in
 
Catholic countries, thanks to a tradition that dates back to the middle ages when
 
the pope ordered Catholics to eat fish instead of meat during Lent. Therefore
 
have Iceland and Norway exported bacalao for centuries to Catholics around the
 
world, especially to Spain and Portugal. There are also number of other traditional
 
markets, like Nigeria for dried fish parts and heads. USA was also a big market for
 
cod products, and it has been growing again in recent years, especially for fresh cod.
 
  
Cod producers from Norway have been taking putting effort in emerging market
+
Cod producers from Norway have been taking putting effort in emerging market like China, where there is great potential but no custom of consuming cod products.
like China, where there is great potential but no custom of consuming cod
 
products.
 
  
[[File:D34_fig_3.png|center|Figure 3]]
+
[[File:D34 fig 3.png|center|Figure 3]] ''Figure 3. Trade of cod in the EU, Import of cod products in the EU, both extra and intra EU trade. Raw data from EUMOFA.''
''Figure 3. Trade of cod in the EU, Import of cod products in the EU, both extra and intra EU trade. Raw data from EUMOFA.''
 
  
The total import in the EU was 761 thousand tons in 2016 and the imports in total
+
The total import in the EU was 761 thousand tons in 2016 and the imports in total have been on the rise in recent years. That don’t mean that this came all from outside of EU. Part of the imports (42.1%) came from Intra EU trade while the larger part (57.9%) came into the EU from countries outside the EU, like Norway and Iceland. Largest part of the EU export figures of 421 thousand tons are Intra EU trade or 94.1%, therefore there are only around 25 thousand tons of cod exported out of the EU to non EU countries.
have been on the rise in recent years. That don’t mean that this came all from
 
outside of EU. Part of the imports (42.1%) came from Intra EU trade while the
 
larger part (57.9%) came into the EU from countries outside the EU, like Norway
 
and Iceland. Largest part of the EU export figures of 421 thousand tons are Intra
 
EU trade or 94.1%, therefore there are only around 25 thousand tons of cod
 
exported out of the EU to non EU countries.
 
  
Frozen cod is by far the most common preservation form of traded cod in the EU
+
Frozen cod is by far the most common preservation form of traded cod in the EU as can been seen in Error: Reference source not found. The import of dried, salted and smoked cod products have been relatively stable in recent years but the main growth has been in the import of frozen and fresh cod products. The imports of fresh cod has been on the rice since 2008, but 2015 the volume went down but gained momentum again in 2016. The imports of prepared or preserved products is low but relatively stable between years.
as can been seen in Error: Reference source not found. The import of dried, salted
 
and smoked cod products have been relatively stable in recent years but the
 
main growth has been in the import of frozen and fresh cod products. The imports
 
of fresh cod has been on the rice since 2008, but 2015 the volume went down but
 
gained momentum again in 2016. The imports of prepared or preserved products
 
is low but relatively stable between years.
 
  
 
=== Fisheries Management System in Norway, Iceland and Newfoundland ===
 
=== Fisheries Management System in Norway, Iceland and Newfoundland ===
Line 229: Line 73:
 
===== Norway =====
 
===== Norway =====
  
“The main objective for the industrial and fisheries policy is
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“The main objective for the industrial and fisheries policy is the highest possible value creation in Norwegian economy, within sustainable limits. The Ministry of Trade, Industry and Fisheries work is to obtain this main objective builds on the following sub- objectives: efficient use of society’s resources, increased innovation and adaptation ability, and companies who succeed in international market. The sub-objectives and prioritised areas to achieve these are just as important for the seafood industry as other activities in Norway. A purposeful superior effort to stimulate to increased innovation and adaptation ability in Norwegian economy is of great importance also for the seafood industry.”
the highest possible value creation in Norwegian economy, within
 
sustainable limits. The Ministry of Trade, Industry and Fisheries work
 
is to obtain this main objective builds on the following sub-
 
objectives: efficient use of society’s resources, increased
 
innovation and adaptation ability, and companies who succeed in
 
international market. The sub-objectives and prioritised areas to
 
achieve these are just as important for the seafood industry
 
as other activities in Norway. A purposeful superior effort to
 
stimulate to increased innovation and adaptation ability in
 
Norwegian economy is of great importance also for the seafood
 
industry.”
 
  
 
===== Iceland =====
 
===== Iceland =====
  
Iceland seafood sector is modern and competitive, based on
+
Iceland seafood sector is modern and competitive, based on sustainable harvest and protection of the marine ecosystem. Marine products have historically been the country’s leading export items and the seafood industry remains the backbone of the economy. The fisheries management in Iceland is primarily based on extensive research on the fish stocks and the marine ecosystem and biodiversity, and decisions on allowable catches are made on the basis of scientific advice from the Icelandic Marine Research Institute and catches are monitored and enforced by the Directorate of Fisheries.
sustainable harvest and protection of the marine ecosystem. Marine
 
products have historically been the country’s leading export items
 
and the seafood industry remains the backbone of the economy. The
 
fisheries management in Iceland is primarily based on extensive
 
research on the fish stocks and the marine ecosystem and
 
biodiversity, and decisions on allowable catches are made on the
 
basis of scientific advice from the Icelandic Marine Research
 
Institute and catches are monitored and enforced by the
 
Directorate of Fisheries.
 
  
 
===== Newfoundland =====
 
===== Newfoundland =====
  
Fisheries and Oceans (DFO) is responsible for management of
+
Fisheries and Oceans (DFO) is responsible for management of the Canadian fisheries stocks in accordance with the roles and responsibilities outlined in Canada’s Fisheries Act. The major objectives and priorities of the DFO’s fisheries management policies include ensuring environmental sustainability and conversation of the resource, ensuring access based on adjacency or proximity to the resources, consideration of the relative dependence of coastal communities and the dependence of various fleet sectors, as well as factors such as economic efficiency and fleet mobility. Inclusion of stakeholders in the decision-making process is regarded as a key priority for fisheries management in Canada (Fisheries Management Decisions, 2017; Sustainable Fisheries Framework, 2017).
the Canadian fisheries stocks in accordance with the roles and
 
responsibilities outlined in Canada’s Fisheries Act. The major
 
objectives and priorities of the DFO’s fisheries
 
management policies include ensuring environmental sustainability and
 
conversation of the resource, ensuring access based on adjacency or proximity to the
 
resources, consideration of the relative dependence of coastal
 
communities and the dependence of various fleet sectors, as well as
 
factors such as economic efficiency and fleet mobility. Inclusion of stakeholders in the
 
decision-making process is regarded as a key priority for fisheries management in Canada
 
(Fisheries Management Decisions, 2017; Sustainable Fisheries Framework, 2017).
 
  
 
==== Quota system: Individually Transferable Access ====
 
==== Quota system: Individually Transferable Access ====
Line 273: Line 87:
 
===== Norway =====
 
===== Norway =====
  
* Rule of thumb: Off-shore vessels governed by licenses, and coastal vessels by annual
+
*Rule of thumb: Off-shore vessels governed by licenses, and coastal vessels by annual  
 +
 
 
participation rights (off-shore conventional vessels excepted).
 
participation rights (off-shore conventional vessels excepted).
* In order to get a fishing quota you have to buy a vessel (a pre- requisite is loosened up in later
+
 
years, where one nowadays can get hold of structured quotas,
+
*In order to get a fishing quota you have to buy a vessel (a pre- requisite is loosened up in later  
without factual vessel transactions). Transferability has increased, buts still with great
+
 
imperfections compared with an ITQ-regime.
+
years, where one nowadays can get hold of structured quotas, without factual vessel transactions). Transferability has increased, buts still with great imperfections compared with an ITQ-regime.
* Quota distribution to vessel groups (coastal vs. off-shore, and different size classes within
+
 
the coastal vessel group) based on allocation formulas agreed within the Norwegian Fishermen
+
*Quota distribution to vessel groups (coastal vs. off-shore, and different size classes within  
Association, upon historical rights. Still with some autonomy for the authorities to allocate
+
 
certain shares of quotas to special schemes (youth, recruitment, R&D, etc.) before allocation to vessels.
+
the coastal vessel group) based on allocation formulas agreed within the Norwegian Fishermen Association, upon historical rights. Still with some autonomy for the authorities to allocate certain shares of quotas to special schemes (youth, recruitment, R&D, etc.) before allocation to vessels.
* Regional distribution safeguarded by fleet composition, and limited transferability between regions
+
 
 +
*Regional distribution safeguarded by fleet composition, and limited transferability between regions  
 +
 
 
for some licenses/participation rights.
 
for some licenses/participation rights.
* Quota year is the same as the almanac year.
+
 
 +
*Quota year is the same as the almanac year.  
  
 
===== Iceland =====
 
===== Iceland =====
  
The ownership of quotas involves the right to catch the fish but does not entail ownership of the fish
+
The ownership of quotas involves the right to catch the fish but does not entail ownership of the fish stock. Thus, it is claimed that the quota does not mean the ownership of the fish but rather the right to catch the fish.  Since 2001 small boats has been allocated TAC (Total allowable catches) and all effort based system abolished until 2009 when coastal fisheries was introduced. As can be seen in figure the share of small boats of the TAC was 14.2% in 1992 and is 22.3% in 2016. It peaked in 2001 when it was 24.1% of the TAC in cod. Part of this increase can be explained with changes in classification of small boats as in 2013 when small boat definition went from 15 gross registered tonnes (GRT) to 30 GRT.
stock. Thus, it is claimed that the quota does not mean the ownership of the fish but rather
+
 
the right to catch the fish.  Since 2001 small boats has been allocated TAC (Total allowable catches) and all effort
+
*The emphasis of the fisheries management system since 2001 has been to simplify the system and bring all into the quota  
based system abolished until 2009 when coastal fisheries was introduced. As can be seen in figure the share of small boats
+
 
of the TAC was 14.2% in 1992 and is 22.3% in 2016. It peaked in 2001 when it was 24.1% of the TAC in cod. Part of this
+
system of ITQ and TAC system. Against this, open access fishing was introduced in 2009 when new system was introduced for small boat called costal fishing (isl. strandveiði).
increase can be explained with changes in classification of small boats as in 2013 when small boat definition went from 15
+
 
gross registered tonnes (GRT) to 30 GRT.
+
*By the 1990 Act the fishing year was set from 1. September to 31. August in the following year but previously  
* The emphasis of the fisheries management system since 2001 has been to simplify the system and bring all into the quota
+
 
system of ITQ and TAC system. Against this, open access fishing was introduced in 2009 when new system was introduced for
+
it had been based on the calendar year. This was an effort to channel fishing of the groundfish stocks away from the summer months, when quality suffers more quickly and many regular factory workers are on vacation.
small boat called costal fishing (isl. strandveiði).
 
* By the 1990 Act the fishing year was set from 1. September to 31. August in the following year but previously
 
it had been based on the calendar year. This was an effort to channel fishing of the groundfish stocks away from
 
the summer months, when quality suffers more quickly and many regular factory workers are on vacation.
 
  
 
===== Newfoundland =====
 
===== Newfoundland =====
  
Generally, DFO allocates quotas for each stock/species (or group of species) in accordance with a specific
+
Generally, DFO allocates quotas for each stock/species (or group of species) in accordance with a specific fishing season and within a specified fisheries management division. The key regions or fisheries management divisions for cod quota or allocation in NL are:
fishing season and within a specified fisheries management division. The key regions or fisheries management divisions
+
 
for cod quota or allocation in NL are:
+
#3K (including 2J3KL)  
# 3K (including 2J3KL)
+
#3Ps  
# 3Ps
+
#4R (including 4R3Pn)  
# 4R (including 4R3Pn)
+
 
 
Information included in a fisheries decision may include:
 
Information included in a fisheries decision may include:
* opening and closing dates for the season,
 
* total allowable catches (TAC),
 
* and management plans (Fisheries Management Plans, 2017) with certain fisheries managed through multi-year Integrated Fisheries
 
Management Plans (Integrated Fisheries Management Plans, 2017). In Newfoundland, Atlantic cod are managed through a series of strategies. Pending the NAFO
 
region, the cod fishery can be a set quota, a weekly allowance or allocation, or may be an experimental fishery.
 
Based on principles of adjacency and the numbers of vessels /harvesters participating in the fishery, the
 
coastal fleet (<65 feet) has a strong position within the NL fisheries sector.
 
  
 +
*opening and closing dates for the season,
 +
*total allowable catches (TAC),
 +
*and management plans (Fisheries Management Plans, 2017) with certain fisheries managed through multi-year Integrated Fisheries
 +
 +
Management Plans (Integrated Fisheries Management Plans, 2017). In Newfoundland, Atlantic cod are managed through a series of strategies. Pending the NAFO region, the cod fishery can be a set quota, a weekly allowance or allocation, or may be an experimental fishery. Based on principles of adjacency and the numbers of vessels /harvesters participating in the fishery, the coastal fleet (<65 feet) has a strong position within the NL fisheries sector.
 +
 +
&nbsp;
  
 
==== Entry barriers into the system: ====
 
==== Entry barriers into the system: ====
Line 326: Line 140:
  
 
The activity demand in the Participation Act states that in order to own a fishing vessel one have to be an active fisher.
 
The activity demand in the Participation Act states that in order to own a fishing vessel one have to be an active fisher.
* Many exceptions have been granted. Firstly, on the same footing as active fishers are administrative fishing vessel
+
 
owners – caretaking the daily operation of vessels from land.  Also, as the filleting industry in the north of
+
*Many exceptions have been granted. Firstly, on the same footing as active fishers are administrative fishing vessel  
Norway was built up and prioritised as whole year employers, many filleting firms were granted cod trawl licenses,
+
 
which today are held by two big processing concerns (Lerøy and Nergård)
+
owners – caretaking the daily operation of vessels from land.  Also, as the filleting industry in the north of Norway was built up and prioritised as whole year employers, many filleting firms were granted cod trawl licenses, which today are held by two big processing concerns (Lerøy and Nergård)
* To become a registered fisher, you have to live in Norway and work on a registered Norwegian fishing vessel
+
 
* To get a vessel registered a as a fishing vessels, demands have to be met regarding size class and operating areas.
+
*To become a registered fisher, you have to live in Norway and work on a registered Norwegian fishing vessel  
Like in other western society fisheries, the closure of the commons have increased the capital intensity, and labour is
+
*To get a vessel registered a as a fishing vessels, demands have to be met regarding size class and operating areas.  
to a large degree substituted by capital intensive production equipment.
+
 
Foreigners can buy vessels below 15 meters in Norway and control no more than 40 per cent for boats above 15 metres.
+
Like in other western society fisheries, the closure of the commons have increased the capital intensity, and labour is to a large degree substituted by capital intensive production equipment. Foreigners can buy vessels below 15 meters in Norway and control no more than 40 per cent for boats above 15 metres. Processing industry - no nationality limitations exists
Processing industry - no nationality limitations exists
 
  
 
===== Iceland =====
 
===== Iceland =====
  
 
All professional fishing in Iceland has to have licences for fishing.
 
All professional fishing in Iceland has to have licences for fishing.
* Capital intensive due to high price of quota
+
 
* Entry for foreign investments very limited (or closed).
+
*Capital intensive due to high price of quota  
* Economics of size Costal fisheries
+
*Entry for foreign investments very limited (or closed).  
* In 2016 total 9790 thousand tones are allocated for coastal fishing one open access base from May to August.
+
*Economics of size Costal fisheries  
* Open access
+
*In 2016 total 9790 thousand tones are allocated for coastal fishing one open access base from May to August.  
* Low profitability (returning loss for all years of operation)
+
*Open access  
* Coastal fishing is limited to small boats with maximum two handlines per person and
+
*Low profitability (returning loss for all years of operation)  
 +
*Coastal fishing is limited to small boats with maximum two handlines per person and  
 +
 
 
maximum two person on the boat. The maximum 650 kg catch per day and fishing is limited to four days a week.
 
maximum two person on the boat. The maximum 650 kg catch per day and fishing is limited to four days a week.
* There are also limits of TAC for each area for the small
+
 
 +
*There are also limits of TAC for each area for the small  
 +
 
 
boats.
 
boats.
  
 +
&nbsp;
  
 
===== Newfoundland =====
 
===== Newfoundland =====
  
 
No new licences being issued by DFO
 
No new licences being issued by DFO
* Entry into fishery is based on acquisition of existing licences
+
 
* Requires a professional fish harvester certification
+
*Entry into fishery is based on acquisition of existing licences  
* Significant investment in terms of education and training and at-sea experience
+
*Requires a professional fish harvester certification  
* Cost of entry into the fishery is prohibitive due to the high cost of capital investment (vessels,
+
*Significant investment in terms of education and training and at-sea experience  
 +
*Cost of entry into the fishery is prohibitive due to the high cost of capital investment (vessels,  
 +
 
 
gear, etc.) and the cost of licences
 
gear, etc.) and the cost of licences
* Uncertainty over future allocation/quotas and if there will be return on investment
 
  
 +
*Uncertainty over future allocation/quotas and if there will be return on investment
 +
 +
&nbsp;
  
 
==== Exit barriers from the industry ====
 
==== Exit barriers from the industry ====
Line 367: Line 189:
 
===== Norway =====
 
===== Norway =====
  
* Exit barriers are fewer Vessel owners are unable to recover the full vessel value as they exit the industry.
+
*Exit barriers are fewer Vessel owners are unable to recover the full vessel value as they exit the industry.  
* However, the increase in quota prices over the years should cover for such discrepancies.
+
*However, the increase in quota prices over the years should cover for such discrepancies.  
* Limited transferability between regions in some vessel groups.
+
*Limited transferability between regions in some vessel groups.  
  
 
===== Iceland =====
 
===== Iceland =====
  
* Low exit barriers quota easily sold and market open
+
*Low exit barriers quota easily sold and market open  
* No tax limitation for selling the fishing rights and ITQ.
+
*No tax limitation for selling the fishing rights and ITQ.  
* Unlimited transferability between regions
+
*Unlimited transferability between regions  
  
 
===== Newfoundland =====
 
===== Newfoundland =====
  
* Low exit barriers licenses are easily sold; open market for licence
+
*Low exit barriers licenses are easily sold; open market for licence  
* No regulations governing the sales
+
*No regulations governing the sales  
* Exit not linked to potential resource re-allocation for new entrants; i.e. portion of
+
*Exit not linked to potential resource re-allocation for new entrants; i.e. portion of  
 +
 
 
share or allocation is not reinvested back into the fishery
 
share or allocation is not reinvested back into the fishery
* No financial reinvestment (e.g.no tax or fee) required to be paid by harvester upon
+
 
 +
*No financial reinvestment (e.g.no tax or fee) required to be paid by harvester upon  
 +
 
 
sale of licence and exit from the system
 
sale of licence and exit from the system
  
Line 390: Line 215:
 
===== Norway =====
 
===== Norway =====
  
There is in Norway a consolidation limit for cod for both conventional off-shore vessels (auto-liners) and
+
There is in Norway a consolidation limit for cod for both conventional off-shore vessels (auto-liners) and cod trawlers, but not for coastal vessels.
cod trawlers, but not for coastal vessels.
+
 
* Firms owning conventional off-shore vessels cannot, directly or indirectly, own vessels that
+
*Firms owning conventional off-shore vessels cannot, directly or indirectly, own vessels that  
 +
 
 
control more than 15 per cent of the group quota for any of the species included.
 
control more than 15 per cent of the group quota for any of the species included.
* For cod trawler, firms cannot control more vessels exceeding more than the number that
 
controls 12 quota factors. With today’s quota ceiling (maximum four quota factors per vessel), it
 
means 3 full structured vessels and about 13 per cent of the group quota for cod trawlers.
 
* However, there are specific rules for ship owners that also own
 
processing facilities, which is the reason that the two before mentioned cod trawler ship
 
owners have more vessels than the limit of the Act. Quotas can be transferred among vessels in a vessel
 
owning company, but only upon authorities’ approval.
 
Also, other eases of transferability exist (renting quotas, ship wrecking, replacement permit – in
 
awaiting of new vessel, and others) A quota flexibility between years is also possible, but within the
 
cod fishery, this is only possible on group level – not for individual vessels.
 
An overfishing of the vessel groups’ cod quota one year will be claimed against next year’s quota,
 
and vice versa if the full quota is not taken.
 
For the vessel groups with a limited number of vessels, this individual vessel quota flexibility
 
between years will be effectuated over the turn of the year from 2017 to 2018.
 
Coastal vessels will have to wait longer until this can be effectuated, since so many
 
extraordinary schemes exists for these vessels Quotas within Norwegian
 
fisheries are transferable, but there exists no central brokerage system where quota prices are noted.
 
  
===== Iceland =====
+
*For cod trawler, firms cannot control more vessels exceeding more than the number that
  
Limitation on consolidation of quota ownership – max 12% ownership of TAC for each species.
+
controls 12 quota factors. With today’s quota ceiling (maximum four quota factors per vessel), it means 3 full structured vessels and about 13 per cent of the group quota for cod trawlers.
* Quota is bound to fishing vessel but companies with number of vessels can transfer quota between vessels.
 
* 15% of TAC can be transferred between years by companies
 
* 5% can be overfished in the fishing year and will then be withdraw from the companies next year TAC
 
TAC cannot  be transferred between systems, example from the hook system to the general TAC system
 
* There is regional restriction to fishing in the coastal fisheries
 
* The fishing ground is split into 4 areas
 
  
===== Newfoundland =====
+
*However, there are specific rules for ship owners that also own
 +
 
 +
processing facilities, which is the reason that the two before mentioned cod trawler ship owners have more vessels than the limit of the Act. Quotas can be transferred among vessels in a vessel owning company, but only upon authorities’ approval. Also, other eases of transferability exist (renting quotas, ship wrecking, replacement permit – in awaiting of new vessel, and others) A quota flexibility between years is also possible, but within the cod fishery, this is only possible on group level – not for individual vessels. An overfishing of the vessel groups’ cod quota one year will be claimed against next year’s quota, and vice versa if the full quota is not taken. For the vessel groups with a limited number of vessels, this individual vessel quota flexibility between years will be effectuated over the turn of the year from 2017 to 2018. Coastal vessels will have to wait longer until this can be effectuated, since so many extraordinary schemes exists for these vessels Quotas within Norwegian fisheries are transferable, but there exists no central brokerage system where quota prices are noted.
 +
 
 +
===== Iceland =====
 +
 
 +
Limitation on consolidation of quota ownership – max 12% ownership of TAC for each species.
 +
 
 +
*Quota is bound to fishing vessel but companies with number of vessels can transfer quota between vessels.
 +
*15% of TAC can be transferred between years by companies
 +
*5% can be overfished in the fishing year and will then be withdraw from the companies next year TAC
 +
 
 +
TAC cannot be transferred between systems, example from the hook system to the general TAC system
 +
 
 +
*There is regional restriction to fishing in the coastal fisheries
 +
*The fishing ground is split into 4 areas
 +
 
 +
===== Newfoundland =====
  
 
Transferability allocation of quota/weekly
 
Transferability allocation of quota/weekly
* Limit on combining (maximum set at 2:1 or 3:1) shares or allocation for inshore fleet
 
* Transfer of shares/allocation between vessels is permanent (inshore fleet);
 
* Larger offshore vessels can transfer quota between vessels annually- it is not permanent
 
* Opportunity to buddy-up is limited or restricted based on region and season
 
  
 +
*Limit on combining (maximum set at 2:1 or 3:1) shares or allocation for inshore fleet
 +
*Transfer of shares/allocation between vessels is permanent (inshore fleet);
 +
*Larger offshore vessels can transfer quota between vessels annually- it is not permanent
 +
*Opportunity to buddy-up is limited or restricted based on region and season
 +
 +
&nbsp;
  
 
==== Possibilities to upgrade in the system ====
 
==== Possibilities to upgrade in the system ====
Line 435: Line 257:
 
===== Norway =====
 
===== Norway =====
  
Upgrading is possible, but is capital intensive. Opposite to the fishing industry, no license is needed to erect
+
Upgrading is possible, but is capital intensive. Opposite to the fishing industry, no license is needed to erect processing capacity. Upstream vertical integration (towards the fishing fleet) is prohibited, while downstream (from fleet to processing) allowed. Less cod in onboard processed in the off-shore over time, but more is sold as frozen HG.
processing capacity.
 
Upstream vertical integration (towards the fishing fleet) is prohibited, while downstream
 
(from fleet to processing) allowed.
 
Less cod in onboard processed in the off-shore over time, but more is sold as frozen HG.
 
  
 
===== Iceland =====
 
===== Iceland =====
  
 
Limitation to move between systems
 
Limitation to move between systems
* hook system is looked in there but can be transferred inside that system
+
 
* Small boats can enter the costal fisheries even if they are operating in other systems.
+
*hook system is looked in there but can be transferred inside that system  
* only requirement’s is during that time they only operate in costal fisheries.
+
*Small boats can enter the costal fisheries even if they are operating in other systems.  
 +
*only requirement’s is during that time they only operate in costal fisheries.  
  
 
===== Newfoundland =====
 
===== Newfoundland =====
  
* Limited opportunity for vertical integration based on PIICAF and allocation of first 115,000
+
*Limited opportunity for vertical integration based on PIICAF and allocation of first 115,000  
 +
 
 
tonnes to inshore sector
 
tonnes to inshore sector
* Upgrading is based on number of licences purchased
+
 
 +
*Upgrading is based on number of licences purchased  
  
 
==== Management measurements ====
 
==== Management measurements ====
Line 458: Line 279:
 
===== Norway =====
 
===== Norway =====
  
Landing obligations are not a subject in Norwegian fisheries, since it is mandatory to land all caught fish.
+
Landing obligations are not a subject in Norwegian fisheries, since it is mandatory to land all caught fish. Delivery obligations have nevertheless been put on about half the cod trawlers in order to see to it that fish is landed where it was supposed to, in the cases where processing firms were granted cod trawler licenses but where ownership to trawlers have been dissolve during the years. No limits exists to how much a vessel can land on a daily basis.
Delivery obligations have nevertheless been put on about half the cod trawlers in order to
 
see to it that fish is landed where it was supposed to, in the cases where processing firms were
 
granted cod trawler licenses but where ownership to trawlers have been dissolve during the years.
 
No limits exists to how much a vessel can land on a daily basis.
 
* safety limits to how much cargo a vessel can hold, and
 
* also a general rule that “a vessel should not carry more than it can take care of in a reasonable manner”,
 
* but no limits exist as to what is the limit for daily catches in order to enable a best possible raw material quality.
 
  
 +
*safety limits to how much cargo a vessel can hold, and
 +
*also a general rule that “a vessel should not carry more than it can take care of in a reasonable manner”,
 +
*but no limits exist as to what is the limit for daily catches in order to enable a best possible raw material quality.
 +
 +
&nbsp;
  
 
===== Iceland =====
 
===== Iceland =====
Line 472: Line 291:
 
'''Landing obligation'''
 
'''Landing obligation'''
  
* None, except in coastal fisheries the fish has to be landed before 16:00 and in harbours in the fishing zone
+
*None, except in coastal fisheries the fish has to be landed before 16:00 and in harbours in the fishing zone  
* Delivery obligations are not in place in Iceland and no processing requirements
+
*Delivery obligations are not in place in Iceland and no processing requirements  
  
 
'''Fishing days – regulations/number of days'''
 
'''Fishing days – regulations/number of days'''
  
* Coastal fisheries have limitation (4 days pr. week/4 months)
+
*Coastal fisheries have limitation (4 days pr. week/4 months)  
* Gear restriction in the hook system
+
*Gear restriction in the hook system  
  
 
'''Quantity'''
 
'''Quantity'''
  
* In the coastal fisheries system
+
*In the coastal fisheries system  
* Max 650 kg pr. day/14 hours pr day
+
*Max 650 kg pr. day/14 hours pr day  
* TAC for each area
+
*TAC for each area  
  
 
'''Closures'''
 
'''Closures'''
  
* Marine Institute has licences to introduce closures fishing areas if for example share of small fish
+
*Marine Institute has licences to introduce closures fishing areas if for example share of small fish  
 +
 
 
is too high according to landing or historical landing data Discard ban
 
is too high according to landing or historical landing data Discard ban
* There are measurement’s in place to avoid discard
+
 
* Limited withdraw on unwanted catch form TAC
+
*There are measurement’s in place to avoid discard  
* Up to 5% of fish that is damage can be landed as VS fish special weighted and not withdraw from TAC
+
*Limited withdraw on unwanted catch form TAC  
 +
*Up to 5% of fish that is damage can be landed as VS fish special weighted and not withdraw from TAC  
  
 
===== Newfoundland =====
 
===== Newfoundland =====
Line 498: Line 319:
 
'''Landing obligation'''
 
'''Landing obligation'''
  
* must land all catch unless a species exemption is received from DFO
+
*must land all catch unless a species exemption is received from DFO  
  
 
'''Minimum processing requirement'''
 
'''Minimum processing requirement'''
  
* cannot process at sea
+
*cannot process at sea  
  
 
'''Fishing season'''
 
'''Fishing season'''
  
* determined annually; reportedly based on ease of access to the fishery and not linked to market conditions
+
*determined annually; reportedly based on ease of access to the fishery and not linked to market conditions  
  
 
'''Gear restriction'''
 
'''Gear restriction'''
  
* in place (e.g. fixed versus mobile gear)
+
*in place (e.g. fixed versus mobile gear)  
 +
 
 +
=== Market approach ===
 +
 
 +
==== Differences in exports ====
  
===Market approach===
+
It is interesting to look at the nature of the export from each of the value chains; that is whole fish, fillets, salted products and dried fish.
  
====Differences in exports====
+
[[File:D34 fig 4.png|center|Figure 4]] ''Figure 4. Export of whole unprocessed fish from Norway and Iceland as share of total exports.''
  
It is interesting to look at the nature of the export from each of the value chains;
+
*Export of whole fish from Norway has rather been increasing in the recent
that is whole fish, fillets, salted products and dried fish.
 
  
[[File:D34_fig_4.png|center|Figure 4]]
+
years. Part of that could be the increase in catch in Norway or from around 215.000 thousand tons in 2008 to 422 thousand tons in 2015. This export is both frozen H/G (headed and gutted) and fresh.
''Figure 4. Export of whole unprocessed fish from Norway and Iceland as share of total exports.''
+
 
 +
*Norwegian have focused a lot the last year of marketing their H/G fresh
 +
 
 +
fish as Skrei where they select the best fish for export under the brand name Skrei and receive premium for that export.
 +
 
 +
*Export from Iceland has been increasing slightly and is mainly fresh with
  
* Export of whole fish from Norway has rather been increasing in the recent
 
years. Part of that could be the increase in catch in Norway or from around
 
215.000 thousand tons in 2008 to 422 thousand tons in 2015. This export
 
is both frozen H/G (headed and gutted) and fresh.
 
* Norwegian have focused a lot the last year of marketing their H/G fresh
 
fish as Skrei where they select the best fish for export under the brand
 
name Skrei and receive premium for that export.
 
* Export from Iceland has been increasing slightly and is mainly fresh with
 
 
head on and is up to 9.7% in 2016 from 4.1% in 2011.
 
head on and is up to 9.7% in 2016 from 4.1% in 2011.
* Newfoundland export of whole fish fluctuates a lot between years;
 
somewhat determined by the fluctuating TAC and weekly
 
allocation/permissible catch rates.
 
Another way to look at the processing stage of the value chain is to look at
 
the share of fillets in the export from those countries. In figure 3, all fillets
 
export is summarized. This takes into account whole fillets, fillets portions and
 
fillets from different processing; fresh, frozen and dried.
 
  
[[File:D34_fig_5.png|center|Figure 5]]
+
*Newfoundland export of whole fish fluctuates a lot between years;
''Figure 5. Total share of volume of fillets in export from Norway, Iceland and Newfoundland.''
+
 
 +
somewhat determined by the fluctuating TAC and weekly allocation/permissible catch rates. Another way to look at the processing stage of the value chain is to look at the share of fillets in the export from those countries. In figure 3, all fillets export is summarized. This takes into account whole fillets, fillets portions and fillets from different processing; fresh, frozen and dried.
 +
 
 +
[[File:D34 fig 5.png|center|Figure 5]] ''Figure 5. Total share of volume of fillets in export from Norway, Iceland and Newfoundland.''
 +
 
 +
*Fillets production is very limited in Norway and accounts for less than 10%
 +
 
 +
of the export in 2016 and the share has been decreasing. The fillets production is mainly frozen in Norway.
 +
 
 +
*Iceland Fillet production is stable from around 55% to almost 60% of the
 +
 
 +
total export. The 12.1&nbsp;% of the export are fresh fillets or fillet parts, 21% is frozen and 10.3% are salted both frozen lightly salted and as salted fillets.
  
* Fillets production is very limited in Norway and accounts for less than 10%
+
*Newfoundland export of fillets fluctuates between years.  
of the export in 2016 and the share has been decreasing. The fillets
 
production is mainly frozen in Norway.
 
  
* Iceland Fillet production is stable from around 55% to almost 60% of the
+
The most valuable fillets production is the fresh fillets or fillet portions. In Figure 6 the fresh fish fillet export is expressed with export value per kg of fillets exported
total export. The 12.1 % of the export are fresh fillets or fillet parts, 21% is
 
frozen and 10.3% are salted both frozen lightly salted and as salted fillets.
 
  
* Newfoundland export of fillets fluctuates between years.
+
[[File:D34 fig 6.png|center|Figure 6]] ''Figure 6. Share of export for fresh fillets by volume and average export price.''
The most valuable fillets production is the fresh fillets or fillet portions. In
 
Figure 6 the fresh fish fillet export is expressed with export value per kg of
 
fillets exported
 
  
[[File:D34_fig_6.png|center|Figure 6]]
+
&nbsp;
''Figure 6. Share of export for fresh fillets by volume and average export price.''
 
  
 +
*The volume of fresh fillets as a share of the total export in Norway has
  
* The volume of fresh fillets as a share of the total export in Norway has
+
been decreasing in share although the real quantity has not been reduced as the share as quantity of landed cod has increased considerable in this period. It is interesting that the price per kg of exported fillets are lower than for Icelandic fillets, which could suggest more export of whole fillets instead of fillet portions (loin cut) export from Iceland or lower price in the market.
been decreasing in share although the real quantity has not been reduced
 
as the share as quantity of landed cod has increased considerable in this
 
period. It is interesting that the price per kg of exported fillets are lower
 
than for Icelandic fillets, which could suggest more export of whole fillets
 
instead of fillet portions (loin cut) export from Iceland or lower price in the
 
market.
 
  
* The export of fresh fillets has been increasing it share in Iceland as well as
+
*The export of fresh fillets has been increasing it share in Iceland as well as  
price per kg which can mainly be traced to higher degree of portioning in
 
Iceland today due to water jet cutting in the processing part of the value
 
chain.
 
  
* The share of fresh fillets in Newfoundland was decreasing from 2011 when
+
price per kg which can mainly be traced to higher degree of portioning in Iceland today due to water jet cutting in the processing part of the value chain.
it was 10.1% to 2015 when it was 1.5%. Then in 2016 it was up to 22% of
 
the total export. Price of the export is in most cases (except 2014) much
 
lower than fresh fillets from Norway and Iceland.
 
  
[[File:D34_fig_7.png|center|Figure 7]]
+
*The share of fresh fillets in Newfoundland was decreasing from 2011 when
''Figure 7. Share of export for frozen fillets by volume and average export price.''
 
  
* The share of the Norwegian frozen fillets export is decreasing or from
+
it was 10.1% to 2015 when it was 1.5%. Then in 2016 it was up to 22% of the total export. Price of the export is in most cases (except 2014) much lower than fresh fillets from Norway and Iceland.
around 6% in 2011 to 2.9% in 2016. What is interesting is that the
 
Norwegian receive higher price per kg of fillet than Iceland. One reason for
 
this could the focus of fresh fillet portions (loin cut) in Iceland leaving the
 
tail and belly flap behind less valuable part of the fillet.
 
  
* Newfoundland have just under 30% of their export in frozen fillet and the
+
[[File:D34 fig 7.png|center|Figure 7]] ''Figure 7. Share of export for frozen fillets by volume and average export price.''
price is in between Iceland and Norway except for 2013 when they receive
 
the highest price of the three nations.
 
The traditional markets of cod from all the three countries is the salted fish
 
markets mainly in the Mediterranean countries.
 
  
[[File:D34_fig_8.png|center|Figure 8]]
+
*The share of the Norwegian frozen fillets export is decreasing or from  
''Figure 8. Total share of volume of salted fish in export from Norway, Iceland and Newfoundland''
 
  
* Salt fish export form Iceland is divided between fillets and split fish. The
+
around 6% in 2011 to 2.9% in 2016. What is interesting is that the Norwegian receive higher price per kg of fillet than Iceland. One reason for this could the focus of fresh fillet portions (loin cut) in Iceland leaving the tail and belly flap behind less valuable part of the fillet.
share of export of split fish has been decreasing and the share of fillets
+
 
increasing.
+
*Newfoundland have just under 30% of their export in frozen fillet and the
 +
 
 +
price is in between Iceland and Norway except for 2013 when they receive the highest price of the three nations. The traditional markets of cod from all the three countries is the salted fish markets mainly in the Mediterranean countries.
 +
 
 +
[[File:D34 fig 8.png|center|Figure 8]] ''Figure 8. Total share of volume of salted fish in export from Norway, Iceland and Newfoundland''
 +
 
 +
*Salt fish export form Iceland is divided between fillets and split fish. The  
 +
 
 +
share of export of split fish has been decreasing and the share of fillets increasing.
 +
 
 +
*The Norwegian export is mainly spited fish or clipfish dried salted that is
  
* The Norwegian export is mainly spited fish or clipfish dried salted that is
 
 
counted as dried fish.
 
counted as dried fish.
  
* The NL export consists of cod fillets dried and salted in brine (with/out
+
*The NL export consists of cod fillets dried and salted in brine (with/out  
 +
 
 
smoking) and wet salted
 
smoking) and wet salted
  
The export of dried fish is also important for Norway and Iceland but not for the
+
The export of dried fish is also important for Norway and Iceland but not for the Newfoundland cod. The total share of salted and/or dried fish for NL has decreased over time. Between the years 2005-2010, NL salt fish exports ranged from 8-37% of total exports. This decreased from 2011-2016 where exports varied from 0% to 8.5%
Newfoundland cod. The total share of salted and/or dried fish for NL has
 
decreased over time. Between the years 2005-2010, NL salt fish exports ranged
 
from 8-37% of total exports. This decreased from 2011-2016 where exports
 
varied from 0% to 8.5%
 
  
[[File:D34_fig_9.png|center|Figure 9]]
+
[[File:D34 fig 9.png|center|Figure 9]] ''Figure 9. Total share of volume of dried fish in export from Norway and Iceland''
''Figure 9. Total share of volume of dried fish in export from Norway and Iceland''
 
  
* The export of dried fish from Iceland is mostly dried head and frames.
+
*The export of dried fish from Iceland is mostly dried head and frames.  
 +
 
 +
*The Norwegian export is stock fish. The main markets is Italy, which
  
* The Norwegian export is stock fish. The main markets is Italy, which
 
 
Norwegian have overtaken almost completely.
 
Norwegian have overtaken almost completely.
  
To summarise the marketing and production part together, it is interesting to look
+
To summarise the marketing and production part together, it is interesting to look at how much value each of the value chains are returning for per kilo of cod. From Figure 10 it can been seen that from 2010, Iceland has in most cases been returning highest value per kg of cod.
at how much value each of the value chains are returning for per kilo of cod.
 
From Figure 10 it can been seen that from 2010, Iceland has in most cases been
 
returning highest value per kg of cod.
 
  
[[File:D34_fig_10.png|center|Figure 10]]
+
[[File:D34 fig 10.png|center|Figure 10]] ''Figure 10 Total value of export per kg of cod landed''
''Figure 10 Total value of export per kg of cod landed''
 
  
* This method of calculating value creation does not take into account stock
+
*This method of calculating value creation does not take into account stock  
in the beginning of the year or at the end of the year. So that could affect
 
the numbers especially in Newfoundland that focuses on frozen products.
 
  
====Summary of main influencing factors regarding market approach====
+
in the beginning of the year or at the end of the year. So that could affect the numbers especially in Newfoundland that focuses on frozen products.
 +
 
 +
==== Summary of main influencing factors regarding market approach ====
  
 
{| class="wikitable" style="width: 100%;"
 
{| class="wikitable" style="width: 100%;"
Line 641: Line 439:
 
|-
 
|-
 
| Degree of processing
 
| Degree of processing
| Focus on:
+
| Focus on:  
* Fresh fillets
+
*Fresh fillets  
* Portions
+
*Portions  
| Raw material exporters.
+
 
 +
| Raw material exporters.  
 
Focus on:
 
Focus on:
* Whole
+
 
* Dried
+
*Whole  
* Salting
+
*Dried  
| Focus on:
+
*Salting  
* Frozen products
+
 
* Fillets
+
| Focus on:  
* Fillet portions
+
*Frozen products  
 +
*Fillets  
 +
*Fillet portions  
 +
 
 
|-
 
|-
 
| Marketing
 
| Marketing
 
| Limited mainly based on individual companies
 
| Limited mainly based on individual companies
| Medium, based on central focus of Norges rafisklag and individual companies.
+
| Medium, based on central focus of Norges rafisklag and individual companies.  
 
Producers and fisherman pays fee for marketing of Norwegian seafood
 
Producers and fisherman pays fee for marketing of Norwegian seafood
 +
 
| Limited or based on individual companies
 
| Limited or based on individual companies
 
|-
 
|-
Line 666: Line 469:
 
|}
 
|}
  
===Processing===
+
=== Processing ===
  
 
==== Profitability and performance ====
 
==== Profitability and performance ====
  
Looking at the profitability of the processing sector as a whole as net profit as a
+
Looking at the profitability of the processing sector as a whole as net profit as a share of revenue it is clear that the Norwegian industry is behind the Icelandic processing sector regarding these criteria. The trend line for profit for the processing sector is but much steeper in for the Icelandic sector than for the Norwegian one. The Norwegian processing sector has been suffering from low profitability in recent years. Information about profitability is not available from Newfoundland.
share of revenue it is clear that the Norwegian industry is behind the Icelandic
 
processing sector regarding these criteria. The trend line for profit for the
 
processing sector is but much steeper in for the Icelandic sector than for the
 
Norwegian one. The Norwegian processing sector has been suffering from low
 
profitability in recent years. Information about profitability is not available from
 
Newfoundland.
 
  
[[File:D34_fig_11.png|center|Figure 11]]
+
[[File:D34 fig 11.png|center|Figure 11]] ''Figure 11. Net profit as share of revenue (Profitability) for the processing sectors in Norway and Iceland 1997-2015.''
''Figure 11. Net profit as share of revenue (Profitability) for the processing sectors in Norway and Iceland 1997-2015.''
 
  
It is interesting to look at the difference in performance for the salting and drying
+
It is interesting to look at the difference in performance for the salting and drying sectors between Iceland and Norway.
sectors between Iceland and Norway.
 
  
[[File:D34_fig_12.png|center|Figure 12]]
+
[[File:D34 fig 12.png|center|Figure 12]] ''Figure 12 Net profit as share of revenue in salting and drying processing sectors in Norway and Iceland 1997-2015''
''Figure 12 Net profit as share of revenue in salting and drying processing sectors in Norway and Iceland 1997-2015''
 
  
 
Main issues:
 
Main issues:
  
* The best profit in Norway is in dried stockfish and clipfish, that is dried
+
*The best profit in Norway is in dried stockfish and clipfish, that is dried  
salted fish. Salting and drying in Iceland is mainly salt fish. Light salted
+
 
and even light salted and frozen. Profitability is much higher than in salted
+
salted fish. Salting and drying in Iceland is mainly salt fish. Light salted and even light salted and frozen. Profitability is much higher than in salted production in Norway, where production is mainly traditionally salted fish.
production in Norway, where production is mainly traditionally salted fish.
+
 
 +
*Stockfish production in Norway is returning healthy EBIT for most year. The
 +
 
 +
stockfish production is aimed for high end niche markets in Italy and lower value markets in Nigeria.
  
* Stockfish production in Norway is returning healthy EBIT for most year. The
+
*Drying of whole fish is very limited, the main product of the drying sector
stockfish production is aimed for high end niche markets in Italy and lower
 
value markets in Nigeria.
 
  
* Drying of whole fish is very limited, the main product of the drying sector
 
 
in Iceland are heads and bone frames.
 
in Iceland are heads and bone frames.
  
[[File:D34_fig_13.png|center|Figure 13]]
+
[[File:D34 fig 13.png|center|Figure 13]] ''Figure 13. Net profit as share of revenue in filleting processing in Norway and frozen production in Iceland 1997-2015''
''Figure 13. Net profit as share of revenue in filleting processing in Norway and frozen production in Iceland 1997-2015''
 
  
* Compering export and profitability on fillets production it is possible to
+
*Compering export and profitability on fillets production it is possible to  
compare the frozen production in Iceland with the filleting production in
 
Norway. The frozen products from Iceland are mainly fillets or fillets
 
portions. It is obvious that there is great difference in profitability although
 
the profitability in Norway has been improving since 2008.
 
One of the influencing factor on the performance of the processing industry is
 
the flow of fish to the processing part. It is interesting to see the distribution of
 
catches for Norway and Iceland as is done in Figure 14, were the flow is shown as
 
monthly share of total catches for the year vs. export price of fresh fillets for
 
these countries in 2014.
 
  
[[File:D34_fig_14.png|center|Figure 14]]
+
compare the frozen production in Iceland with the filleting production in Norway. The frozen products from Iceland are mainly fillets or fillets portions. It is obvious that there is great difference in profitability although the profitability in Norway has been improving since 2008. One of the influencing factor on the performance of the processing industry is the flow of fish to the processing part. It is interesting to see the distribution of catches for Norway and Iceland as is done in Figure 14, were the flow is shown as monthly share of total catches for the year vs. export price of fresh fillets for these countries in 2014.
''Figure 14. Monthly catches of cod as share of total catches for 2014 and export price in Euro per kg for fresh fillets.''
 
  
 +
[[File:D34 fig 14.png|center|Figure 14]] ''Figure 14. Monthly catches of cod as share of total catches for 2014 and export price in Euro per kg for fresh fillets.''
  
* Norway has around 62.1% of the total catch landed in the first four months
+
&nbsp;
of the year while in Iceland the 39.2% of the total catch is caught during
+
 
that period.
+
*Norway has around 62.1% of the total catch landed in the first four months  
 +
 
 +
of the year while in Iceland the 39.2% of the total catch is caught during that period.
 +
 
 +
*During the first four months the price is lower than in the rest of the year
  
* During the first four months the price is lower than in the rest of the year
 
 
and Iceland receives higher prices every month, except in December.
 
and Iceland receives higher prices every month, except in December.
  
====By-products====
+
==== By-products ====
  
Product export statistic from the countries are not comparable making it difficult
+
Product export statistic from the countries are not comparable making it difficult to estimate the utilisation of the cod. However, the availability and the critical mass needed for creative usage of by-products is always facilitated by the size of processing facilities and level of automation.5.3 Summary of main influencing factors regarding processing
to estimate the utilisation of the cod. However, the availability and the critical
 
mass needed for creative usage of by-products is always facilitated by the size of
 
processing facilities and level of automation.5.3 Summary of main influencing factors regarding
 
processing
 
  
====Summary of main influencing factors regarding processing====
+
==== Summary of main influencing factors regarding processing ====
  
 
{| class="wikitable" style="width: 100%;"
 
{| class="wikitable" style="width: 100%;"
Line 756: Line 539:
 
| Stable controlled by the processing marketing needs
 
| Stable controlled by the processing marketing needs
 
| Seasonal controlled by the catch and seasons
 
| Seasonal controlled by the catch and seasons
| Seasonal controlled by catch limits (weekly limits may vary within
+
| Seasonal controlled by catch limits (weekly limits may vary within  
 
the same season) and fisherman’s willingness to sell to processing companies
 
the same season) and fisherman’s willingness to sell to processing companies
 +
 
|-
 
|-
 
| Structure of the industry
 
| Structure of the industry
 
| Vertical integrations
 
| Vertical integrations
 
| Ban or limits to vertical integrations
 
| Ban or limits to vertical integrations
| Limited vertical integration; Regulations in place to limit
+
| Limited vertical integration; Regulations in place to limit  
 
increase in vertical integration
 
increase in vertical integration
 +
 
|-
 
|-
 
| Vertical integrations
 
| Vertical integrations
Line 776: Line 561:
 
|}
 
|}
  
===Price settling mechanism===
+
=== Price settling mechanism ===
  
One of the factors determine the dynamic in the value chain is the first gate
+
One of the factors determine the dynamic in the value chain is the first gate price that the industry is capable of paying for the raw material and the form of selling. It is also interesting to study how effective the price settling mechanism is in rewarding for attributes of the raw material, like quality and fishing gear used. In Figure 15 development of the first gate price is expressed as weighted average price.
price that the industry is capable of paying for the raw material and the form of
 
selling. It is also interesting to study how effective the price settling mechanism
 
is in rewarding for attributes of the raw material, like quality and fishing gear
 
used. In Figure 15 development of the first gate price is expressed as weighted
 
average price.
 
  
[[File:D34_fig_15.png|center|Figure 15]]
+
[[File:D34 fig 15.png|center|Figure 15]] ''Figure 15. First sale price as weighted average price for cod in Norway and Iceland 2000-2016.''
''Figure 15. First sale price as weighted average price for cod in Norway and Iceland 2000-2016.''
 
  
 
Iceland has three ways of exchanging fish:
 
Iceland has three ways of exchanging fish:
* Auction markets sells around 16% of the total landed cod,
 
* The VICs are responsible for around 70% of the landed catch and process
 
most of the catches in own processing facilities. The price to the VIC ́s is
 
connected to the auction price in Iceland.
 
* Contracts between individual boat owners and producers is responsible
 
for 14% of the first sales.
 
In Norway there are two main form of trade of fish from fisherman to producers:
 
* Fresh fish is traded upon direct agreements between seller and buyer, but
 
with minimise price settling according to Act of the Fish Sales
 
organizations (Fiskesalgslagsloven), which gives sales organizations owned
 
by the fishers monopoly in the first hand trade of fish. In the case of cod,
 
two of those organization are responsible for nearly 99 % of all cod landed
 
by Norwegian fishers (in 2016). The sales organizations are responsible for
 
setting minimum prices for fish which is in most cases the price in the
 
transaction.
 
* Frozen fish is sold on auction or by own acquisition, where the vessel
 
owner upon landing himself takes care the sale of fish. In general, frozen
 
cod either goes to clipfish production or is exported unprocessed abroad,
 
while fresh cod to a greater degree is processed where it is landed.
 
In Newfoundland first hand price is negated before the start of the respective
 
fishing season.
 
* This is done by The Fish, Food and Allied Workers Union (FFAW) and the
 
processing companies convene as a price settling panel to negotiate the
 
first gate prices paid to harvesters.
 
* The grade or quality of the product constitutes the price received with cod
 
graded as either Grade A, B, C, or reject. The negotiated price is
 
considered the minimum price and it is often augmented by the
 
processing companies.
 
  
====Price according to fishing gear====
+
*Auction markets sells around 16% of the total landed cod,
 +
*The VICs are responsible for around 70% of the landed catch and process
 +
 
 +
most of the catches in own processing facilities. The price to the VIC ́s is connected to the auction price in Iceland.
 +
 
 +
*Contracts between individual boat owners and producers is responsible
 +
 
 +
for 14% of the first sales. In Norway there are two main form of trade of fish from fisherman to producers:
 +
 
 +
*Fresh fish is traded upon direct agreements between seller and buyer, but
 +
 
 +
with minimise price settling according to Act of the Fish Sales organizations (Fiskesalgslagsloven), which gives sales organizations owned by the fishers monopoly in the first hand trade of fish. In the case of cod, two of those organization are responsible for nearly 99&nbsp;% of all cod landed by Norwegian fishers (in 2016). The sales organizations are responsible for setting minimum prices for fish which is in most cases the price in the transaction.
 +
 
 +
*Frozen fish is sold on auction or by own acquisition, where the vessel
 +
 
 +
owner upon landing himself takes care the sale of fish. In general, frozen cod either goes to clipfish production or is exported unprocessed abroad, while fresh cod to a greater degree is processed where it is landed. In Newfoundland first hand price is negated before the start of the respective fishing season.
 +
 
 +
*This is done by The Fish, Food and Allied Workers Union (FFAW) and the
 +
 
 +
processing companies convene as a price settling panel to negotiate the first gate prices paid to harvesters.
 +
 
 +
*The grade or quality of the product constitutes the price received with cod
 +
 
 +
graded as either Grade A, B, C, or reject. The negotiated price is considered the minimum price and it is often augmented by the processing companies.
 +
 
 +
==== Price according to fishing gear ====
  
It is important to understand if the price settling mechanism is rewarding
+
It is important to understand if the price settling mechanism is rewarding fisherman for attribute that could affect the value creation in later stages in the value chain. These attributes are for example quality, timing, size of fish, fishing gear and temperature of the fish. It is impossible to evaluate all those factors, but it is possible to evaluate the ability of the price settling mechanism to pay different price according to fishing gear.
fisherman for attribute that could affect the value creation in later stages in the
 
value chain. These attributes are for example quality, timing, size of fish, fishing
 
gear and temperature of the fish. It is impossible to evaluate all those factors,
 
but it is possible to evaluate the ability of the price settling mechanism to pay
 
different price according to fishing gear.
 
  
[[File:D34_fig_16.png|center|Figure 16]]
+
[[File:D34 fig 16.png|center|Figure 16]] ''Figure 16. Norway, price according to fishing gear Euros/kg 2010 to 2016''
''Figure 16. Norway, price according to fishing gear Euros/kg 2010 to 2016''
 
  
 
It is clear that the price is different in Norway after according to the fishing gear.
 
It is clear that the price is different in Norway after according to the fishing gear.
* Longline and trawl receive the highest price but it is interesting that hand
 
line usually gets the lowest price which is in contrast with the general
 
believe that hook and line fish have the best quality.
 
The price difference is quite high or up to 0.58 euro in 2015 between the
 
highest and the lowest. Which means that the lowest price in 33% lower
 
than the highest.
 
  
[[File:D34_fig_17.png|center|Figure 17]]
+
*Longline and trawl receive the highest price but it is interesting that hand
''Figure 17. Iceland, price according to fishing gear Euros/kg 2012 to 2016''
+
 
 +
line usually gets the lowest price which is in contrast with the general believe that hook and line fish have the best quality. The price difference is quite high or up to 0.58 euro in 2015 between the highest and the lowest. Which means that the lowest price in 33% lower than the highest.
 +
 
 +
[[File:D34 fig 17.png|center|Figure 17]] ''Figure 17. Iceland, price according to fishing gear Euros/kg 2012 to 2016''
  
 
Price varies according to fishing gear in Iceland.
 
Price varies according to fishing gear in Iceland.
* The same trends can be detected as in Norway that the longline and trawl
 
receive usually the highest price. Gillnets receive the lowest price but
 
hand line receive the highest price in 2012, although the share of the total
 
landed cod is rather low.
 
* The price difference between the highest and lowest price range between
 
0.25 to 0.51 euros per kilo and is biggest in 2013 when the difference is
 
27%.
 
* It is interesting to see the difference in price between hand line in Norway
 
and Iceland that races questions about quality and the how active the
 
price settling mechanism is in identifying and rewarding for quality.
 
  
[[File:D34_fig_18.png|center|Figure 18]]
+
*The same trends can be detected as in Norway that the longline and trawl
''Figure 18 Newfoundland, price according to fishing gear Euros/kg 2000 to 2016''
 
  
In Newfoundland there is no difference according to fishing gear indicating there
+
receive usually the highest price. Gillnets receive the lowest price but hand line receive the highest price in 2012, although the share of the total landed cod is rather low.
is no efficiency in the price settling mechanism to identify quality and pay
 
incentives for that. There are recent examples were processing companies are
 
engaged in collaborative relationships with harvesters and are paying higher
 
premiums to those using fishing gear that produce a premium product.
 
  
====Summary of main influencing factors on value chain dynamic====
+
*The price difference between the highest and lowest price range between
 +
 
 +
0.25 to 0.51 euros per kilo and is biggest in 2013 when the difference is 27%.
 +
 
 +
*It is interesting to see the difference in price between hand line in Norway
 +
 
 +
and Iceland that races questions about quality and the how active the price settling mechanism is in identifying and rewarding for quality.
 +
 
 +
[[File:D34 fig 18.png|center|Figure 18]] ''Figure 18 Newfoundland, price according to fishing gear Euros/kg 2000 to 2016''
 +
 
 +
In Newfoundland there is no difference according to fishing gear indicating there is no efficiency in the price settling mechanism to identify quality and pay incentives for that. There are recent examples were processing companies are engaged in collaborative relationships with harvesters and are paying higher premiums to those using fishing gear that produce a premium product.
 +
 
 +
==== Summary of main influencing factors on value chain dynamic ====
  
 
{| class="wikitable" style="width: 100%;"
 
{| class="wikitable" style="width: 100%;"
Line 872: Line 636:
 
|-
 
|-
 
| Price settling
 
| Price settling
| Auction markets Price settling committee but the auction price is
+
| Auction markets Price settling committee but the auction price is  
used as benchmark for other prices calculations in vertically integrated
+
used as benchmark for other prices calculations in vertically integrated companies (VIC).
companies (VIC).
+
 
| Minimize price decided by sales organizations owned by the fishers for fresh
+
| Minimize price decided by sales organizations owned by the fishers for fresh  
 
fish Frozen fish is put up to auction
 
fish Frozen fish is put up to auction
 +
 
| Minimize price negotiated in the beginning of the season
 
| Minimize price negotiated in the beginning of the season
 
|-
 
|-
Line 885: Line 650:
 
|-
 
|-
 
| Transparency in price settling
 
| Transparency in price settling
| High Transparency in price formation – online auctions.
+
| High Transparency in price formation – online auctions.  
 
Equal access to auctions. Price to harvester has increased.
 
Equal access to auctions. Price to harvester has increased.
 +
 
| Low
 
| Low
 
| Low
 
| Low
 
|-
 
|-
 
| Dynamic of the price settling mechanism
 
| Dynamic of the price settling mechanism
| They play important role in returning marketing signal to the harvesting sector
+
| They play important role in returning marketing signal to the harvesting sector  
making price formation transparent and market based Provided necessary quality incentives
+
making price formation transparent and market based Provided necessary quality incentives Facilitate the utilization of by-products
Facilitate the utilization of by-products
+
 
| The price settling mechanism has been effective in avoiding “noise” or sharp changes
+
| The price settling mechanism has been effective in avoiding “noise” or sharp changes  
 
on fish price to fishermen. Less part goes through auction markets of the offshore fish.
 
on fish price to fishermen. Less part goes through auction markets of the offshore fish.
 +
 
| None or limited
 
| None or limited
 
|-
 
|-
Line 909: Line 676:
 
|-
 
|-
 
| Role of Auction markets regarding Specialisation
 
| Role of Auction markets regarding Specialisation
| The auction markets have support specialisation in processing. Transforming heterogenetic raw
+
| The auction markets have support specialisation in processing. Transforming heterogenetic raw  
 
material into standardise lots for processing (spices, size,quality)
 
material into standardise lots for processing (spices, size,quality)
 +
 
| Limited
 
| Limited
 
| Limited
 
| Limited
 
|-
 
|-
 
| Role of Auction markets regarding flow of raw material
 
| Role of Auction markets regarding flow of raw material
| They provide a stable flow of raw material to many small processors, creating a lower entry barrier for
+
| They provide a stable flow of raw material to many small processors, creating a lower entry barrier for  
entrepreneurs in fish processing. Helps maintaining competition in the processing. Foreign companies are on
+
entrepreneurs in fish processing. Helps maintaining competition in the processing. Foreign companies are on the market. Even out short run catch variations. Pressed for new product mix. Create channel for by-catch species and undersized fish. Creates critical mass in small species/economic of scale Supported more efficient logistic
the market. Even out short run catch variations. Pressed for new product mix. Create channel for
+
 
by-catch species and undersized fish. Creates critical mass in small species/economic of scale
 
Supported more efficient logistic
 
 
| Seasonal flow of material
 
| Seasonal flow of material
 
| Auction markets non-existent. Seasonal flow of material
 
| Auction markets non-existent. Seasonal flow of material
 
|}
 
|}
  
===Fishing===
+
=== Fishing ===
 +
 
 +
==== Fishing gear ====
 +
 
 +
[[File:D34 fig 19.png|center|Figure 19]] ''Figure 19. Newfoundland, Icelandic and Norwegian cod catch by fishing gear as share of total catch for the years 2016 and 2006.''
  
====Fishing gear====
+
Use of gillnets in Newfoundland had been dominated fishing gear accounting for around 80% of the total catch in 2016. In 1998 use of gillnet was around 62% and longline was around 28% but since then use of longline has been decreasing and in 2016 it counts for 3.9%. Use of hand line has been increasing or from 6.4% in 1998 to 14.9% in 2016. The reasons are:
  
[[File:D34_fig_19.png|center|Figure 19]]
+
*No active auction markets
''Figure 19. Newfoundland, Icelandic and Norwegian cod catch by fishing gear as share of total catch for the years 2016 and 2006.''
+
*Very limited price difference between fishing gear  
 +
*Very limited marketing effect in the relationships between producers and  
  
Use of gillnets in Newfoundland had been dominated fishing gear accounting for
 
around 80% of the total catch in 2016. In 1998 use of gillnet was around 62%
 
and longline was around 28% but since then use of longline has been decreasing
 
and in 2016 it counts for 3.9%. Use of hand line has been increasing or from
 
6.4% in 1998 to 14.9% in 2016. The reasons are:
 
* No active auction markets
 
* Very limited price difference between fishing gear
 
* Very limited marketing effect in the relationships between producers and
 
 
fisherman’s.
 
fisherman’s.
* The use of gillnets and lack of markets connection suggest that most
+
 
fisherman focus on minimising the cost of fishing and low cost strategy.
+
*The use of gillnets and lack of markets connection suggest that most  
Trawl is the most important fishing gear in Iceland with around 43% of the total
+
 
catch in 2016. The main change in development of fishing gear is that the share
+
fisherman focus on minimising the cost of fishing and low cost strategy. Trawl is the most important fishing gear in Iceland with around 43% of the total catch in 2016. The main change in development of fishing gear is that the share of gillnets has steadily been decreasing from around 33% in 1982 to 13% in 2006 down to 8.8% in 2016. Longline has been increasing it share or from 11% in 1982 to 37% in 2006 and is around 33.5% in 2016. Use of hand line has increased mainly due to the introduction of coastal fishing in 2008. The share of hand line is around 6% and has double from 2006 when it was around 3% which is similar as in 1982. The reasons are:
of gillnets has steadily been decreasing from around 33% in 1982 to 13% in 2006
+
 
down to 8.8% in 2016. Longline has been increasing it share or from 11% in 1982
+
*The auction market in Iceland is active  
to 37% in 2006 and is around 33.5% in 2016. Use of hand line has increased
+
*Price varies between fishing gear is creating incentives for better quality  
mainly due to the introduction of coastal fishing in 2008. The share of hand line
+
*The strategy is in most cases on quality and maximising the revenue  
is around 6% and has double from 2006 when it was around 3% which is similar
+
 
as in 1982. The reasons are:
+
In Norway, trawl is the most important fishing gear and accounts for 33% in 2016 which is increase of 1% since 2006. The use of gillnets has been going down from 2006 when the share was 28% to 23% in 2016. The biggest increase is in use of Danish seine has been increasing from 17% in 2006 to 22% in 2016. The reasons are:
* The auction market in Iceland is active
+
 
* Price varies between fishing gear is creating incentives for better quality
+
*Clear difference in price between fishing gear  
* The strategy is in most cases on quality and maximising the revenue
+
*Suggesting quality incentives in the relationship between producers  
In Norway, trawl is the most important fishing gear and accounts for 33% in 2016
+
 
which is increase of 1% since 2006. The use of gillnets has been going down
 
from 2006 when the share was 28% to 23% in 2016. The biggest increase is in
 
use of Danish seine has been increasing from 17% in 2006 to 22% in 2016. The
 
reasons are:
 
* Clear difference in price between fishing gear
 
* Suggesting quality incentives in the relationship between producers
 
 
and fisherman
 
and fisherman
*Seasonal fishing and use of gillnet and Danish seine suggest that the focus
+
 
 +
*Seasonal fishing and use of gillnet and Danish seine suggest that the focus  
 +
 
 
in fishing is mainly on minimizing cost of fishing
 
in fishing is mainly on minimizing cost of fishing
  
====Performance and profitability====
+
==== Performance and profitability ====
 +
 
 +
Profitability in fishing in Norway and Iceland have been rather low during the past. In figure 20 all the demersal vessel from small boats to processing trawlers are expressed. This is net profit of the operation as share of revenue (EBIT = Earnings Before Interest & Tax).
 +
 
 +
[[File:D34 fig 20.png|center|Figure 20]] ''Figure 20. Profitability for the demersal fishing sector, based on EBIT as share of revenue.''
 +
 
 +
*The profitability in Norway and Iceland varies a lot but the profitability in
  
Profitability in fishing in Norway and Iceland have been rather low during the
+
Iceland is considerable higher than in Norway. The EBIT in Norwegian demersal fisheries has been rather low or in most cases below 10% with few exceptions.
past. In figure 20 all the demersal vessel from small boats to processing trawlers
 
are expressed. This is net profit of the operation as share of revenue (EBIT =
 
Earnings Before Interest & Tax).
 
  
[[File:D34_fig_20.png|center|Figure 20]]
+
*There is difference in the fleet groups as in Norway cod trawler are
''Figure 20. Profitability for the demersal fishing sector, based on EBIT as share of revenue.''
 
  
* The profitability in Norway and Iceland varies a lot but the profitability in
+
returning highest profitability in the last years and the coastal fleet or smaller vessels are less profitable. The same trend is in Iceland as small boat fleet is returning lower profitability than fresh fish trawler and bigger vessels.
Iceland is considerable higher than in Norway. The EBIT in Norwegian
 
demersal fisheries has been rather low or in most cases below 10% with
 
few exceptions.
 
* There is difference in the fleet groups as in Norway cod trawler are
 
returning highest profitability in the last years and the coastal fleet or
 
smaller vessels are less profitable. The same trend is in Iceland as small
 
boat fleet is returning lower profitability than fresh fish trawler and bigger
 
vessels.
 
  
 +
&nbsp;
  
====Performance====
+
==== Performance ====
  
Fishing per vessel have increase a lot last years both in Iceland and Norway while
+
Fishing per vessel have increase a lot last years both in Iceland and Norway while it has rather decreased in Newfoundland.
it has rather decreased in Newfoundland.
+
 
 +
*Trawler in Norway is fishing 43.8% more in 2016 than 2008
 +
*Coastal boat 15-21 m Norway are fishing 145.7% more in 2016 than 2008
 +
*Trawler in Iceland is fishing 36,0% more in 2016 than 2008
 +
*From 1998 the increase is 136%
 +
*Medium vessel is fishing 24.1% more in 2016 than 2008.
 +
*From 1998 the increase is 367&nbsp;%
 +
*The change in Newfoundland depend on the size class.
 +
*Average vessel is fishing 3.0% less in 2016 than 2008.
 +
*Looking further back the or from 1998 this development has been
  
* Trawler in Norway is fishing 43.8% more in 2016 than 2008
 
* Coastal boat 15-21 m Norway are fishing 145.7% more in 2016 than 2008
 
* Trawler in Iceland is fishing 36,0% more in 2016 than 2008
 
* From 1998 the increase is 136%
 
* Medium vessel is fishing 24.1% more in 2016 than 2008.
 
* From 1998 the increase is 367 %
 
* The change in Newfoundland depend on the size class.
 
* Average vessel is fishing 3.0% less in 2016 than 2008.
 
* Looking further back the or from 1998 this development has been
 
 
the same except for the class size 45 to 54 feet
 
the same except for the class size 45 to 54 feet
  
Line 1,009: Line 763:
 
|-
 
|-
 
| Fisheries management system
 
| Fisheries management system
| ITQ system pushed for consolidation increased efficiency more catches pr. boat
+
| ITQ system pushed for consolidation increased efficiency more catches pr. boat  
fewer boats catching more fish fresh fish trawlers have been the most profitable reduction on
+
fewer boats catching more fish fresh fish trawlers have been the most profitable reduction on processing trawlers Costal fisheries struggling financially
processing trawlers Costal fisheries struggling financially
+
 
| Quota system have supported increased efficiency and catch per vessel has increased.
+
| Quota system have supported increased efficiency and catch per vessel has increased.  
 
Profitability has been increasing
 
Profitability has been increasing
| Restriction and limited catch per vessel. Catch level have been decreasing Lack of flexibility
+
 
 +
| Restriction and limited catch per vessel. Catch level have been decreasing Lack of flexibility  
 
and transferability
 
and transferability
 +
 
|-
 
|-
 
| Profitability
 
| Profitability
Line 1,023: Line 779:
 
|-
 
|-
 
| Productivity
 
| Productivity
| Productivity has increased because of more automation, both in fishing and
+
| Productivity has increased because of more automation, both in fishing and  
 
processing of seafood. More catches pr. boat
 
processing of seafood. More catches pr. boat
| Productivity has increased because of more automation, both in fishing and
+
 
 +
| Productivity has increased because of more automation, both in fishing and  
 
processing of seafood. More catches pr. boat
 
processing of seafood. More catches pr. boat
 +
 
| Limitation of catch per week and lack of transferability of licences limits the productivity
 
| Limitation of catch per week and lack of transferability of licences limits the productivity
 
|-
 
|-
 
| Processing
 
| Processing
| Fish is more processed in Iceland instead of exporting HG (headed and gutted) fish for
+
| Fish is more processed in Iceland instead of exporting HG (headed and gutted) fish for  
further processing abroad. Changes from processing on sea to processing on land, where
+
further processing abroad. Changes from processing on sea to processing on land, where utilization is better (better filleting)
utilization is better (better filleting)
+
 
| Emphasis on minimum processing that is H/G frozen at sea
+
| Emphasis on minimum processing that is H/G frozen at sea  
 
or export of Skei H/G fresh fish. Fillet production has been decreasing
 
or export of Skei H/G fresh fish. Fillet production has been decreasing
 +
 
| Emphasis on frozen fillet production.
 
| Emphasis on frozen fillet production.
 
|}
 
|}
  
===Consolidation in the sector===
+
=== Consolidation in the sector ===
  
One way of expressing consolidation in the seafood sector in different countries
+
One way of expressing consolidation in the seafood sector in different countries is to calculate HHI or Herfindahl, Hirschman index which for the seafood sector can be calculated by summing up the squared quota shares of the firms in question. The index value is found by the sum of the squared market shares of all firms (N): and can be expressed as a normalized figure (0 ≤ HHI ≤ 1), or taking numbers between 5 and 10,000, for whether market shares are expressed in percentages or rates. For a company with 100 per cent market share the value will be 10,000 (or corresponding 1), while for a market with 10 firms and 10 per cent market share each the value will be 1,000 or 0.1.
is to calculate HHI or Herfindahl, Hirschman index which for the seafood sector
 
can be calculated by summing up the squared quota shares of the firms in
 
question. The index value is found by the sum of the squared market shares of
 
all firms (N): and can be expressed as a normalized figure (0 ≤ HHI ≤ 1), or
 
taking numbers between 5 and 10,000, for whether market shares are expressed
 
in percentages or rates.
 
For a company with 100 per cent market share the value will be 10,000 (or
 
corresponding 1), while for a market with 10 firms and 10 per cent market share
 
each the value will be 1,000 or 0.1.
 
  
====Iceland====
+
==== Iceland ====
  
Concentration ratios are calculated by simply adding together the quota shares
+
Concentration ratios are calculated by simply adding together the quota shares of a pre-determined number of firms. A five firm concentration ratio will thus show the combined quota share of the five largest firms, but will not consider how the quota is shared within this group of firms. The HHI values obtained in the Icelandic study indicated that the market for quota shares is competitive. This is hardly surprising, given that there are quota ceilings in place for both fleet segments. However, although relatively small, the HHI values have increased over the period under study; by two thirds for the larger vessels and more than three times for the hook-and-line boats. Some further consolidation has occurred since the fishing year 2014/2015 with individual boats or trawlers with quota or just quota being bought by VICs, however, the HHI is probably still far less than 1000, indicating low market concentration.
of a pre-determined number of firms. A five firm concentration ratio will thus
 
show the combined quota share of the five largest firms, but will not consider
 
how the quota is shared within this group of firms.
 
The HHI values obtained in the Icelandic study indicated that the market for
 
quota shares is competitive. This is hardly surprising, given that there are quota
 
ceilings in place for both fleet segments. However, although relatively small, the
 
HHI values have increased over the period under study; by two thirds for the
 
larger vessels and more than three times for the hook-and-line boats.
 
Some further consolidation has occurred since the fishing year 2014/2015 with
 
individual boats or trawlers with quota or just quota being bought by VICs,
 
however, the HHI is probably still far less than 1000, indicating low market
 
concentration.
 
  
====Norway====
+
==== Norway ====
  
The Norwegian whitefish sector is a heterogeneous branch consisting of very
+
The Norwegian whitefish sector is a heterogeneous branch consisting of very different units in all links of the value chain – from small independent coastal vessels, fishing and delivering fresh whitefish (mainly cod), to smaller or larger seafood processors in rural areas, to large (concentrated or diversified) concerns of firms with a fleet of integrated (freezing) trawlers. Our choice of case study firms show intendedly only sparse examples of businesses found in this sector, since there is practically no “typical” firm in this industry. They are however, examples of firms that we find in this sector.
different units in all links of the value chain – from small independent coastal
 
vessels, fishing and delivering fresh whitefish (mainly cod), to smaller or larger
 
seafood processors in rural areas, to large (concentrated or diversified) concerns
 
of firms with a fleet of integrated (freezing) trawlers. Our choice of case study
 
firms show intendedly only sparse examples of businesses found in this sector,
 
since there is practically no “typical” firm in this industry. They are however,
 
examples of firms that we find in this sector.
 
  
For the sellers of cod/whitefish in the first hand market in the Norwegian seafood
+
For the sellers of cod/whitefish in the first hand market in the Norwegian seafood value chain (fisheries) it is obvious that the first hand market of fish is the relevant market. However, the products sold on in this market are not necessarily homogeneous, and therefore substitutes to such a degree that they all should be weighed together.
value chain (fisheries) it is obvious that the first hand market of fish is the
 
relevant market. However, the products sold on in this market are not necessarily
 
homogeneous, and therefore substitutes to such a degree that they all should be
 
weighed together.
 
  
The largest company has a 15 per cent market share in 2010, while 17 per cent
+
The largest company has a 15 per cent market share in 2010, while 17 per cent in 2015. Increased concentration was seen in this market from 2010 to 2015, but still at modest level. Hence, the first hand market for frozen fish should also be deemed “un-concentrated” when following the rule of thumb, where the “cut-off” to becoming moderately concentrated, was 0.15.
in 2015. Increased concentration was seen in this market from 2010 to 2015, but
 
still at modest level. Hence, the first hand market for frozen fish should also
 
be deemed “un-concentrated” when following the rule of thumb, where the “cut-off”
 
to becoming moderately concentrated, was 0.15.
 
  
====Newfoundland====
+
==== Newfoundland ====
  
HHI index was not calculated for Newfoundland due to low concentration in the
+
HHI index was not calculated for Newfoundland due to low concentration in the cod fishing in Newfoundland. The NL cod fishery is a relatively homogenous industry with the majority of landings (~95%) coming from predominately small, independently owned and operated vessels <45 feet (13.7m) in length. Comparatively, there are much fewer larger companies with fully integrated systems in operation. There are approximately 73 primary and 2 secondary processing facilities, the majority of which compete for available cod catches. The current fisheries management structure in NL, in particular the allocations of quota or weekly catch limits, caps the number of licenses an enterprise can acquire. Similarly, the fleet separation policy is also having an impact on the level of concentration, the competitiveness and consolidation by harvesters and processing companies.
cod fishing in Newfoundland. The NL cod fishery is a relatively homogenous
 
industry with the majority of landings (~95%) coming from predominately small,
 
independently owned and operated vessels <45 feet (13.7m) in length.
 
Comparatively, there are much fewer larger companies with fully integrated
 
systems in operation. There are approximately 73 primary and 2 secondary
 
processing facilities, the majority of which compete for available cod catches.
 
The current fisheries management structure in NL, in particular the allocations of
 
quota or weekly catch limits, caps the number of licenses an enterprise can
 
acquire. Similarly, the fleet separation policy is also having an impact on the
 
level of concentration, the competitiveness and consolidation by harvesters and
 
processing companies.
 
  
====Summary of main influencing factors regarding concentration====
+
==== Summary of main influencing factors regarding concentration ====
  
* According to HHI index calculated for Iceland and Norway there is no real
+
*According to HHI index calculated for Iceland and Norway there is no real  
danger of too high consolidation in the value chains. The HHI index was
+
 
not calculated for Newfoundland fisheries due lack of data and it was
+
danger of too high consolidation in the value chains. The HHI index was not calculated for Newfoundland fisheries due lack of data and it was obvious that the degree of consolidation is very low.
obvious that the degree of consolidation is very low.
+
 
* It is though question if calculating the HHI index is the right way of
+
*It is though question if calculating the HHI index is the right way of  
measure the danger of too much consolidation in the fishing sector as it is
+
 
mainly meant for calculating market domination rather than consolidation
+
measure the danger of too much consolidation in the fishing sector as it is mainly meant for calculating market domination rather than consolidation in the fishing sector.
in the fishing sector.
+
 
* Too calculate and identify consolidation and the danger of lack of
+
*Too calculate and identify consolidation and the danger of lack of  
competition in the fishing sector it would be necessary to study the
+
 
different subgroups in the fishing sector, that is quota classes or size
+
competition in the fishing sector it would be necessary to study the different subgroups in the fishing sector, that is quota classes or size groups in those different countries.
groups in those different countries.
 
  
 
{| class="wikitable" style="width: 100%;"
 
{| class="wikitable" style="width: 100%;"
Line 1,128: Line 839:
 
|-
 
|-
 
| Restriction on consolidation
 
| Restriction on consolidation
| Quota celling For vessels operating under the regular quota
+
| Quota celling For vessels operating under the regular quota  
system, the combined share in all fisheries may not exceed
+
system, the combined share in all fisheries may not exceed 12% in cod equivalents, The corresponding maximum for hook-and-line boats is 5%.
12% in cod equivalents, The corresponding maximum for hook-and-line boats is 5%.
+
 
| Limits to quota consolidation both in offshore vessels 15% and cod trawler,12
+
| Limits to quota consolidation both in offshore vessels 15% and cod trawler,12  
quota factors accounting for around 13% of the share. For coastal vessels
+
quota factors accounting for around 13% of the share. For coastal vessels there are not quota limits.
there are not quota limits.
+
 
 
| Limits of stacking of licences, maximise three licences
 
| Limits of stacking of licences, maximise three licences
 
|-
 
|-
Line 1,142: Line 853:
 
|}
 
|}
  
=== Overall economic performance and competitiveness of the fisheries value chain===
+
=== Overall economic performance and competitiveness of the fisheries value chain ===
  
Value chain dynamics depends heavily on the governmental form of the vale
+
Value chain dynamics depends heavily on the governmental form of the vale chain and the relationship within the value chain and the governance form. Geraffi claims that in many chains are characteristic of dominate party/parties who determine overall character of the chain. In the same way the lead firm(s) becomes then responsible for upgrading activities within individual links and coordinating interaction between links in the value chain. Hence, the role of governance in the value chain is important and Geraffi[ CITATION Ger94 \l 1039 ] makes distinction between two types of governance in value chain, first where buyers is undertaken coordination in the value chain (buyer drive commodity chains) and those which producers play key role of coordination (producer-driven commodity chains). In fisheries that builds on natural resource, it is interesting to analyse the different forces in the value chains and how activities are impacting the results of the value chain.
chain and the relationship within the value chain and the governance form.
 
Geraffi claims that in many chains are characteristic of dominate party/parties
 
who determine overall character of the chain. In the same way the lead firm(s)
 
becomes then responsible for upgrading activities within individual links and
 
coordinating interaction between links in the value chain. Hence, the role of
 
governance in the value chain is important and Geraffi[ CITATION Ger94 \l 1039 ]
 
makes distinction between two types of governance in value chain, first where
 
buyers is undertaken coordination in the value chain (buyer drive commodity
 
chains) and those which producers play key role of coordination (producer-driven
 
commodity chains). In fisheries that builds on natural resource, it is interesting to
 
analyse the different forces in the value chains and how activities are impacting
 
the results of the value chain.
 
  
====Iceland====
+
==== Iceland ====
  
=====Governmental form of the value chain=====
+
===== Governmental form of the value chain =====
  
 
'''Links between fishery and producers'''
 
'''Links between fishery and producers'''
* One of the most important changes of the domestic value chain dynamic was the establishment of the auction markets.
+
 
* Before that the most common form of the governmental of the domestic part of the value chain was either hierarchy through VIC or relational through landing agreements between individual boat owners and producers.
+
*One of the most important changes of the domestic value chain dynamic was the establishment of the auction markets.  
* In some cases, there are market relationships where individual boat owner based their relationship with the producers on just the highest available price.
+
*Before that the most common form of the governmental of the domestic part of the value chain was either hierarchy through VIC or relational through landing agreements between individual boat owners and producers.  
* By the establishment of the auction markets more and more of the individual boat owners moved their business to the auction markets increasing the emphasis of the market form.
+
*In some cases, there are market relationships where individual boat owner based their relationship with the producers on just the highest available price.  
* Then after the implementing the ITQ system more of the TAC moved to the VIC as can be seen that only around 15% of cod is sold through the auction markets and around 70% thought he VICs.
+
*By the establishment of the auction markets more and more of the individual boat owners moved their business to the auction markets increasing the emphasis of the market form.  
** There are mainly two form of governmental structure in the domestic part of the value chain of cod that is markets based on supply and demand of the auction markets and hierarchy relationship through vertical integrated companies. Other form as relational can still be identified but in limited cases.
+
*Then after the implementing the ITQ system more of the TAC moved to the VIC as can be seen that only around 15% of cod is sold through the auction markets and around 70% thought he VICs.  
 +
**There are mainly two form of governmental structure in the domestic part of the value chain of cod that is markets based on supply and demand of the auction markets and hierarchy relationship through vertical integrated companies. Other form as relational can still be identified but in limited cases.  
  
 
'''Producers export links'''
 
'''Producers export links'''
* During the period before 1994 when the limited export licences were still
+
 
active the governmental structure of the value chain of cod from fishing to
+
*During the period before 1994 when the limited export licences were still  
markets was Captive form as the sale organisation in key position in the
+
 
value chain where producers had duty of handing inn all their product for
+
active the governmental structure of the value chain of cod from fishing to markets was Captive form as the sale organisation in key position in the value chain where producers had duty of handing inn all their product for selling thought the SMOs.
selling thought the SMOs.
+
 
* The export part of the value chain has as changed a lot for the last 30
+
*The export part of the value chain has as changed a lot for the last 30  
years. The bigger VIC have in many cases established their own marketing
+
 
division or even their own marketing companies abroad depending on
+
years. The bigger VIC have in many cases established their own marketing division or even their own marketing companies abroad depending on hierarchy form of governance.
hierarchy form of governance.
+
 
* In most cases Icelandic companies are selling to middleman abroad as
+
*In most cases Icelandic companies are selling to middleman abroad as  
distributers or wholesalers, although some are selling directly to retail
+
 
chain as in the fresh fish markets. In most cases companies have contract
+
distributers or wholesalers, although some are selling directly to retail chain as in the fresh fish markets. In most cases companies have contract with buyers that that could be regarded as relational from of governance.
with buyers that that could be regarded as relational from of governance.
 
  
 
'''Dependency'''
 
'''Dependency'''
* The dependency in the value chain varies a lot depending degree of long
+
 
term contracts in their business instead of ad hoc sale. In interview with
+
*The dependency in the value chain varies a lot depending degree of long  
mangers in the Icelandic fish industry it is clear that more and more of the
+
 
TAC is sold before it is caught. This indicates long term relationship and
+
term contracts in their business instead of ad hoc sale. In interview with mangers in the Icelandic fish industry it is clear that more and more of the TAC is sold before it is caught. This indicates long term relationship and relational governance form in the export part of the value chain term relationship
relational governance form in the export part of the value chain term
 
relationship
 
  
 
'''Power structure/balance'''
 
'''Power structure/balance'''
* It is in the nature of quota system that the quota holder has the power in
 
the value chain. Hence it is in the hands of the quota holders when where
 
and how the fish is caught and then for others to try to make the most out
 
of the raw material that is brought onshore. Due to high degree of VICs
 
(70%) in the value chain in Iceland, the negative effects of this power is
 
not real. Auction markets are as well important for power balance as they
 
send markets signal to the independent fisherman about quality, fishing
 
gear and even timing. The power balance between links in the value chain
 
are in good balance in the Icelandic value chain
 
  
=====Drive force in the value chain=====
+
*It is in the nature of quota system that the quota holder has the power in
 +
 
 +
the value chain. Hence it is in the hands of the quota holders when where and how the fish is caught and then for others to try to make the most out of the raw material that is brought onshore. Due to high degree of VICs (70%) in the value chain in Iceland, the negative effects of this power is not real. Auction markets are as well important for power balance as they send markets signal to the independent fisherman about quality, fishing gear and even timing. The power balance between links in the value chain are in good balance in the Icelandic value chain
 +
 
 +
===== Drive force in the value chain =====
 +
 
 +
The drive force in the value chain have changed a lot the last 30 years from having:
 +
 
 +
*harvesting/production driven value chain to becoming more and more marketing driven value chain. The main reasons for this changes can be trace to:
 +
**Introduction of auction markets in 1987
 +
**Introduction of the ITQ system in 1991
 +
**Abolishment of strict and limited export licences opening up for more marketing connection of producers. 
 +
*The drive force for changes in the dynamic of the value chain of Icelandic cod areo FMS (ITQ) system that allows companies to maximize their returns and plan according to market condition
 +
**Direct marketing connection and understanding of market situation
 +
**Coordination in the value chain mainly done through the hierarchy in the VIC
 +
**Auction markets support coordination and specialisation in production
 +
**Power balance. In quota system it is clear that the formal power lies with the quota holder or the individual that has the TAC. Due to the fact that around 70% of the TAC is hold by the VIC companies so it is clear that they are the most powerful players in the value chain. Due to limits to the consolidation that is 12% in the demersal spices there are limits to how individual company can dominate the industry.
 +
**Vertical integration support power balance in the value chain 
 +
 
 +
==== Norway ====
 +
 
 +
===== Governmental Form =====
 +
 
 +
*In modern times (after WWII), up until the new seafood export legislation
  
The drive force in the value chain have changed a lot the last 30 years from
+
in the 1990’ies, all branches in the cod sector was subject to the trade conditions dictated by the sectoral export commissions. These commissions was leading actors in the centralised export, where they lead negotiations and entered into common agreements for most all important seafood products. They were, like in Iceland at that time, a captive lead firm that explicitly coordinated the export, and by that had great influence on the business environment.
having:
 
  
* harvesting/production driven value chain to becoming more and more marketing driven value chain. The main reasons for this changes can be trace to:
+
*After the new Export Act in 1992, these export commissions were
** Introduction of auction markets in 1987
 
** Introduction of the ITQ system in 1991
 
** Abolishment of strict and limited export licences opening up for more marketing connection of producers.
 
* The drive force for changes in the dynamic of the value chain of Icelandic cod areo FMS (ITQ) system that allows companies to maximize their returns and plan according to market condition
 
** Direct marketing connection and understanding of market situation
 
** Coordination in the value chain mainly done through the hierarchy in the VIC
 
** Auction markets support coordination and specialisation in production
 
** Power balance. In quota system it is clear that the formal power lies with the quota holder or the individual that has the TAC. Due to the fact that around 70% of the TAC is hold by the VIC companies so it is clear that they are the most powerful players in the value chain. Due to limits to the consolidation that is 12% in the demersal spices there are limits to how individual company can dominate the industry.
 
** Vertical integration support power balance in the value chain
 
  
====Norway====
+
dissolved, and new liberal rules granted practically anyone paying an export fee could to start export of seafood. With this many processors above a certain side (or even just processors that have found it opportunistic) have started their own export. There are of course cooperation between exporters, processors and both, where some quantities/products/species are sold by standalone exporters, while some have caretaker in-house, but in general the structure and governance form in the marketing sector is atomistic. Some large exporters exists within some products, and also some major processing firms dominate the export of other products, but in general a market to modular form of this trade is the usual. This is our impression of the chain as a whole, and we cannot see a big development towards one governmental form or the other throughout the latest 10 to 20 years.
  
=====Governmental Form=====
+
*The power between purchasers and suppliers is balanced in the way that
  
* In modern times (after WWII), up until the new seafood export legislation
+
terms of trade is governed by the price, even though relations play a role together with trust and esteem/reputation.
in the 1990’ies, all branches in the cod sector was subject to the trade
 
conditions dictated by the sectoral export commissions. These
 
commissions was leading actors in the centralised export, where they lead
 
negotiations and entered into common agreements for most all important
 
seafood products. They were, like in Iceland at that time, a captive lead
 
firm that explicitly coordinated the export, and by that had great influence
 
on the business environment.
 
* After the new Export Act in 1992, these export commissions were
 
dissolved, and new liberal rules granted practically anyone paying an
 
export fee could to start export of seafood. With this many processors
 
above a certain side (or even just processors that have found it
 
opportunistic) have started their own export. There are of course
 
cooperation between exporters, processors and both, where some
 
quantities/products/species are sold by standalone exporters, while some
 
have caretaker in-house, but in general the structure and governance form
 
in the marketing sector is atomistic. Some large exporters exists within
 
some products, and also some major processing firms dominate the export
 
of other products, but in general a market to modular form of this trade is
 
the usual. This is our impression of the chain as a whole, and we cannot
 
see a big development towards one governmental form or the
 
other throughout the latest 10 to 20 years.
 
* The power between purchasers and suppliers is balanced in the way that
 
terms of trade is governed by the price, even though relations play a role
 
together with trust and esteem/reputation.
 
  
 
'''Power balance/structure'''
 
'''Power balance/structure'''
* The consolidation in the fleet might have had an effect on the power
 
balance, and some would maintain that the fishing industry have
 
increased their power on expense of the processing industry.
 
* Others again, would maintain that the processing industry, by ways of
 
consolidation in this link of the chain, have ascertained increased power
 
over the fishing/selling side of the transaction.
 
* However, the heterogeneity of the fishing sector makes it impossible to
 
conclude unanimously on this matter. In some areas for some vessel
 
groups consolidation might have increased the fishing side’s power
 
towards the processing sector, whereas in other areas the opposite might
 
be the case. The power balance might also depend on the aggregated
 
demand and supply situation, and as such depend on the cod quota
 
available for the industry.
 
  
=====Drive force in the value chain=====
+
*The consolidation in the fleet might have had an effect on the power
 +
 
 +
balance, and some would maintain that the fishing industry have increased their power on expense of the processing industry.
  
* The development of the Norwegian seafood industry has over time
+
*Others again, would maintain that the processing industry, by ways of  
followed a trend of liberalization, where the emphasis has changed from
 
protection and subsidies (pre-1990’ies) to international competitiveness
 
and environmental and economic sustainability. It is not easy to set a clear
 
division in time where this policy change occurs, but over time the
 
emphasis has gone in that direction.
 
* From early 1970’ies as a process where resources and resource allocations
 
becomes the main theme in the fisheries policy, while negotiations on
 
subsidies and its distributions becomes secondary.
 
* In the mid-1990’ies, Norway has left a period with free conduct on the
 
ocean and regulated market behaviour, to one with regulated conduct on
 
sea and free competition in the market. Earlier (pre-1990’ies), the seafood
 
export was organised in trade unions, dependent on product (dried fish,
 
salt fish, fresh fish, frozen fish and clipfish) whereas a deregulation of the
 
seafood export act in early 1990’ies open up for anyone – satisfying a set
 
of objective criteria, to export seafood.
 
* In the first hand market, the abolishment of subsidies involved that the
 
price wedge between supply and demand was removed, enabling price
 
movements in the market to be directly transferred to fishers.
 
* Sales organisations’ right to set minimum prices still meant a
 
share of market power on behalf of fishers, but also here the
 
development towards a dynamic minimum price – dependent on
 
objective and observable factors on the market place – have reduced
 
the shielding of fishermen from market signals.
 
* The reduction of both fishing vessels and purchasers along the coast, has
 
consolidated and professionalised the industry on both sides of the
 
transaction in the first hand market.9.3
 
  
====Newfoundland====
+
consolidation in this link of the chain, have ascertained increased power over the fishing/selling side of the transaction.
  
=====Governmental Form=====
+
*However, the heterogeneity of the fishing sector makes it impossible to
  
* In Newfoundland it is possible to separate the fishing industry into two
+
conclude unanimously on this matter. In some areas for some vessel groups consolidation might have increased the fishing side’s power towards the processing sector, whereas in other areas the opposite might be the case. The power balance might also depend on the aggregated demand and supply situation, and as such depend on the cod quota available for the industry.
sectors. First is the offshore sector that is vertical integrated in fishing,
 
processing and marketing and then inshore fleet, which is based up on
 
individual boat owners where vertical integration is banned.
 
* Today TAC in cod is only allocated to the inshore sector (TAC will need to
 
exceed 115.000 thousand tons before it is reallocated to the offshore
 
sector).
 
* The links between boat owner and producers is based on negotiated price
 
between FFAW (The Fish, Food and Allied Workers Union) and associations
 
of producers. There are no auction markets and more or less the
 
negotiated price is used in the transaction.
 
* The relationship is in some way captive due to lack of active markets in
 
the relationship but in some cases it could be regarded relational where
 
boat owner and producers have some contract about landing of cod and
 
other spices.
 
* Stakeholders seems to play more active role in governing the value chain
 
and its structure than in other countries as allocation of quota and limits
 
on transferability seems to depend on the stakeholders as FFAW.
 
  
'''Power balance/structure'''
+
===== Drive force in the value chain =====
* Due to the structure of the fisheries management system that is individual
+
 
vessel do not have TAC (have to follow the weekly limits of catch) and very
+
*The development of the Norwegian seafood industry has over time
limited possibility of transferring fishing licenses (stacking up) the power in
+
 
the value chain lies in the hands of the stakeholders that decides on the
+
followed a trend of liberalization, where the emphasis has changed from protection and subsidies (pre-1990’ies) to international competitiveness and environmental and economic sustainability. It is not easy to set a clear division in time where this policy change occurs, but over time the emphasis has gone in that direction.
system.
 
* The stakeholders are the policymakers that is the politicians and the
 
parliament that decide on the system. Secondly it is the FFAW that plays
 
big role in influencing the system and deciding of how it is conducted.
 
* FFAW and negotiated agreements are having significant influence on the
 
free markets; the agreements preventing markets relationship and market
 
influence in the value chain.
 
  
=====Drive force in the value chain=====
+
*From early 1970’ies as a process where resources and resource allocations
  
* Due to low quota in Newfoundland and more important species as lobster
+
becomes the main theme in the fisheries policy, while negotiations on subsidies and its distributions becomes secondary.
and crab, cod have been looked up as filling and not major species in
 
fishing. With foreseeable increase in quota this can become problematic.
 
* The fishing of cod in gillnet during August points out that the drive force is
 
minimising the cost of fishing rather than anything else.
 
* Longer season and strict rules about transferring quota (stacking up)
 
points out that the fishing is looked at as a social aspect rather than
 
building up economic sustainable business.
 
The influence of stakeholders seams to affect the economical
 
sustainability of the industry.
 
  
====Summary of main influencing factors regarding concentration====
+
*In the mid-1990’ies, Norway has left a period with free conduct on the
  
* The structure and the governance of the value chain, Vertical integration is
+
ocean and regulated market behaviour, to one with regulated conduct on sea and free competition in the market. Earlier (pre-1990’ies), the seafood export was organised in trade unions, dependent on product (dried fish, salt fish, fresh fish, frozen fish and clipfish) whereas a deregulation of the seafood export act in early 1990’ies open up for anyone – satisfying a set of objective criteria, to export seafood.
creating more value per kg of raw material and returning higher profit
 
** The profitability is higher than in other system
 
** The market responsive is better
 
** The flow and stability is better
 
* In value chain where vertical integration is banned or limited the strategy
 
of fishing is more or less to minimise the cost of fishing.
 
** Seasonal fishing
 
** Use of gillnets is common
 
* The auction markets in Iceland has created new source of dynamic in the
 
value chain that is specialisation in production
 
** Companies selling of species and sizes that do not fit their
 
production mix
 
* Iceland has freedom on decide on its structure that is vertical integration
 
or not
 
* Norway has limits on vertical integration in the coastal fishing
 
* Newfoundland ban vertical integration in inshore fleet.
 
* Source of competitiveness of the value chains
 
  
{| class="wikitable" style="width: 100%;"
+
*In the first hand market, the abolishment of subsidies involved that the
|-
+
 
! Factor
+
price wedge between supply and demand was removed, enabling price movements in the market to be directly transferred to fishers.
! Iceland
+
 
! Norway
+
*Sales organisations’ right to set minimum prices still meant a
! Newfoundland
+
 
|-
+
share of market power on behalf of fishers, but also here the development towards a dynamic minimum price – dependent on objective and observable factors on the market place – have reduced the shielding of fishermen from market signals.
| Structure of the industry
+
 
| Vertical integrations Hierarchy Market through auction markets
+
*The reduction of both fishing vessels and purchasers along the coast, has
| Limits to vertical integrations Individual boat owner and producers
+
 
| Ban on vertical integration’s in the inshore fleet. Offshore fleet has no cod quota
+
consolidated and professionalised the industry on both sides of the transaction in the first hand market.9.3
|-
+
 
|  Vertical integrations
+
==== Newfoundland ====
| High
+
 
| Low
+
===== Governmental Form =====
| Low/none in inshore fleet
+
 
|-
+
*In Newfoundland it is possible to separate the fishing industry into two
| Flow of raw material
+
 
| Stable controlled by the processing marketing needs
+
sectors. First is the offshore sector that is vertical integrated in fishing, processing and marketing and then inshore fleet, which is based up on individual boat owners where vertical integration is banned.
| Seasonal controlled by the catch and seasons
+
 
| Seasonal controlled by catch limits and fisherman’s effort
+
*Today TAC in cod is only allocated to the inshore sector (TAC will need to
|-
+
 
| Governance
+
exceed 115.000 thousand tons before it is reallocated to the offshore sector).
| Mainly through hierarchy of VICs or use of auction markets
+
 
Market relationship, based on auction markets
+
*The links between boat owner and producers is based on negotiated price
| The role of minimum price affect the dynamic in the value chain
+
 
| Significant stakeholder involvement such as FFAW
+
between FFAW (The Fish, Food and Allied Workers Union) and associations of producers. There are no auction markets and more or less the negotiated price is used in the transaction.
|-
+
 
| Coordination
+
*The relationship is in some way captive due to lack of active markets in  
| High in the VICs and based on buyers need in some sense.
+
 
In the auction markets coordination is limited
+
the relationship but in some cases it could be regarded relational where boat owner and producers have some contract about landing of cod and other spices.
| Low in coastal fleet In the offshore fleet it could be high due to
+
 
vertical integration
+
*Stakeholders seems to play more active role in governing the value chain
| Very low in inshore fleet; some in the offshore sector and cooperatives
+
 
|-
+
and its structure than in other countries as allocation of quota and limits on transferability seems to depend on the stakeholders as FFAW.
| Dependency
+
 
| High in the hierarchy low in the market based
+
'''Power balance/structure'''
| High in the hierarchy low in the market based
+
 
| Low but minimum processing requirements can create dependency
+
*Due to the structure of the fisheries management system that is individual
between fishing and production
+
 
|-
+
vessel do not have TAC (have to follow the weekly limits of catch) and very limited possibility of transferring fishing licenses (stacking up) the power in the value chain lies in the hands of the stakeholders that decides on the system.
| Power structure/balance
 
| Twofold Hierarchy with high dependency by sectors and power balance Markets based on
 
power of quota holders. Low dependency
 
| Twofold Hierarchy with high dependency by sectors and power balance Markets based on
 
power of quota holders. Lowdependency
 
| Unbalanced power lies in the hands of stakeholders mainly FFAW
 
|-
 
| Drive force
 
| Buyer driven value chain based on coordination of fishing and production through
 
VICs and auction markets
 
| Harvesting (product) driven value chain. Based on minimising cost strategy of fisherman’s
 
| Harvesting (product) driven value chain, Stakeholders driven (FFAW) Based on minimising cost
 
strategy of fisherman
 
|-
 
| Lead firm
 
| VICs
 
| Owner of the off shore fleet.
 
| None/FFAW on behalf of small boat owners
 
|-
 
| Specialisation
 
| Rather high ITQ in in fishing Auction markets for processing, spices, sizes etc.
 
| Rather low or limited
 
| Very low seasonal industry
 
|}
 
  
=== Strategic Positioning Briefing ===
+
*The stakeholders are the policymakers that is the politicians and the
  
==== Norway ====
+
parliament that decide on the system. Secondly it is the FFAW that plays big role in influencing the system and deciding of how it is conducted.
  
Norway’s main advantage within the cod sector is the proximity to a productive
+
*FFAW and negotiated agreements are having significant influence on the  
Barents Sea and a cod stock in good shape. A disadvantage market wise is the
 
seasonality in landings, following the spawning and feeding pattern of the cod.
 
This is also a cost effective advantage, since great volumes can be caught close
 
to the coast as the cod find its way to the spawning grounds of Lofoten. Within
 
the fishing industry, structuring combined with large quotas (at a reasonable first
 
hand price) has increased the profitability in the last decade.
 
  
For the processing industry, the high Norwegian labour cost is a disadvantage.
+
free markets; the agreements preventing markets relationship and market influence in the value chain.
Moreover, sectors emphasising a continuous production throughout the year to
 
meet pull market demands, meet great barriers in the seasonal supply of cod.
 
Conventional production (saltfish, clipfish and stockfish) are used to and have
 
adapted to these supply variabilities. Clipfish is also the sector that to the
 
greatest degree have adapted to the relatively new raw material source of frozen
 
cod, which have insulated them from the seasonal supply. The interest from
 
investors stemming from aquaculture can revive the supply chain by ways of
 
competence, financial muscles and the utilization of already established markets,
 
logistics and marketing channels.
 
  
{| class="wikitable" style="width: 100%;"
+
===== Drive force in the value chain =====
 +
 
 +
*Due to low quota in Newfoundland and more important species as lobster
 +
 
 +
and crab, cod have been looked up as filling and not major species in fishing. With foreseeable increase in quota this can become problematic.
 +
 
 +
*The fishing of cod in gillnet during August points out that the drive force is
 +
 
 +
minimising the cost of fishing rather than anything else.
 +
 
 +
*Longer season and strict rules about transferring quota (stacking up)
 +
 
 +
points out that the fishing is looked at as a social aspect rather than building up economic sustainable business. The influence of stakeholders seams to affect the economical sustainability of the industry.
 +
 
 +
==== Summary of main influencing factors regarding concentration ====
 +
 
 +
*The structure and the governance of the value chain, Vertical integration is
 +
 
 +
creating more value per kg of raw material and returning higher profit
 +
 
 +
*
 +
**The profitability is higher than in other system
 +
**The market responsive is better
 +
**The flow and stability is better 
 +
*In value chain where vertical integration is banned or limited the strategy
 +
 
 +
of fishing is more or less to minimise the cost of fishing.
 +
 
 +
*
 +
**Seasonal fishing
 +
**Use of gillnets is common 
 +
*The auction markets in Iceland has created new source of dynamic in the
 +
 
 +
value chain that is specialisation in production
 +
 
 +
*
 +
**Companies selling of species and sizes that do not fit their 
 +
 
 +
production mix
 +
 
 +
*Iceland has freedom on decide on its structure that is vertical integration
 +
 
 +
or not
 +
 
 +
*Norway has limits on vertical integration in the coastal fishing
 +
*Newfoundland ban vertical integration in inshore fleet.
 +
*Source of competitiveness of the value chains
 +
 
 +
{| class="wikitable" style="width: 100%;"
 +
|-
 +
! Factor
 +
! Iceland
 +
! Norway
 +
! Newfoundland
 
|-
 
|-
!
+
| Structure of the industry
! Description
+
| Vertical integrations Hierarchy Market through auction markets
! Share cod quota
+
| Limits to vertical integrations Individual boat owner and producers
! Access barriers
+
| Ban on vertical integration’s in the inshore fleet. Offshore fleet has no cod quota
! Opportunities and upgrade possibilities
 
! Threats
 
! Value chain relationship
 
! Dynamic in the value chain
 
 
|-
 
|-
! scope="row" | Open vessel group
+
| Vertical integrations
| 2000 vessels <11m, max. vessel quota 15-24t (length dep.) guaranteed 11-18t
+
| High
| 6.8 %
 
 
| Low
 
| Low
| Pressure due to high uptake and stop. Opportunities in other fisheries than cod, and quota purchase.
+
| Low/none in inshore fleet
| Lower cod quotas. Regional differences in availability and landing opportunities.
 
New safety regulations will increase capital demands.
 
| Direct agreement with buyers, little influence on price.
 
| Open fishery with entry under profitable circumstances
 
 
|-
 
|-
! scope="row" | Coastal vessels under 11m
+
| Flow of raw material
| 1200 vessels, with vessel quota of 25- 50t
+
| Stable controlled by the processing marketing needs
| 14.1 %
+
| Seasonal controlled by the catch and seasons
| Relatively low. Higher quota prices up to 350kEUR
+
| Seasonal controlled by catch limits and fisherman’s effort
| Differentiation through quality, opportunities in other fisheries (king crab, haddock) and co-fishing
 
| Uncertainty regarding future fisheries management system, (structuring and vessel length
 
limits). Structural development in landing sites.
 
| Direct agreements with buyers. Often close ties with local purchaser.
 
| Maximize first hand value, often with low cost focus (seasonality).
 
 
|-
 
|-
! scope="row" | Coastal vessels, 11m and above
+
| Governance
| 560 vessels, with
+
| Mainly through hierarchy of VICs or use of auction markets
structuring, vessel
+
Market relationship, based on auction markets
quotas of 50-166t
+
 
| 37.1 %
+
| The role of minimum price affect the dynamic in the value chain
| High - capital intensive, due quota price
+
| Significant stakeholder involvement such as FFAW
| Better handling. Sale contracts with producers. Many generalists with rights in pelagic sector also.
 
| Uncertainty regarding fisheries management system, potential introduction of resource rent tax, affecting profitability.
 
| Direct agreements, high mobility and in greater (volume) demand.
 
| Maximize first hand value, low cost focus (seasonality). On board freezing incr.
 
 
|-
 
|-
! scope="row" | Off shore vessels (auto-line and trawl)
+
| Coordination
| 26 conventional vessels (autoline), vessel quota >274t 36 cod trawlers, vessel quota >1,096t
+
| High in the VICs and based on buyers need in some sense.  
| 8 %
+
In the auction markets coordination is limited
30.8 %
 
| Very high
 
| On board processing potential exploited by few. High quality on hook catch, with price
 
premium. Tendencies towards own sale. Structuring potential exploited.
 
| Currency and quota fluctuations. Uncertainty regarding future management options and resource rent tax.
 
| Auction sale of frozen fish, tendency towards contracts and own takeover of catch
 
| Maximize value from catch. Full capacity utilisation with later years’ quotas.
 
|-
 
! scope="row" | White fish processing firms
 
| Companies with processing facilities, some with vessel ownership, some
 
with export licence. Great heterogeneity.
 
| 0
 
| Low to medium, dependent of capital intensity of production.
 
| Choice of product mix. Increasingly capital intensive processing have led to big fresh fish export under high
 
quotas and seasonality. Falling quotas can counter this dev.
 
| Favourable but unstable currency fluctuations. Seasonality in supply. Much fish surpass traditional supply
 
channels, to an increasing degree. Thawing have reduced comp. power of fresh. High Norw. salary level.
 
| Tough competition up- and  downstream the value chain, but close ties and trust
 
| Small margins and low profitability on average. Liquidity challenges in production of conventional prod.
 
|-
 
! scope="row" | Export and marketing companies
 
| Many exporters of varying size, markets and product portfolio.
 
In-house, stand alone and preferred traders.
 
| 0
 
| Low
 
| Small degree of own brands in international seafood trade, especially with raw material and semi-finished products.
 
Supported by the generic marketing of seafood from the Norw. Seafood council.
 
| Currency fluctuation. Lack of branding. Seasonal landings complicates continuous supply of fresh fish.
 
| Demanding retail chains and spot markets. Price signals most important but also relational customer ties.
 
| Monitor markets needs and preferences and share market signals to producers. Multiple and regional
 
sourcing eases supply continuity
 
|}
 
  
==== Iceland ====
+
| Low in coastal fleet In the offshore fleet it could be high due to
 +
vertical integration
  
In general the main strength of the Icelandic system is the distribution of catches
+
| Very low in inshore fleet; some in the offshore sector and cooperatives
around the whole year, strengthen by the start of the quota year on 1.
 
September each year. The industry is putting more emphasis on production of
 
fresh fish instead of frozen or salted product with huge investment in new fresh
 
fish trawlers. The processing companies have also been investing in new
 
equipment, especially regarding water cutting and super-chilling. With super-
 
chilling and good control of temperature in containers, more emphasis has been
 
put in transportation on sea rather than by plane. This is related to cost but also
 
to carbon footprint. There is also more emphasis on markets in N-Amerika and
 
the industry in closely monitoring developments in Asia.
 
VICs are extremely strong as they control more than 2/3 of the cod quota and
 
therefore limited amount is going through the auction markets.
 
 
 
{| class="wikitable" style="width: 100%;"
 
 
|-
 
|-
!
+
| Dependency
! Description
+
| High in the hierarchy low in the market based
! Share cod quota
+
| High in the hierarchy low in the market based
! Access barriers
+
| Low but minimum processing requirements can create dependency
! Opportunities and upgrade possibilities
+
between fishing and production
! Threats
+
 
! Value chain relationship
+
|-
! Dynamic in the value chain
+
| Power structure/balance
 +
| Twofold Hierarchy with high dependency by sectors and power balance Markets based on
 +
power of quota holders. Low dependency
 +
 
 +
| Twofold Hierarchy with high dependency by sectors and power balance Markets based on
 +
power of quota holders. Lowdependency
 +
 
 +
| Unbalanced power lies in the hands of stakeholders mainly FFAW
 
|-
 
|-
! scope="row" | Independent small boat owners in costal fisheries
+
| Drive force
| <30 tons, number of fishing days limitation.
+
| Buyer driven value chain based on coordination of fishing and production through
| 3.2%
+
VICs and auction markets
| Low
+
 
| Better handling, buy quota.
+
| Harvesting (product) driven value chain. Based on minimising cost strategy of fisherman’s
| Unstable currency, uncertainty of number of fishing days resulting in poor profitability.
+
| Harvesting (product) driven value chain, Stakeholders driven (FFAW) Based on minimising cost
| Almost all goes through auction markets.
+
strategy of fisherman
| Lack of dynamic
+
 
 
|-
 
|-
! scope="row" | Independent small boat owners with quota
+
| Lead firm
| <30 tons, TAC
+
| VICs
| 19.4%
+
| Owner of the off shore fleet.
| High - capital intensive quota price
+
| None/FFAW on behalf of small boat owners
| Can participate in costal fisheries without using their TAC. Better handling. Sale contracts with producers.
 
| Unstable currency, Uncertainty regarding fisheries management system, uncertainty regarding resource rent that
 
could affect profitability.
 
| Auction market around 70%. Rest sold by contract relationships.
 
| Maximize first sale price.
 
 
|-
 
|-
! scope="row" | Independent big boat owners
+
| Specialisation
| >30 tons with TAC
+
| Rather high ITQ in in fishing Auction markets for processing, spices, sizes etc.
| 7.6%
+
| Rather low or limited
| High - capital intensive quota price
+
| Very low seasonal industry
| Better handling. Sale contracts with producers.
+
|}
| Unstable currency, Uncertainty regarding fisheries management system, uncertainty
+
 
regarding resource rent that could affect profitability. Reduction in number of
+
=== Strategic Positioning Briefing ===
independent big boat owners.
+
 
| Mixture of auction market and contract relationship.
+
==== Norway ====
| Maximize first sale price.
+
 
 +
Norway’s main advantage within the cod sector is the proximity to a productive Barents Sea and a cod stock in good shape. A disadvantage market wise is the seasonality in landings, following the spawning and feeding pattern of the cod. This is also a cost effective advantage, since great volumes can be caught close to the coast as the cod find its way to the spawning grounds of Lofoten. Within the fishing industry, structuring combined with large quotas (at a reasonable first hand price) has increased the profitability in the last decade.
 +
 
 +
For the processing industry, the high Norwegian labour cost is a disadvantage. Moreover, sectors emphasising a continuous production throughout the year to meet pull market demands, meet great barriers in the seasonal supply of cod. Conventional production (saltfish, clipfish and stockfish) are used to and have adapted to these supply variabilities. Clipfish is also the sector that to the greatest degree have adapted to the relatively new raw material source of frozen cod, which have insulated them from the seasonal supply. The interest from investors stemming from aquaculture can revive the supply chain by ways of competence, financial muscles and the utilization of already established markets, logistics and marketing channels.
 +
 
 +
{| class="wikitable" style="width: 100%;"
 
|-
 
|-
! scope="row" | Individual producer
+
! &nbsp;
| Supplies fish by contracts and from auction markets. Medium and small size producers with often low
+
! Description
degree of automatization, mainly focusing on fresh niece markets.
+
! Share cod quota
| 0
+
! Access barriers
| Medium - depends on markets needs and level of automatization required.
+
! Opportunities and upgrade possibilities
| Market relationships, product mix, long time source and sales contracts
+
! Threats
| Unstable currency, Access to supply do to quota system and high degree of VICs. Lack of branding
+
! Value chain relationship
| Sourcing form auction market and by contracts with boat owners and other producers.
+
! Dynamic in the value chain
| Maximize value from bycatches and serving niece markets
 
 
|-
 
|-
! scope="row" | Vertical integrated company in fishing, production and marketing (VICs)
+
! scope="row" | Open vessel group
| Companies with own boats, processing facilities and marketing office. High degree of atomisation in
+
| 2000 vessels <11m, max. vessel quota 15-24t (length dep.) guaranteed 11-18t
processing and fishing. Producing fresh, frozen and salted products.
+
| 6.8&nbsp;%
| 70.8%
+
| Low
| Very high - quota price, capital intensive fishing and production.
+
| Pressure due to high uptake and stop. Opportunities in other fisheries than cod, and quota purchase.
| Branding, product mix, market relationships, usage of by-products, increase quota share up to limit.
+
| Lower cod quotas. Regional differences in availability and landing opportunities.  
| Unstable currency, Uncertainty regarding fisheries management system, uncertainty regarding resource rent that
+
New safety regulations will increase capital demands.
could affect profitability. Reduction in number of independent big boat owners. Refresh fish. Lack of branding.
 
| Internal sourcing and auction market when there is shortage of own catches.
 
| Coordination of fishing and processing according to market needs, current sales and quota limitations.
 
|-
 
! scope="row" | Export and marketing companies with no own production
 
| One big sales company and number of small companies selling fish products from VICs and smaller producers
 
by long term contracts and adhoc trade. Sourcing fish from Iceland and other countries.
 
| 0
 
| Low - depends of market and supply relationships
 
| Branding, market relationship, long time contracts
 
| Unstable currency, Lack of branding, unstable supply.
 
| Mixture contract relationship ad hoc trade
 
| Monitor markets needs and preferences and share market signals to
 
producers. Risk reduction through network of suppliers.
 
|}
 
  
 
+
| Direct agreement with buyers, little influence on price.
====Newfoundland and Labrador====
+
| Open fishery with entry under profitable circumstances
 
 
In general, the main strengths of the Newfoundland and Labrador system is the
 
proximity of the resource to the landing sites and the proximity to the North
 
American markets. The industry is putting more emphasis on the quality of the
 
product and efforts are being made to expand into the fresh fillet markets. Labour
 
costs when compared to European costs are cheaper however the industry is
 
currently very labour dependent as most of processing sector is still manually
 
driven with limited automation. The export market to the US continues to remain
 
strong as the market has shifted to higher value product forms. The resource
 
(harvestable biomass) has remained stable and is expected to grow over the
 
coming years. In recent years, government has been providing financial support
 
for technology enhancement initiatives within the harvesting and processing
 
sectors.
 
 
 
From an economic or value chain perspective the NL cod fishery (and Canadian
 
fisheries in general) is a social resource where market conditions have limited
 
consideration in terms of the structure or management of the industry.
 
Compared to the European market the challenges for the NL market are based on
 
economies of scale as the NL biomass or landed volume is a fraction of that
 
produced by Iceland, Norway and Russia. Some of the challenges with the fishery
 
include the number of vessels and harvesters competing for the limited resource.
 
The current industry structure limits the transferability of quota between vessels
 
thus impacting the self-rationalization within the industry. The current fishery has
 
a seasonality that is not linked to market demand or prices. The fishery does
 
however have the potential to extend its current season so that it operates longer
 
throughout the year and efforts are being made to move in this direction.
 
Strict regulation on enterprise combining and owner operator fleet separation has
 
influenced vertical integration within the industry. The lack of exit barriers has
 
resulted in licenses being sold at extremely high value which is negatively
 
impacting new entrants into the industry as the costs are prohibitive.
 
Demographics are challenging both the harvesting and processing sectors as the
 
average age of participants is >50 years+ and recruitment of people <30 years
 
has been declining. To combat pending labour losses, the fishery
 
(harvesting/processing) will have to move towards more automated systems. For
 
the limited harvestable resource, the number of landing ports (>400) and
 
potentially processing facilities adds a level of complexity to the logistics
 
component of the value chain. Many processing facilities have aging and outdated
 
equipment based on current markets.
 
 
 
{| class="wikitable" style="width: 100%;"
 
 
|-
 
|-
!
+
! scope="row" | Coastal vessels under 11m
! Description
+
| 1200 vessels, with vessel quota of 25- 50t
! Share cod quota
+
| 14.1&nbsp;%
! Access barriers
+
| Relatively low. Higher quota prices up to 350kEUR
! Opportunities and upgrade possibilities
+
| Differentiation through quality, opportunities in other fisheries (king crab, haddock) and co-fishing
! Threats
+
| Uncertainty regarding future fisheries management system, (structuring and vessel length
! Value chain relationship
+
limits). Structural development in landing sites.
! Dynamic in the value chain
+
 
 +
| Direct agreements with buyers. Often close ties with local purchaser.
 +
| Maximize first hand value, often with low cost focus (seasonality).
 
|-
 
|-
! scope="row" | Independent small boat owners in inshore/coastal fisheries
+
! scope="row" | Coastal vessels, 11m and above
| <65 feet (or 19.8 metre), fishery can be based on a weekly allocation or quota based (e.g. certain NAFO
+
| 560 vessels, with
regions such as 3Ps); number of fishing days/season determined by union and government
+
structuring, vessel quotas of 50-166t
| 75+%
+
 
| High cost for vessels and licences; no new licence being issued must buy existing licences
+
| 37.1&nbsp;%
| Can improve on board handling/holding technology; can buy additional licences (2:1 or 3:1).
+
| High - capital intensive, due quota price
| Weekly catch allocation is variable and overall stock/quota is uncertain; Negotiated price;
+
| Better handling. Sale contracts with producers. Many generalists with rights in pelagic sector also.
fishing season not necessarily linked to market
+
| Uncertainty regarding fisheries management system, potential introduction of resource rent tax, affecting profitability.
| Most goes to independent processing companies; portion of catch is processed and sold directly (micro-
+
| Direct agreements, high mobility and in greater (volume) demand.
vertical integration model)
+
| Maximize first hand value, low cost focus (seasonality). On board freezing incr.
| Maximize first sale price
 
 
|-
 
|-
! scope="row" | Independent boat owners (inshore/mid-shore range)
+
! scope="row" | Off shore vessels (auto-line and trawl)
| 65 feet (19.8 m) – 90 feet (27.4m); fishery can be based on a weekly allocation or
+
| 26 conventional vessels (autoline), vessel quota >274t 36 cod trawlers, vessel quota >1,096t
quota based (e.g. certain NAFO regions such as 3Ps); number of fishing days/season determined by union and government
+
| 8&nbsp;%
| 20+%
+
30.8&nbsp;%
| High cost for vessels and licences; no new licence being issued must buy existing licences
+
 
| Can improve on board handling/holding technology; can buy additional licences (2:1 or 3:1).
+
| Very high
| Weekly catch allocation is variable and overall stock/quota is uncertain; Negotiated price;
+
| On board processing potential exploited by few. High quality on hook catch, with price
fishing season not necessarily linked to market
+
premium. Tendencies towards own sale. Structuring potential exploited.
| Most goes to independent processing companies
+
 
| Maximize first sale price.
+
| Currency and quota fluctuations. Uncertainty regarding future management options and resource rent tax.
 +
| Auction sale of frozen fish, tendency towards contracts and own takeover of catch
 +
| Maximize value from catch. Full capacity utilisation with later years’ quotas.
 
|-
 
|-
! scope="row" | Vertical integrated company in fishing, production and marketing (VICs)
+
! scope="row" | White fish processing firms
| Companies with own boats, processing facilities and marketing office. Medium degree of automation
+
| Companies with processing facilities, some with vessel ownership, some
processing and fishing. Producing a variety of products frozen, portions, block, fresh
+
with export licence. Great heterogeneity.
| ~1%
+
 
| Very high - quota price, capital intensive fishing and production.
 
| Improved technology in processing facilities and vessels; building relationships with
 
smaller vessels for secure product
 
| Unstable currency, Uncertainty regarding access to quota; regulations preventing growth of
 
vertically integrated sector
 
| Internal sourcing
 
| Coordination of fishing and processing according to market needs, current sales and quota limitations.
 
|-
 
! scope="row" | Export and marketing companies with no own production
 
| One big sales company and number of small companies selling fish products from VICs and smaller producers
 
by long term contracts and adhoc trade. Sourcing fish from Iceland and other countries.
 
 
| 0
 
| 0
| Low - depends of market and supply relationships
+
| Low to medium, dependent of capital intensity of production.
| Branding, market relationship, long time contracts
+
| Choice of product mix. Increasingly capital intensive processing have led to big fresh fish export under high
| Unstable currency, Lack of branding, unstable supply.
+
quotas and seasonality. Falling quotas can counter this dev.
| Variable, based on relationships and access to resources
 
| Variable, constrained by the seasonality and availability of product; Monitor markets needs and
 
preferences and share market signals to producers
 
|}
 
  
 +
| Favourable but unstable currency fluctuations. Seasonality in supply. Much fish surpass traditional supply
 +
channels, to an increasing degree. Thawing have reduced comp. power of fresh. High Norw. salary level.
  
====Summary of Strategic Positioning====
+
| Tough competition up- and downstream the value chain, but close ties and trust
 
+
| Small margins and low profitability on average. Liquidity challenges in production of conventional prod.
It is very interesting to see the huge difference in structure and functionality of
+
|-
the value chains between Norway, Iceland and Newfoundland. Previous studies
+
! scope="row" | Export and marketing companies
have argued that the superior harvesting and marketing strategies of the
+
| Many exporters of varying size, markets and product portfolio.  
Icelandic industry may be rooted in factor conditions that are difficult to duplicate
+
In-house, stand alone and preferred traders.
and a rigid institutional framework in Norway and partly the social resource
 
structure of the Newfoundland industry, where market conditions have very
 
limited consideration in terms of the structure or management of the industry.
 
Both in Norway and Newfoundland, this structure or rigid framework is hampering
 
the industry to organise the value chain, to be more market competitive by
 
methods like vertical integration.
 
  
The vertically integrated companies in Iceland where the processor owns its own
+
| 0
fishing vessels. Unlike the push supply chain system followed by the Norwegian
+
| Low
and partly the Newfoundland companies where they must process the fish that
+
| Small degree of own brands in international seafood trade, especially with raw material and semi-finished products.  
they receive, the Icelandic processors places orders to its fishing vessels based
+
Supported by the generic marketing of seafood from the Norw. Seafood council.
on the customer orders and quota status, thus following a pull supply chain
 
system. The Icelandic processors are able to sends orders to the vessels for how
 
much fish of each main spices is wanted, where to catch and to land so they have
 
the desired size and quality of raw material needed for fulfilling customer orders.
 
This structural difference is also affecting the product mix that the countries are
 
going for. Iceland is therefore placing more and more emphasis on fresh fillets
 
and pieces, while the other countries are going for more traditional products, like
 
salted, dried and frozen products. Due to the vertical integration in Iceland, the
 
production plans are developed based on customer orders and then a plan is
 
made for fishing, while in Norway and Newfoundland, the production plans is
 
usually developed after receiving the fish at the processing plant as the
 
information about volumes of specifies caught and quality is not available
 
beforehand.
 
  
However, the socioeconomic effects of VICs in Iceland and aforementioned
+
| Currency fluctuation. Lack of branding. Seasonal landings complicates continuous supply of fresh fish.
consolidation where not addressed in this report.
+
| Demanding retail chains and spot markets. Price signals most important but also relational customer ties.
 +
| Monitor markets needs and preferences and share market signals to producers. Multiple and regional
 +
sourcing eases supply continuity
  
 +
|}
  
== Atlantic Herring ==
+
==== Iceland ====
  
===Executive summary===
+
In general the main strength of the Icelandic system is the distribution of catches around the whole year, strengthen by the start of the quota year on 1. September each year. The industry is putting more emphasis on production of fresh fish instead of frozen or salted product with huge investment in new fresh fish trawlers. The processing companies have also been investing in new equipment, especially regarding water cutting and super-chilling. With super- chilling and good control of temperature in containers, more emphasis has been put in transportation on sea rather than by plane. This is related to cost but also to carbon footprint. There is also more emphasis on markets in N-Amerika and the industry in closely monitoring developments in Asia. VICs are extremely strong as they control more than 2/3 of the cod quota and therefore limited amount is going through the auction markets.
  
It is very interesting to see the difference in structure and functionality of the
+
{| class="wikitable" style="width: 100%;"
value chains between Norway, Iceland, Denmark and Newfoundland. The
+
|-
structure of the industries is different as seen in the degree of vertical integration
+
! &nbsp;
and the limits that government’s put on the industries. It is though surprising
+
! Description
how homogeneous the industry is between those nations. The nature of pelagic
+
! Share cod quota
species that is, seasonality and high catch volumes in short periods, makes the
+
! Access barriers
product global commodity for further processing from one season to the next.
+
! Opportunities and upgrade possibilities
The main markets are Business to Business (B2B)
+
! Threats
 +
! Value chain relationship
 +
! Dynamic in the value chain
 +
|-
 +
! scope="row" | Independent small boat owners in costal fisheries
 +
| <30 tons, number of fishing days limitation.
 +
| 3.2%
 +
| Low
 +
| Better handling, buy quota.
 +
| Unstable currency, uncertainty of number of fishing days resulting in poor profitability.
 +
| Almost all goes through auction markets.
 +
| Lack of dynamic
 +
|-
 +
! scope="row" | Independent small boat owners with quota
 +
| <30 tons, TAC
 +
| 19.4%
 +
| High - capital intensive quota price
 +
| Can participate in costal fisheries without using their TAC. Better handling. Sale contracts with producers.
 +
| Unstable currency, Uncertainty regarding fisheries management system, uncertainty regarding resource rent that
 +
could affect profitability.
  
The first noticeable difference observed, apart from the structure, is the price
+
| Auction market around 70%. Rest sold by contract relationships.
settling mechanism. On one hand it is the Norwegian system that builds on
+
| Maximize first sale price.
minimum price and auction market which is the same that is used to determine
+
|-
the Danish price. In Iceland the price is decided by the Official Bureau of Ex-
+
! scope="row" | Independent big boat owners
Vessel Fish Prices. The Norwegian price is in many cases double that of the price
+
| >30 tons with TAC
in Iceland. The price obviously affects the profitability of the industry as the
+
| 7.6%
Norwegian fishing is benefiting from high price but the processing sector is
+
| High - capital intensive quota price
suffering from low profitability. On the other hand, the processing sector in
+
| Better handling. Sale contracts with producers.
Iceland is doing well as well as the profitability of the fishing is healthy. It can be
+
| Unstable currency, Uncertainty regarding fisheries management system, uncertainty
claimed that the overall profitability is higher in Iceland due to the freedom of
+
regarding resource rent that could affect profitability. Reduction in number of independent big boat owners.
strategically positioning yourself in the value chain and being vertical integrated
 
or not, without external limitation as those that can been seen in Norway,
 
Denmark and Newfoundland. There are certain signs that the price settling
 
mechanism in Iceland could be more efficient like, paying for quality of the raw
 
material. Herring is caught almost completely in pelagic trawl compared with
 
purse seining of virtually all the catch in Norway, that is believed to return better
 
quality than the trawl.
 
  
The vertically integrated system where one company owns its own fishing vessels
+
| Mixture of auction market and contract relationship.
and production has the opportunity to control the flow of the raw material to its
+
| Maximize first sale price.
production like in Iceland. Instead, in Norway and Denmark this coordination has
+
|-
to been done through auction markets and informal coordination between the
+
! scope="row" | Individual producer
owner of fishing vessels and producers. Due to the short fishing season this
+
| Supplies fish by contracts and from auction markets. Medium and small size producers with often low
seems to have less influence on the value chain e.g. compared with cod where
+
degree of automatization, mainly focusing on fresh niece markets.
the push system is clearly returning less value creation and profitability.
 
In such seasonal value chain as seen in the herring fishing is it is difficult to enter
 
the industry due to high capital cost and the competitiveness builds on
 
economics of scale. The competitiveness of the value chains also depends
 
heavily on other pelagic spices as capelin, mackerel and blue whiting in most of
 
the countries. All this makes upgrading in the value chain difficult. Opportunities
 
to upgrade the value chains in the case of Norway and Iceland are in increasing
 
the production stage of the herring at least part of it into consumer’s value added
 
products instead of B2B commodity. Evidence from Newfoundland and partly
 
Denmark show that more value can be created by focusing more on consumer’s
 
markets. Tariffs, distances from consumer markets and limited seasons can limit
 
this option. The option to increase the processing stage has as well to be
 
61economically sustainable in competition with countries with lower salary cost and
 
better access to the main markets as for example Poland and other former
 
eastern European countries have, being part of EU.
 
  
=== National comparison ===
+
| 0
 +
| Medium - depends on markets needs and level of automatization required.
 +
| Market relationships, product mix, long time source and sales contracts
 +
| Unstable currency, Access to supply do to quota system and high degree of VICs. Lack of branding
 +
| Sourcing form auction market and by contracts with boat owners and other producers.
 +
| Maximize value from bycatches and serving niece markets
 +
|-
 +
! scope="row" | Vertical integrated company in fishing, production and marketing (VICs)
 +
| Companies with own boats, processing facilities and marketing office. High degree of atomisation in
 +
processing and fishing. Producing fresh, frozen and salted products.
  
====Introduction====
+
| 70.8%
 +
| Very high - quota price, capital intensive fishing and production.
 +
| Branding, product mix, market relationships, usage of by-products, increase quota share up to limit.
 +
| Unstable currency, Uncertainty regarding fisheries management system, uncertainty regarding resource rent that
 +
could affect profitability. Reduction in number of independent big boat owners. Refresh fish. Lack of branding.
  
=====Global market review - herring=====
+
| Internal sourcing and auction market when there is shortage of own catches.
 +
| Coordination of fishing and processing according to market needs, current sales and quota limitations.
 +
|-
 +
! scope="row" | Export and marketing companies with no own production
 +
| One big sales company and number of small companies selling fish products from VICs and smaller producers
 +
by long term contracts and adhoc trade. Sourcing fish from Iceland and other countries.
  
Herring has been an important food for humans since ancient times; 5,000-7,000-
+
| 0
year-old herring bones from the stone age have been found in Denmark, both
+
| Low - depends of market and supply relationships
indicating catching and consumption of the fish (Albala, 2011).
+
| Branding, market relationship, long time contracts
 
+
| Unstable currency, Lack of branding, unstable supply.
Herring played an important role in the economic development of Iceland during
+
| Mixture contract relationship ad hoc trade
the last century. Herring revenues built up whole villages, ensured renewal of the
+
| Monitor markets needs and preferences and share market signals to  
fishing fleet and allowed thousands of young Icelanders to educate themselves.
+
producers. Risk reduction through network of suppliers.
(Sigurdsson et al., 2007). Herring still plays a large role in the economy of Iceland
 
with about 4-12% of the total value in fish export (Statistics Iceland, 2018). In
 
Canada, the herring fishery has supported major commercial fisheries on both its
 
Pacific and Atlantic coasts. The development of an almost unlimited world market
 
for herring meal and oil, plus major advances in fishing technology led to
 
overfishing both stocks during the 1950 through to the early 1970’s. Since then,
 
both fisheries have been strictly regulated and the herring fishery is still
 
contributing to the Canadian economy (valued at ~€28 million in 2015.
 
 
 
The Atlantic herring is one of the most important pelagic fish species in the world
 
with historic catches ranging from about 4 million tons (1965) to about 880
 
thousand tons (1979). The catches in 2014 were about 1.631 tons (FAO, 2017).
 
Other (true) herrings are the pacific herring, found in the north Pacific and the
 
Araucanian herring found off the cost of Chile. These latter herrings will not be
 
covered in this report.
 
  
According to the FAO (2016), fishery production varies greatly among species
+
|}
with the ten most productive species accounting for ~27% of the world’s marine
 
capture fishery production in 2013. Some stocks are regarded as overfished,
 
while most are considered fully fished without potential for further increase in
 
production. The Atlantic herring stocks on both the northeast and the northwest
 
Atlantic are considered fully fished.
 
  
 +
&nbsp;
  
[[File:D34_fig_21.png|center|Figure 21]]
+
==== Newfoundland and Labrador ====
''Figure 21. Catches of herring from 1950-2014 (FAO, 2017).''
 
  
=====Main producers=====
+
In general, the main strengths of the Newfoundland and Labrador system is the proximity of the resource to the landing sites and the proximity to the North American markets. The industry is putting more emphasis on the quality of the product and efforts are being made to expand into the fresh fillet markets. Labour costs when compared to European costs are cheaper however the industry is currently very labour dependent as most of processing sector is still manually driven with limited automation. The export market to the US continues to remain strong as the market has shifted to higher value product forms. The resource (harvestable biomass) has remained stable and is expected to grow over the coming years. In recent years, government has been providing financial support for technology enhancement initiatives within the harvesting and processing sectors.
  
The main producers of Atlantic herring have traditionally been Norway, Iceland,
+
From an economic or value chain perspective the NL cod fishery (and Canadian fisheries in general) is a social resource where market conditions have limited consideration in terms of the structure or management of the industry. Compared to the European market the challenges for the NL market are based on economies of scale as the NL biomass or landed volume is a fraction of that produced by Iceland, Norway and Russia. Some of the challenges with the fishery include the number of vessels and harvesters competing for the limited resource. The current industry structure limits the transferability of quota between vessels thus impacting the self-rationalization within the industry. The current fishery has a seasonality that is not linked to market demand or prices. The fishery does however have the potential to extend its current season so that it operates longer throughout the year and efforts are being made to move in this direction. Strict regulation on enterprise combining and owner operator fleet separation has influenced vertical integration within the industry. The lack of exit barriers has resulted in licenses being sold at extremely high value which is negatively impacting new entrants into the industry as the costs are prohibitive. Demographics are challenging both the harvesting and processing sectors as the average age of participants is >50 years+ and recruitment of people <30 years has been declining. To combat pending labour losses, the fishery (harvesting/processing) will have to move towards more automated systems. For the limited harvestable resource, the number of landing ports (>400) and potentially processing facilities adds a level of complexity to the logistics component of the value chain. Many processing facilities have aging and outdated equipment based on current markets.
Russia (previously the Soviet Union) and Canada with on average 60% of the
 
herring catch during the last 20 years (1994-2014) (FAO, 2017). The main herring
 
producer within EU are Denmark, Finland, UK, The Netherlands, Germany, France,
 
Poland and Ireland with about 650 thousand tons on average during the period
 
2012-2014 (FAO, 2017).
 
  
[[File:D34_fig_22.png|center|Figure 22]]
+
{| class="wikitable" style="width: 100%;"
''Figure 22. Main producers of herring (FAO, 2017).''
+
|-
 +
! &nbsp;
 +
! Description
 +
! Share cod quota
 +
! Access barriers
 +
! Opportunities and upgrade possibilities
 +
! Threats
 +
! Value chain relationship
 +
! Dynamic in the value chain
 +
|-
 +
! scope="row" | Independent small boat owners in inshore/coastal fisheries
 +
| <65 feet (or 19.8 metre), fishery can be based on a weekly allocation or quota based (e.g. certain NAFO
 +
regions such as 3Ps); number of fishing days/season determined by union and government
  
=====Main markets=====
+
| 75+%
 +
| High cost for vessels and licences; no new licence being issued must buy existing licences
 +
| Can improve on board handling/holding technology; can buy additional licences (2:1 or 3:1).
 +
| Weekly catch allocation is variable and overall stock/quota is uncertain; Negotiated price;
 +
fishing season not necessarily linked to market
  
The great majority of landings across countries was destined for human
+
| Most goes to independent processing companies; portion of catch is processed and sold directly (micro-
consumption and this share has been growing over time. Still parts of the Atlantic
+
vertical integration model)
herring catch e.g. the Baltic herring is mainly used for feed production (Anon,
 
2018).
 
  
The main food markets for herring have traditionally been Eastern Europe and
+
| Maximize first sale price
Russia. Herring has been stable food in these regions both as a good source of
+
|-
relatively cheap fish and as a protein source. In former times much of the herring
+
! scope="row" | Independent boat owners (inshore/mid-shore range)
was salted in the countries catching the herring before export. However, after the
+
| 65 feet (19.8 m) – 90 feet (27.4m); fishery can be based on a weekly allocation or
collapse of the Soviet Union at the end of 1991 the market for the primary goods
+
quota based (e.g. certain NAFO regions such as 3Ps); number of fishing days/season determined by union and government
has switched largely from salted herring in barrels to frozen herring (whole,
 
headless and gutted, butterfly fillets and single fillets, with or without skin). The
 
frozen herring is both eaten as is, but a large part of the import is used for further
 
processing e.g. for salting and marinating (salting or vinegar curing), smoking or
 
canning. The market in Russia has recently become less important due to political
 
reasons and the frozen herring has been exported mainly to other markets in
 
Eastern Europe.
 
  
There are traditional markets in Scandinavia (Sweden, Finland, Denmark and
+
| 20+%
Norway) and in Germany for herring and a (small) part of the Atlantic herring
+
| High cost for vessels and licences; no new licence being issued must buy existing licences
catch is salted (mainly in Norway but also in Denmark, Sweden and Iceland). A
+
| Can improve on board handling/holding technology; can buy additional licences (2:1 or 3:1).
large part of the Atlantic herring catch in Newfoundland is also salted for markets
+
| Weekly catch allocation is variable and overall stock/quota is uncertain; Negotiated price;
in USA. The herring is salted or vinegar cured using traditional recipes into large
+
fishing season not necessarily linked to market
plastic barrels which serve as the raw material for the final marinated products in
 
glass, plastic or metal containers.
 
  
There is also a market for herring in various European countries e.g. for matjes in
+
| Most goes to independent processing companies
Holland and smoked in France and UK (as kippers) and some other European
+
| Maximize first sale price.
countries.
+
|-
 +
! scope="row" | Vertical integrated company in fishing, production and marketing (VICs)
 +
| Companies with own boats, processing facilities and marketing office. Medium degree of automation
 +
processing and fishing. Producing a variety of products frozen, portions, block, fresh
  
Herring rest materials (bone, head, and intestines) and the part of the catch not
+
| ~1%
intended for processing is used for meal and oil processing. The main market for
+
| Very high - quota price, capital intensive fishing and production.
these products is Norway as feed for farmed salmon.
+
| Improved technology in processing facilities and vessels; building relationships with
 +
smaller vessels for secure product
 +
 
 +
| Unstable currency, Uncertainty regarding access to quota; regulations preventing growth of
 +
vertically integrated sector
 +
 
 +
| Internal sourcing
 +
| Coordination of fishing and processing according to market needs, current sales and quota limitations.
 +
|-
 +
! scope="row" | Export and marketing companies with no own production
 +
| One big sales company and number of small companies selling fish products from VICs and smaller producers
 +
by long term contracts and adhoc trade. Sourcing fish from Iceland and other countries.
 +
 
 +
| 0
 +
| Low - depends of market and supply relationships
 +
| Branding, market relationship, long time contracts
 +
| Unstable currency, Lack of branding, unstable supply.
 +
| Variable, based on relationships and access to resources
 +
| Variable, constrained by the seasonality and availability of product; Monitor markets needs and
 +
preferences and share market signals to producers
 +
 
 +
|}
  
=====Value chains flow=====
+
&nbsp;
  
In Figure 3a, a visualization of the European herring value chain is given, showing
+
==== Summary of Strategic Positioning ====
the different stages, and with arrows suggesting the most important flows
 
through the chain. This is by no means a complete rendering of the many value
 
chains for herring, but it illustrates some important features. The most important
 
is probably that herring finds various ways from catch to consumption.
 
Likewise, Figure 3b, provides a visualization of the Canadian (predominantly NL)
 
value chain, illustrating some of the important relationships or channels within
 
the value chain.
 
  
[[File:D34_fig_3a.png|center|Figure 3a]]
+
It is very interesting to see the huge difference in structure and functionality of the value chains between Norway, Iceland and Newfoundland. Previous studies have argued that the superior harvesting and marketing strategies of the Icelandic industry may be rooted in factor conditions that are difficult to duplicate and a rigid institutional framework in Norway and partly the social resource structure of the Newfoundland industry, where market conditions have very limited consideration in terms of the structure or management of the industry. Both in Norway and Newfoundland, this structure or rigid framework is hampering the industry to organise the value chain, to be more market competitive by methods like vertical integration.
''Figure 3a. The European value chain for herring''
 
  
[[File:D34_fig_3b.png|center|Figure 3b]]
+
The vertically integrated companies in Iceland where the processor owns its own fishing vessels. Unlike the push supply chain system followed by the Norwegian and partly the Newfoundland companies where they must process the fish that they receive, the Icelandic processors places orders to its fishing vessels based on the customer orders and quota status, thus following a pull supply chain system. The Icelandic processors are able to sends orders to the vessels for how much fish of each main spices is wanted, where to catch and to land so they have the desired size and quality of raw material needed for fulfilling customer orders. This structural difference is also affecting the product mix that the countries are going for. Iceland is therefore placing more and more emphasis on fresh fillets and pieces, while the other countries are going for more traditional products, like salted, dried and frozen products. Due to the vertical integration in Iceland, the production plans are developed based on customer orders and then a plan is made for fishing, while in Norway and Newfoundland, the production plans is usually developed after receiving the fish at the processing plant as the information about volumes of specifies caught and quality is not available beforehand.
''Figure 3b. The Canadian/NL value chain for herring''
 
  
As can be seen in Figure 3a much of the caught herring is landed in another
+
However, the socioeconomic effects of VICs in Iceland and aforementioned consolidation where not addressed in this report.
country. Iceland is the exception as all the herring caught is landed in the country.
 
In Canada (Figure 3b) herring is landed in and typically processed, at least at the
 
primary level.
 
  
====Fisheries Management System====
+
&nbsp;
  
{| class="wikitable" style="width: 100%;"
+
== Atlantic Herring ==
|-
+
 
!
+
=== Executive summary ===
! Norway
+
 
! Iceland
+
It is very interesting to see the difference in structure and functionality of the value chains between Norway, Iceland, Denmark and Newfoundland. The structure of the industries is different as seen in the degree of vertical integration and the limits that government’s put on the industries. It is though surprising how homogeneous the industry is between those nations. The nature of pelagic species that is, seasonality and high catch volumes in short periods, makes the product global commodity for further processing from one season to the next. The main markets are Business to Business (B2B)
! Denmark
+
 
! Newfoundland
+
The first noticeable difference observed, apart from the structure, is the price settling mechanism. On one hand it is the Norwegian system that builds on minimum price and auction market which is the same that is used to determine the Danish price. In Iceland the price is decided by the Official Bureau of Ex- Vessel Fish Prices. The Norwegian price is in many cases double that of the price in Iceland. The price obviously affects the profitability of the industry as the Norwegian fishing is benefiting from high price but the processing sector is suffering from low profitability. On the other hand, the processing sector in Iceland is doing well as well as the profitability of the fishing is healthy. It can be claimed that the overall profitability is higher in Iceland due to the freedom of strategically positioning yourself in the value chain and being vertical integrated or not, without external limitation as those that can been seen in Norway, Denmark and Newfoundland. There are certain signs that the price settling mechanism in Iceland could be more efficient like, paying for quality of the raw material. Herring is caught almost completely in pelagic trawl compared with purse seining of virtually all the catch in Norway, that is believed to return better quality than the trawl.
|-
+
 
! scope="row" | General
+
The vertically integrated system where one company owns its own fishing vessels and production has the opportunity to control the flow of the raw material to its production like in Iceland. Instead, in Norway and Denmark this coordination has to been done through auction markets and informal coordination between the owner of fishing vessels and producers. Due to the short fishing season this seems to have less influence on the value chain e.g. compared with cod where the push system is clearly returning less value creation and profitability. In such seasonal value chain as seen in the herring fishing is it is difficult to enter the industry due to high capital cost and the competitiveness builds on economics of scale. The competitiveness of the value chains also depends heavily on other pelagic spices as capelin, mackerel and blue whiting in most of the countries. All this makes upgrading in the value chain difficult. Opportunities to upgrade the value chains in the case of Norway and Iceland are in increasing the production stage of the herring at least part of it into consumer’s value added products instead of B2B commodity. Evidence from Newfoundland and partly Denmark show that more value can be created by focusing more on consumer’s markets. Tariffs, distances from consumer markets and limited seasons can limit this option. The option to increase the processing stage has as well to be 61economically sustainable in competition with countries with lower salary cost and better access to the main markets as for example Poland and other former eastern European countries have, being part of EU.
| Fisheries restrictions in 1971, fisheries ban from 1972. Cooperation between Norway, Iceland and Russia. Licences for purse seiners
+
 
introduced in 1973
+
=== National comparison ===
| Quota system was first introduced in Iceland on herring fisheries in 1975 and for most all other spices in 1983.
+
 
|
+
==== Introduction ====
| Herring fishery in NL is managed through TAC and sharing arrangements; in the maritime region (e.g. 4WX) the fishery is management through
+
 
an Integrated Fisheries Management Plans; which sets quota allocations, fishing seasons and areas; no new licenses are available for either
+
===== Global market review - herring =====
fixed gear or purse seine; harvesters may only hold a license for one gear type; fixed gear licenses are permitted to fish in
+
 
their Fishing area or port of residence; mobile gear fishers can fish in specified Fishing Areas/zones.
+
Herring has been an important food for humans since ancient times; 5,000-7,000- year-old herring bones from the stone age have been found in Denmark, both indicating catching and consumption of the fish (Albala, 2011).
|-
+
 
! scope="row" | Quota system: Individually Transferable Access
+
Herring played an important role in the economic development of Iceland during the last century. Herring revenues built up whole villages, ensured renewal of the fishing fleet and allowed thousands of young Icelanders to educate themselves. (Sigurdsson et al., 2007). Herring still plays a large role in the economy of Iceland with about 4-12% of the total value in fish export (Statistics Iceland, 2018). In Canada, the herring fishery has supported major commercial fisheries on both its Pacific and Atlantic coasts. The development of an almost unlimited world market for herring meal and oil, plus major advances in fishing technology led to overfishing both stocks during the 1950 through to the early 1970’s. Since then, both fisheries have been strictly regulated and the herring fishery is still contributing to the Canadian economy (valued at ~€28 million in 2015.
| 850 base tonnes limit
+
 
| ITQ implemented in 1991 20% quota ceiling for companies
+
The Atlantic herring is one of the most important pelagic fish species in the world with historic catches ranging from about 4 million tons (1965) to about 880 thousand tons (1979). The catches in 2014 were about 1.631 tons (FAO, 2017). Other (true) herrings are the pacific herring, found in the north Pacific and the Araucanian herring found off the cost of Chile. These latter herrings will not be covered in this report.
| Changed in 2003 from ratio allocation to ITQ
+
 
| Seasonal quotas vary by fishing zone or region; recipient of a license must have a homeport based in, or be resident of the fishing area of the license
+
According to the FAO (2016), fishery production varies greatly among species with the ten most productive species accounting for ~27% of the world’s marine capture fishery production in 2013. Some stocks are regarded as overfished, while most are considered fully fished without potential for further increase in production. The Atlantic herring stocks on both the northeast and the northwest Atlantic are considered fully fished.
Regulations governing enterprise/license combining- up to two individual quotas; buddy-up provisions are authorized for the herring fishery (Area 14)
 
|-
 
! scope="row" | Entry barriers into the system:
 
| Capital intensive - High price of quota (compared with value of products)
 
* High investment cost in vessels and technology to chill the fish-on-board Economics of scale and scope
 
* Multispecies access is necessary (capelin, blue whiting, mackerel)
 
* Short seasons Requires high catch capacity and financial strength to leave the vessel idle for 6-8 months a year
 
| Capital intensive
 
* High price of quota (compared with value of products)
 
* High investment cost in vessels and technology to chill the fish-on-board and process the fish Economics of scale and scope
 
* Multispecies access is necessary (capelin, blue whiting, mackerel)
 
* Reduces seasonal fluctuations and optimises the use of capital Strict laws govern ownership of vessels holding quota (and processing). Must be
 
Icelandic or controlled by Icelanders – foreigners can only own 25% in fishing or fish processing companies
 
All professional fishing in Iceland requires a licence Seasonality of the fishing
 
Small boat access
 
* Competitive fishing
 
* Migration creating uncertainty in fishing
 
* Instability in issuing quotas (political)
 
| Capital intensive
 
Has to be active fisherman that hold quota „slipper skippers“ A status as fisherman with one year as commercial fisherman
 
and 60% of income from fisheries
 
Very high price of the vessels and especially the quotas Limitation of quota concentration
 
Requirement of at least 2/3-ownership of active fishers with a- status.
 
| Requires a professional fish harvester certification
 
Significant investment in terms of education and training and at-sea experience
 
Cost of entry into the fishery is prohibitive due to the high cost of capital investment (vessels, gear, etc.) and the cost of licences
 
Uncertainty over future allocation/quotas and if there will be return on investment
 
|-
 
! scope="row" | Exit barriers from the industry
 
| Quotas and vessels easily sold
 
| Quotas easily sold and markets available – in Iceland
 
* Consolidation is set at 20% for herring which can affect exit
 
Vessels and equipment can be sold on the open market
 
|
 
| Low exit barriers licenses are easily sold; open market for licence No regulations governing the sales
 
Exit not linked to potential resource re- allocation for new entrants; i.e. portion of share or allocation is
 
not reinvested back into the fishery
 
No financial reinvestment (e.g.no tax or fee) required to be paid by harvester upon sale of licence and exit from the system
 
|-
 
! scope="row" | Transferability of quota/regional regulations
 
| No regional restrictions on transferability
 
| Quota ownership - Limitation on consolidation of quota ownership – max 20% ownership of TAC for herring
 
* Quota is bound to fishing vessel but companies with number of vessels can transfer quota between vessels
 
* 15% of TAC can be transferred from one year to the next by companies
 
* 5% can be overfished in the fishing year and will then be subtracted from next year TAC
 
| The regulation of limitation of concentration has been changed over the years with the present
 
interpretation for the pelagics of a limit of 10% of all pelagic quota, and 2% of the total pelagic quota if the vessel also
 
owns demersal quota | Limit on combining (2:1) shares or allocation
 
Transfer of shares/allocation between vessels is permanent
 
Opportunity to buddy-up is limited to NAFO division 4R trap gear
 
|-
 
! scope="row" | Possibilitiesto upgradein thesystem
 
|
 
| There is no restriction on upgrade or move from species but due to the specialisation
 
of pelagic fishing and processing the vessels/processing are simply too specialized to easily allow a move from
 
pelagic to other species e.g. demersal. This also applies for the processing or freezer trawlers
 
Small boats there are limits, except when going into the coastal or quota system
 
|
 
| Limited opportunity for vertical integration based on PIIFCAF; Upgrading is limited to 2 purchased licensed; no new licenses are issued for the fishery
 
|-
 
! scope="row" | Management measurements
 
| Most of the herring quota is caught by large purse seiners.
 
This is a group of vessels that historically has seen a strong reduction. In later years, though, the number of large
 
purse seiners has stabilised just below 80 vessels. Quota for herring may not be sold without a vessel,
 
but there is still room for expanding the quota for most vessels (only two vessels are at the new limit of 850 base-
 
tonnes (increased from 650 tonnes)).
 
| Landing obligation
 
* None
 
Min processing
 
requirements
 
* None
 
Fishing days – regulations /number of days
 
* None
 
Quantity
 
* None
 
Closures
 
* Marine Institute has licences to introduce closures for fishing areas if for example share of small fish is
 
too high according to landing or historical landing data
 
Discard ban
 
* Herring discards were banned in 1977 (with 5 other species)
 
* In 1996 a ban on all discards of fish; all species
 
* There are measurement’s in place to avoid discard
 
* Limited withdrawal on unwanted catch from TAC
 
* Up to 0,5% of herring can be landed as VS fish (project fund for fisheries), must be weighted and is not subtracted from
 
TAC. 20% goes to the vessel and 80% to the fund
 
* Damaged fish is kept separate and weighted not subtracted from quota
 
* By-catch should be recorded, but is mainly cod and lumpfish
 
|
 
| Landing obligation
 
* must land all catch unless a species exemption is received from DFO
 
Minimum processing requirement;
 
cannot process at sea
 
Fishing season is determined annually;
 
Gear restriction in place (e.g. fixed versus mobile gear)
 
|}
 
  
====Markets- and production development====
+
[[File:D34 fig 21.png|center|Figure 21]] ''Figure 21. Catches of herring from 1950-2014 (FAO, 2017).''
  
The aim of this section is to demonstrate what the different value chains are
+
===== Main producers =====
providing to markets in product mix, value and share of export as well as the
 
overall value creation within individual countries. This approach demonstrates
 
how responsive/dynamic the value chain is in serving the markets with products
 
and value. It has to be kept in mind however that there is great difference in
 
quantity of raw material within the different value chains. Norway’s total catch in
 
2015 was 422 thousand tons, Iceland received 244 thousand tons, Denmark
 
about 140 thousand tons and Newfoundland was just over 12 thousand tons.
 
  
=====Differences in exports/productions=====
+
The main producers of Atlantic herring have traditionally been Norway, Iceland, Russia (previously the Soviet Union) and Canada with on average 60% of the herring catch during the last 20 years (1994-2014) (FAO, 2017). The main herring producer within EU are Denmark, Finland, UK, The Netherlands, Germany, France, Poland and Ireland with about 650 thousand tons on average during the period 2012-2014 (FAO, 2017).
  
======Products======
+
[[File:D34 fig 22.png|center|Figure 22]] ''Figure 22. Main producers of herring (FAO, 2017).''
  
[[File:D34_fig_23.png|center|Figure 23]]
+
===== Main markets =====
''Figure 23. Export of whole herring (frozen and fresh) from Denmark, Iceland, Norway and Newfoundland as share of total export volume (fish meal and oil excluded).''
 
  
* Whole herring is a large part of the herring export for all the countries
+
The great majority of landings across countries was destined for human consumption and this share has been growing over time. Still parts of the Atlantic herring catch e.g. the Baltic herring is mainly used for feed production (Anon, 2018).
except for Canada. The whole herring is exported mainly as frozen but both
 
Norway and Denmark export as well fresh herring.
 
* NL market decreasing from 42% in 2000 to 0% in 2016
 
  
[[File:D34_fig_24.png|center|Figure 24]]
+
The main food markets for herring have traditionally been Eastern Europe and Russia. Herring has been stable food in these regions both as a good source of relatively cheap fish and as a protein source. In former times much of the herring was salted in the countries catching the herring before export. However, after the collapse of the Soviet Union at the end of 1991 the market for the primary goods has switched largely from salted herring in barrels to frozen herring (whole, headless and gutted, butterfly fillets and single fillets, with or without skin). The frozen herring is both eaten as is, but a large part of the import is used for further processing e.g. for salting and marinating (salting or vinegar curing), smoking or canning. The market in Russia has recently become less important due to political reasons and the frozen herring has been exported mainly to other markets in Eastern Europe.
''Figure 24. Export of herring fillets (single and butterfly, frozen at sea and on land) from''
 
  
Denmark, Iceland, Norway and Newfoundland as share of total export volume
+
There are traditional markets in Scandinavia (Sweden, Finland, Denmark and Norway) and in Germany for herring and a (small) part of the Atlantic herring catch is salted (mainly in Norway but also in Denmark, Sweden and Iceland). A large part of the Atlantic herring catch in Newfoundland is also salted for markets in USA. The herring is salted or vinegar cured using traditional recipes into large plastic barrels which serve as the raw material for the final marinated products in glass, plastic or metal containers.
(fish meal and oil excluded).
 
  
* Herring fillets, both single and butterfly fillets frozen at sea or on land, are
+
There is also a market for herring in various European countries e.g. for matjes in Holland and smoked in France and UK (as kippers) and some other European countries.
the most important export category in Iceland indicating the growing
 
importance placed on processing
 
* Fillets are also of growing importance in Norway, reflecting on the
 
investment made in both Iceland and Norway on investment in processing
 
and automatization of the process. Both countries focus on processing the
 
fish into fillets and using the rest raw materials (offal, bones and heads) for
 
fish meal and oil.
 
* All the large pelagic processers in Iceland have included in their integrated
 
operation a fish meal plant(s). Figure 25 shows the value of herring fish
 
meal and oil during the last few years for Iceland as share of total herring
 
products export value.
 
* Fillets are not a large item of the exports from Denmark
 
* NL market decreasing from 33% in 2008 to 0% in 2016
 
  
[[File:D34_fig_25.png|center|Figure 25]]
+
Herring rest materials (bone, head, and intestines) and the part of the catch not intended for processing is used for meal and oil processing. The main market for these products is Norway as feed for farmed salmon.
''Figure 25. Value of herring product exports from Iceland during the period 1999-2016 as share of total export (fish meal and oil included).''
 
  
[[File:D34_fig_26.png|center|Figure 26]]
+
===== Value chains flow =====
''Figure 26. Export of salted, dried and smoked herring products from Denmark, Iceland, Norway and Newfoundland as share of total export volume (fish meal and oil excluded). The figures for Norway include both salted and preserved products. ''
 
  
* Salted and vinegar cured products are important as raw materials for the
+
In Figure 3a, a visualization of the European herring value chain is given, showing the different stages, and with arrows suggesting the most important flows through the chain. This is by no means a complete rendering of the many value chains for herring, but it illustrates some important features. The most important is probably that herring finds various ways from catch to consumption. Likewise, Figure 3b, provides a visualization of the Canadian (predominantly NL) value chain, illustrating some of the important relationships or channels within the value chain.
Scandinavian herring market as well as for the German market.
 
* Denmark and Norway produce for this market and approximately 3-4% of
 
the herring products are export as salted
 
* Iceland has virtually stopped salted – 1% or less of the herring is exported as salted
 
* This is a growing market for NL,- increased from 6% in 2000 to 50% in 2016
 
  
[[File:D34_fig_27.png|center|Figure 27]]
+
[[File:D34 fig 3a.png|center|Figure 3a]] ''Figure 3a. The European value chain for herring''
''Figure 27. Export of prepared and preserved herring products from Denmark, Iceland and Newfoundland as share of total export volume (fish meal and oil excluded).''
 
  
* Denmark and NL both focus on this market. Denmark exports between 15-
+
[[File:D34 fig 3b.png|center|Figure 3b]] ''Figure 3b. The Canadian/NL value chain for herring''
25% of the herring as value added products to EU28 countries. Denmark
 
does not have to pay tariffs for the products being a member of EU
 
whereas both Iceland and Norway must pay 10% tariff on prepared and
 
preserved herring products to EU as EEA countries.
 
* Due to tariffs there is virtually no production of consumer herring goods for
 
export in Iceland and Norway. There is some bulk production in Norway of
 
herring products (in brine or vinegar cured) which form the main ingredient
 
in the consumer goods (mainly jars) which are produced in EU (mostly
 
Sweden) to avoid import taxes
 
* Newfoundland export a large part of their herring products (>40%) to the
 
US as preserved and prepared goods. No import tariffs are on the products.
 
  
======Customers======
+
As can be seen in Figure 3a much of the caught herring is landed in another country. Iceland is the exception as all the herring caught is landed in the country. In Canada (Figure 3b) herring is landed in and typically processed, at least at the primary level.
  
Both Norway and Iceland are outside EU and must pay tariffs on value added
+
==== Fisheries Management System ====
products and even on some salted herring raw materials into EU. The main
 
markets, though, are eastern European countries, with a long history of eating
 
herring.
 
  
''Table 1. Main buyers of Icelandic herring products (as share of herring export volume and value, excluding meal and oil)''
 
 
{| class="wikitable" style="width: 100%;"
 
{| class="wikitable" style="width: 100%;"
 
|-
 
|-
! colspan="4" | Volume
+
! &nbsp;
! colspan="3" | Value
+
! Norway
 +
! Iceland
 +
! Denmark
 +
! Newfoundland
 
|-
 
|-
! Country
+
! scope="row" | General
! 2010
+
| Fisheries restrictions in 1971, fisheries ban from 1972. Cooperation between Norway, Iceland and Russia. Licences for purse seiners
! 2014
+
introduced in 1973
! 2016
+
 
! 2010
+
| Quota system was first introduced in Iceland on herring fisheries in 1975 and for most all other spices in 1983.
! 2014
+
| &nbsp;
! 2016
+
| Herring fishery in NL is managed through TAC and sharing arrangements; in the maritime region (e.g. 4WX) the fishery is management through
 +
an Integrated Fisheries Management Plans; which sets quota allocations, fishing seasons and areas; no new licenses are available for either fixed gear or purse seine; harvesters may only hold a license for one gear type; fixed gear licenses are permitted to fish in their Fishing area or port of residence; mobile gear fishers can fish in specified Fishing Areas/zones.
 +
 
 
|-
 
|-
| Poland
+
! scope="row" | Quota system: Individually Transferable Access
| 33%
+
| 850 base tonnes limit
| 9%
+
| ITQ implemented in 1991 20% quota ceiling for companies
| 30%
+
| Changed in 2003 from ratio allocation to ITQ
| 36%
+
| Seasonal quotas vary by fishing zone or region; recipient of a license must have a homeport based in, or be resident of the fishing area of the license
| 9%
+
Regulations governing enterprise/license combining- up to two individual quotas; buddy-up provisions are authorized for the herring fishery (Area 14)
| 32%
+
 
 
|-
 
|-
| Ukraine
+
! scope="row" | Entry barriers into the system:
| 5%
+
| Capital intensive - High price of quota (compared with value of products)
| 2%
+
*High investment cost in vessels and technology to chill the fish-on-board Economics of scale and scope
| 18%
+
*Multispecies access is necessary (capelin, blue whiting, mackerel)
| 5%
+
*Short seasons Requires high catch capacity and financial strength to leave the vessel idle for 6-8 months a year
| 2%
+
 
| 20%
+
| Capital intensive
 +
*High price of quota (compared with value of products)
 +
*High investment cost in vessels and technology to chill the fish-on-board and process the fish Economics of scale and scope
 +
*Multispecies access is necessary (capelin, blue whiting, mackerel)
 +
*Reduces seasonal fluctuations and optimises the use of capital Strict laws govern ownership of vessels holding quota (and processing). Must be
 +
 
 +
Icelandic or controlled by Icelanders – foreigners can only own 25% in fishing or fish processing companies All professional fishing in Iceland requires a licence Seasonality of the fishing Small boat access
 +
 
 +
*Competitive fishing
 +
*Migration creating uncertainty in fishing
 +
*Instability in issuing quotas (political)
 +
 
 +
| Capital intensive
 +
Has to be active fisherman that hold quota „slipper skippers“ A status as fisherman with one year as commercial fisherman and 60% of income from fisheries Very high price of the vessels and especially the quotas Limitation of quota concentration Requirement of at least 2/3-ownership of active fishers with a- status.
 +
 
 +
| Requires a professional fish harvester certification
 +
Significant investment in terms of education and training and at-sea experience Cost of entry into the fishery is prohibitive due to the high cost of capital investment (vessels, gear, etc.) and the cost of licences Uncertainty over future allocation/quotas and if there will be return on investment
 +
 
 
|-
 
|-
| Belarus
+
! scope="row" | Exit barriers from the industry
| 0%
+
| Quotas and vessels easily sold
| 2%
+
| Quotas easily sold and markets available – in Iceland
| 15%
+
*Consolidation is set at 20% for herring which can affect exit
| 0%
+
 
| 2%
+
Vessels and equipment can be sold on the open market
| 16%
+
 
 +
| &nbsp;
 +
| Low exit barriers licenses are easily sold; open market for licence No regulations governing the sales
 +
Exit not linked to potential resource re- allocation for new entrants; i.e. portion of share or allocation is not reinvested back into the fishery No financial reinvestment (e.g.no tax or fee) required to be paid by harvester upon sale of licence and exit from the system
 +
 
 
|-
 
|-
| Lithuania
+
! scope="row" | Transferability of quota/regional regulations
| 28%
+
| No regional restrictions on transferability
| 15%
+
| Quota ownership - Limitation on consolidation of quota ownership – max 20% ownership of TAC for herring
| 14%
+
*Quota is bound to fishing vessel but companies with number of vessels can transfer quota between vessels
| 25%
+
*15% of TAC can be transferred from one year to the next by companies
| 14%
+
*5% can be overfished in the fishing year and will then be subtracted from next year TAC
| 15%
+
 
 +
| The regulation of limitation of concentration has been changed over the years with the present
 +
interpretation for the pelagics of a limit of 10% of all pelagic quota, and 2% of the total pelagic quota if the vessel also owns demersal quota &#124; Limit on combining (2:1) shares or allocation Transfer of shares/allocation between vessels is permanent Opportunity to buddy-up is limited to NAFO division 4R trap gear
 +
 
 
|-
 
|-
| Russia
+
! scope="row" | Possibilitiesto upgradein thesystem
| 22%
+
| &nbsp;
| 64%
+
| There is no restriction on upgrade or move from species but due to the specialisation
| 9%
+
of pelagic fishing and processing the vessels/processing are simply too specialized to easily allow a move from pelagic to other species e.g. demersal. This also applies for the processing or freezer trawlers Small boats there are limits, except when going into the coastal or quota system
| 20%
+
 
| 68%
+
| &nbsp;
| 9%
+
| Limited opportunity for vertical integration based on PIIFCAF; Upgrading is limited to 2 purchased licensed; no new licenses are issued for the fishery
 
|-
 
|-
| Holland
+
! scope="row" | Management measurements
| 0%
+
| Most of the herring quota is caught by large purse seiners.
| 2%
+
This is a group of vessels that historically has seen a strong reduction. In later years, though, the number of large purse seiners has stabilised just below 80 vessels. Quota for herring may not be sold without a vessel, but there is still room for expanding the quota for most vessels (only two vessels are at the new limit of 850 base- tonnes (increased from 650 tonnes)).
| 0%
+
 
| 0%
+
| Landing obligation
| 3%
+
*None
| 0%
+
 
|-
+
Min processing requirements
| EU28
 
| 65%
 
| 30%
 
| 52%
 
| 67%
 
| 31%
 
| 57%
 
|-
 
| EEA
 
| 65%
 
| 30%
 
| 52%
 
| 68%
 
| 31%
 
| 57%
 
|}
 
  
* Main markets for the products are in Eastern Europe
+
*None
* The focus is on commodities or raw material (fillets or whole fish) that can
+
 
be used to produce the final consumer goods. Virtually nothing is produced
+
Fishing days – regulations /number of days
of the prepared or preserved ready to eat products.
+
 
* There is considerable variability of main buyers (as countries) between
+
*None
years; it depends on market conditions and prices to whom the products
+
 
are sold. Often uncertain market conditions e.g. closure of the Russian
+
Quantity
market recently, but also lack of loyalty between buyers and supplier
+
 
* EU purchases between 30-65% of the products (mainly Poland)
+
*None
 +
 
 +
Closures
 +
 
 +
*Marine Institute has licences to introduce closures for fishing areas if for example share of small fish is
 +
 
 +
too high according to landing or historical landing data Discard ban
 +
 
 +
*Herring discards were banned in 1977 (with 5 other species)
 +
*In 1996 a ban on all discards of fish; all species
 +
*There are measurement’s in place to avoid discard
 +
*Limited withdrawal on unwanted catch from TAC
 +
*Up to 0,5% of herring can be landed as VS fish (project fund for fisheries), must be weighted and is not subtracted from
 +
 
 +
TAC. 20% goes to the vessel and 80% to the fund
 +
 
 +
*Damaged fish is kept separate and weighted not subtracted from quota
 +
*By-catch should be recorded, but is mainly cod and lumpfish
 +
 
 +
| &nbsp;
 +
| Landing obligation
 +
*must land all catch unless a species exemption is received from DFO
 +
 
 +
Minimum processing requirement; cannot process at sea Fishing season is determined annually; Gear restriction in place (e.g. fixed versus mobile gear)
  
''Table 2. Main buyers of Norwegian herring products (as share of herring export volume, excluding meal and oil)''
 
{| class="wikitable" style="width: 100%;"
 
|-
 
!Country
 
!2013
 
!2014
 
!2015
 
|-
 
|Denmark
 
|10%
 
|15%
 
|18%
 
|-
 
|Germany
 
|10%
 
|14%
 
|15%
 
|-
 
|Lithuania
 
|15%
 
|16%
 
|15%
 
|-
 
|Ukraine
 
|12%
 
|15%
 
|15%
 
|-
 
|Poland
 
|7%
 
|9%
 
|12%
 
|-
 
|Netherlands
 
|6%
 
|8%
 
|11%
 
|-
 
|Egypt
 
|4%
 
|1%
 
|7%
 
|-
 
|Belarus
 
|2%
 
|6%
 
|6%
 
|-
 
|Russia
 
|32%
 
|17%
 
|0%
 
|-
 
|EU28
 
|43%
 
|53%
 
|61%
 
|-
 
|EEA
 
|43%
 
|53%
 
|61%
 
 
|}
 
|}
  
* Main markets are in Eastern Europe
+
==== Markets- and production development ====
* The focus is on commodities or raw material (fillets or whole fish) that can
+
 
be used to produce the final consumer goods. Virtually nothing is produced
+
The aim of this section is to demonstrate what the different value chains are providing to markets in product mix, value and share of export as well as the overall value creation within individual countries. This approach demonstrates how responsive/dynamic the value chain is in serving the markets with products and value. It has to be kept in mind however that there is great difference in quantity of raw material within the different value chains. Norway’s total catch in 2015 was 422 thousand tons, Iceland received 244 thousand tons, Denmark about 140 thousand tons and Newfoundland was just over 12 thousand tons.
of the prepared or preserved ready to eat products.
+
 
* EU purchases between 43-61% of the products (mainly Denmark, Germany
+
===== Differences in exports/productions =====
and Lithuania)
+
 
*More stability in customer base than seen for Iceland – possibly due to
+
====== Products ======
more loyalty between buyers and supplier. Easier logistic routes to markets
+
 
also help
+
[[File:D34 fig 23.png|center|Figure 23]] ''Figure 23. Export of whole herring (frozen and fresh) from Denmark, Iceland, Norway and Newfoundland as share of total export volume (fish meal and oil excluded).''
  
''Table 3. Main buyers of Danish herring products (as share of herring export volume and value, excluding meal and oil)''
+
*Whole herring is a large part of the herring export for all the countries
  
* Main markets are in Eastern Europe
+
except for Canada. The whole herring is exported mainly as frozen but both Norway and Denmark export as well fresh herring.
* The focus is on commodities or raw material (fillets or whole fish) that can
 
be used to produce the final consumer goods. Virtually nothing is produced
 
of the prepared or preserved ready to eat products.
 
* EU purchases between 43-61% of the products (mainly Denmark, Germany and Lithuania)
 
  
{| class="wikitable" style="width: 100%;"
+
*NL market decreasing from 42% in 2000 to 0% in 2016
|-
+
 
! Country
+
[[File:D34 fig 24.png|center|Figure 24]] ''Figure 24. Export of herring fillets (single and butterfly, frozen at sea and on land) from''
! colspan="3" | Volume
+
 
 +
Denmark, Iceland, Norway and Newfoundland as share of total export volume (fish meal and oil excluded).
 +
 
 +
*Herring fillets, both single and butterfly fillets frozen at sea or on land, are
 +
 
 +
the most important export category in Iceland indicating the growing importance placed on processing
 +
 
 +
*Fillets are also of growing importance in Norway, reflecting on the
 +
 
 +
investment made in both Iceland and Norway on investment in processing and automatization of the process. Both countries focus on processing the fish into fillets and using the rest raw materials (offal, bones and heads) for fish meal and oil.
 +
 
 +
*All the large pelagic processers in Iceland have included in their integrated
 +
 
 +
operation a fish meal plant(s). Figure 25 shows the value of herring fish meal and oil during the last few years for Iceland as share of total herring products export value.
 +
 
 +
*Fillets are not a large item of the exports from Denmark
 +
*NL market decreasing from 33% in 2008 to 0% in 2016
 +
 
 +
[[File:D34 fig 25.png|center|Figure 25]] ''Figure 25. Value of herring product exports from Iceland during the period 1999-2016 as share of total export (fish meal and oil included).''
 +
 
 +
[[File:D34 fig 26.png|center|Figure 26]] ''Figure 26. Export of salted, dried and smoked herring products from Denmark, Iceland, Norway and Newfoundland as share of total export volume (fish meal and oil excluded). The figures for Norway include both salted and preserved products.''
 +
 
 +
*Salted and vinegar cured products are important as raw materials for the
 +
 
 +
Scandinavian herring market as well as for the German market.
 +
 
 +
*Denmark and Norway produce for this market and approximately 3-4% of
 +
 
 +
the herring products are export as salted
 +
 
 +
*Iceland has virtually stopped salted – 1% or less of the herring is exported as salted
 +
*This is a growing market for NL,- increased from 6% in 2000 to 50% in 2016
 +
 
 +
[[File:D34 fig 27.png|center|Figure 27]] ''Figure 27. Export of prepared and preserved herring products from Denmark, Iceland and Newfoundland as share of total export volume (fish meal and oil excluded).''
 +
 
 +
*Denmark and NL both focus on this market. Denmark exports between 15-
 +
 
 +
25% of the herring as value added products to EU28 countries. Denmark does not have to pay tariffs for the products being a member of EU whereas both Iceland and Norway must pay 10% tariff on prepared and preserved herring products to EU as EEA countries.
 +
 
 +
*Due to tariffs there is virtually no production of consumer herring goods for
 +
 
 +
export in Iceland and Norway. There is some bulk production in Norway of herring products (in brine or vinegar cured) which form the main ingredient in the consumer goods (mainly jars) which are produced in EU (mostly Sweden) to avoid import taxes
 +
 
 +
*Newfoundland export a large part of their herring products (>40%) to the
 +
 
 +
US as preserved and prepared goods. No import tariffs are on the products.
 +
 
 +
====== Customers ======
 +
 
 +
Both Norway and Iceland are outside EU and must pay tariffs on value added products and even on some salted herring raw materials into EU. The main markets, though, are eastern European countries, with a long history of eating herring.
 +
 
 +
''Table 1. Main buyers of Icelandic herring products (as share of herring export volume and value, excluding meal and oil)''
 +
 
 +
{| class="wikitable" style="width: 100%;"
 +
|-
 +
! colspan="4" | Volume
 
! colspan="3" | Value
 
! colspan="3" | Value
 
|-
 
|-
| Country
+
! Country
| 2008
+
! 2010
| 2012
+
! 2014
| 2016
+
! 2016
| 2008
+
! 2010
| 2012
+
! 2014
| 2016
+
! 2016
|-
 
| Germany
 
| 61%
 
| 61%
 
| 59%
 
| 49%
 
| 55%
 
| 51%
 
 
|-
 
|-
 
| Poland
 
| Poland
| 16%
+
| 33%
| 6%
+
| 9%
| 10%
+
| 30%
| 24%
+
| 36%
| 13%
+
| 9%
| 16%
+
| 32%
 
|-
 
|-
| Holland
+
| Ukraine
| 8%
+
| 5%
| 7%
 
| 8%
 
| 13%
 
| 11%
 
| 12%
 
|-
 
| Norway
 
 
| 2%
 
| 2%
| 6%
+
| 18%
 
| 5%
 
| 5%
 
| 2%
 
| 2%
| 5%
+
| 20%
| 4%
 
 
|-
 
|-
| UK
+
| Belarus
 +
| 0%
 +
| 2%
 +
| 15%
 +
| 0%
 
| 2%
 
| 2%
| 13%
+
| 16%
| 5%
 
| 1%
 
| 8%
 
| 3%
 
 
|-
 
|-
| Sweden
+
| Lithuania
| 6%
+
| 28%
| 3%
+
| 15%
| 4%
+
| 14%
| 3%
+
| 25%
| 3%
+
| 14%
 +
| 15%
 +
|-
 +
| Russia
 +
| 22%
 +
| 64%
 +
| 9%
 +
| 20%
 +
| 68%
 +
| 9%
 +
|-
 +
| Holland
 +
| 0%
 +
| 2%
 +
| 0%
 +
| 0%
 
| 3%
 
| 3%
 +
| 0%
 
|-
 
|-
 
| EU28
 
| EU28
| 97%
+
| 65%
| 94%
+
| 30%
| 90%
+
| 52%
| 97%
+
| 67%
| 94%
+
| 31%
| 91%
+
| 57%
 
|-
 
|-
 
| EEA
 
| EEA
| 100%
+
| 65%
| 100%
+
| 30%
| 95%
+
| 52%
| 99%
+
| 68%
| 99%
+
| 31%
| 95%
+
| 57%
 
|}
 
|}
  
* EU is the main market for the products purchasing 90-97% of the products.
+
*Main markets for the products are in Eastern Europe
The access to the common market is a key (no tariffs) as well as short
+
*The focus is on commodities or raw material (fillets or whole fish) that can
logistic routes.
+
 
* High stability in customer base indicating loyalty between supplier and
+
be used to produce the final consumer goods. Virtually nothing is produced of the prepared or preserved ready to eat products.
buyer. Germany is by far the biggest market not only for the commodities
+
 
but also taking the largest share of the value-added products
+
*There is considerable variability of main buyers (as countries) between
 +
 
 +
years; it depends on market conditions and prices to whom the products are sold. Often uncertain market conditions e.g. closure of the Russian market recently, but also lack of loyalty between buyers and supplier
 +
 
 +
*EU purchases between 30-65% of the products (mainly Poland)
 +
 
 +
''Table 2. Main buyers of Norwegian herring products (as share of herring export volume, excluding meal and oil)''
  
''Table 4. Top buyers (based on value) each year for Newfoundland herring products (as share of herring export value, excluding meal and oil)''
 
 
{| class="wikitable" style="width: 100%;"
 
{| class="wikitable" style="width: 100%;"
 
|-
 
|-
 
! Country
 
! Country
! 2011
 
! 2012
 
 
! 2013
 
! 2013
 
! 2014
 
! 2014
 
! 2015
 
! 2015
! 2016
 
 
|-
 
|-
| United States
+
| Denmark
| 83%
+
| 10%
| 53%
+
| 15%
| 82%
+
| 18%
| 53%
 
| 64%
 
| 64%
 
 
|-
 
|-
| Poland
+
| Germany
| 2%
+
| 10%
|
+
| 14%
|
 
| 16%
 
| 15%
 
 
| 15%
 
| 15%
 
|-
 
|-
 
| Lithuania
 
| Lithuania
|
+
| 15%
|
+
| 16%
|
+
| 15%
|
 
| 5%
 
| 2%
 
 
|-
 
|-
| C´ote d´Ivory
+
| Ukraine
|
+
| 12%
|
+
| 15%
|
+
| 15%
|
 
| 3%
 
|
 
 
|-
 
|-
| Germany
+
| Poland
|
+
| 7%
|
+
| 9%
|
+
| 12%
|
 
| 6%
 
|
 
 
|-
 
|-
| Ukraine
+
| Netherlands
|
 
|
 
|
 
|
 
|
 
 
| 6%
 
| 6%
 +
| 8%
 +
| 11%
 
|-
 
|-
| Japan
+
| Egypt
| 2%
+
| 4%
| 13%
+
| 1%
| 2%
+
| 7%
|
 
|
 
| 3%
 
 
|-
 
|-
| South Africa
+
| Belarus
|
 
|
 
|
 
| 4%
 
|
 
 
| 2%
 
| 2%
 +
| 6%
 +
| 6%
 
|-
 
|-
| China
+
| Russia
| 3%
+
| 32%
|
+
| 17%
|
+
| 0%
|
 
|
 
|
 
 
|-
 
|-
| Nigeria
+
| EU28
| 3%
+
| 43%
| 13%
+
| 53%
| 3%
+
| 61%
|
 
|
 
|
 
 
|-
 
|-
| Georgia
+
| EEA
|
+
| 43%
| 5%
+
| 53%
| 3%
+
| 61%
|
 
|
 
|
 
|-
 
| Russian Federation
 
|
 
| 6%
 
|
 
| 18%
 
|
 
|
 
|-
 
| Egypt
 
|
 
|
 
| 3%
 
|
 
|
 
|
 
 
|}
 
|}
  
* USA purchases almost 80% of the products. Easy access routes favour
+
*Main markets are in Eastern Europe
products from Canada
+
*The focus is on commodities or raw material (fillets or whole fish) that can
* Most of the remainder of the products are exported to East Europe.
 
  
======Value creation======
+
be used to produce the final consumer goods. Virtually nothing is produced of the prepared or preserved ready to eat products.
  
The below figure shows the value creation within each country based on the total
+
*EU purchases between 43-61% of the products (mainly Denmark, Germany
export value for all the herring food products. As it was difficult to obtain accurate
 
information on the total quantity and value of herring meal and oil produced
 
within each country, feed products (meal and oil) are excluded in this comparison
 
and the focus is on exported goods for food purposes.
 
  
[[File:D34_fig_28.png|center|Figure 28]]
+
and Lithuania)
''Figure 28. Value creation in euro/kg of export value of herring products from Iceland, Norway, Denmark and Newfoundland''
 
  
* Value creation has increased with time mainly due to price increases of
+
*More stability in customer base than seen for Iceland – possibly due to  
herring products as herring quotas have been in steep decline from 2009
 
until 2017.
 
* Similar value creation is observed in all the countries
 
* The value creation within Newfoundland seems to be increasing in the last
 
few years, possibly because of their focus on final consumer goods
 
  
=====Processing=====
+
more loyalty between buyers and supplier. Easier logistic routes to markets also help
  
======Profitability and performance======
+
''Table 3. Main buyers of Danish herring products (as share of herring export volume and value, excluding meal and oil)''
  
Profitability figures for the processing sector are just available for Norway and
+
*Main markets are in Eastern Europe
Iceland. The figure for Norway is for the pelagic processing mainly herring and
+
*The focus is on commodities or raw material (fillets or whole fish) that can
mackerel. The only separation in Iceland is the meal production of pelagic
 
species as whole. The production of frozen herring is included in the profitability
 
figure for the whole freezing sector, both demersal and pelagic. Hence, the
 
profitability comparison is limited. Below is comparison of profitability in the
 
processing industry in Iceland and Norway based on EBIT (Earnings Before
 
Interest and Taxes) as share of revenue.
 
  
[[File:D34_fig_29.png|center|Figure 29]]
+
be used to produce the final consumer goods. Virtually nothing is produced of the prepared or preserved ready to eat products.
''Figure 29. EBIT as share of revenue in Iceland and Norway 1997 to 2015''
 
  
* The profitability in processing is higher in Iceland than Norway in most
+
*EU purchases between 43-61% of the products (mainly Denmark, Germany and Lithuania)
cases.
 
* The profitability as EBIT in Norwegian processing is very low or below 5% in
 
most years while the EBIT in Iceland has been over 15% from about 2008.
 
* Profitability for meal and oil production yield an EBIT of around 10 % in
 
Norway. This industry bases its production on capelin, blue whiting and rest
 
raw material from herring. The amount of whole herring used for meal and
 
oil is negligible.
 
 
 
===== Summary of main influencing factors regarding markets- and production development =====
 
  
 
{| class="wikitable" style="width: 100%;"
 
{| class="wikitable" style="width: 100%;"
 
|-
 
|-
! Factor
+
! Country
! Iceland
+
! colspan="3" | Volume
! Norway
+
! colspan="3" | Value
! Denmark
 
! Newfoundland
 
 
|-
 
|-
| Strategy
+
| Country
| Vertical integrated companies focusing on value creation and control of raw material
+
| 2008
flow (inside the seasons)
+
| 2012
| Auction markets limits vertical integration.
+
| 2016
Strong focus on large-scale efficient production.
+
| 2008
| Auction markets limits vertical integration.
+
| 2012
Strong focus on large-scale efficient production.
+
| 2016
| Small degree of vertical integration;
 
recent year increasing focus on secondary processing and higher valued product forms instead of bait or zoo feed
 
 
|-
 
|-
| Marketing
+
| Germany
| Main countries that buy herring from Iceland vary a lot between years.
+
| 61%
Indicating spot markets and always going for highest price?
+
| 61%
| Stable markets. Mostly intermediate products for further processing in market countries
+
| 59%
| Mixture of B2B raw material commodity  and consumers packing
+
| 49%
| Stable markets as US is largest buyer; marketing done directly by processing companies/retailers; main
+
| 55%
countries relatively consistent over time
+
| 51%
 
|-
 
|-
| Risk in
+
| Poland
marketing
+
| 16%
| Medium and in many cases, could be improved
+
| 6%
| Relatively short catch seasons, with sales over a longer period, makes the
+
| 10%
industry vulnerable for exchange-rate risk
+
| 24%
| Relatively well distributed by selecting numbers of buyers to spread the risk
+
| 13%
| Relatively short season; annual quotas decisions unpredictable; focused primarily on existing markets
+
| 16%
 
|-
 
|-
| Degree of processing
+
| Holland
| High degree of automation
+
| 8%
* Capital intensive
+
| 7%
* Consolidation of processing Fillets and butterflied fillets has been increasing and is currently around 50%.
+
| 8%
| High degree of automation
+
| 13%
* Capital intensive
+
| 11%
*Consolidation of processing Fillets and butterflied fillets have been  relatively stable at around 40 %
+
| 12%
for the last five years.
 
| The production seems to in two main sections that  is Whole unprocessed herring and the end markets with
 
prepared or preserved products. The biggest share or around 70% of the volume is whole frozen.
 
Fillets counts for around 9% of the volume
 
* Around 20% of the volume goes to prepared or preserved markets (around 40% of the value)
 
| Low level of automation;
 
Value of the product is increasing as Canadian quotas decrease Fish are processed more in Canada instead of
 
exporting fish for further processing abroad Minimum processing requirement makes processing on sea impossible
 
 
|-
 
|-
| Flow of raw material
+
| Norway
| Fishing and processing done in harmony by VICs based on
+
| 2%
* Quota status
+
| 6%
* Coordination of landings with processing capacity within each season
+
| 5%
| Raw material flow governed through first-hand auction. Vessels may have to travel
+
| 2%
2 days extra to reach the highest bidder
+
| 5%
| Through the auction markets and some degree of coordination with buyers
+
| 4%
| Depending on size of boats and fishing grounds. Off shore vessels
 
are not as bound to location Landing obligation and minimum processing requirements make location of
 
production important to be close to landing stations
 
 
|-
 
|-
| Structure of the industry
+
| UK
| Almost completely vertical integrated industry.
+
| 2%
Small share of catch done by independent small boats Limited competition within the pelagic
+
| 13%
(herring) sector due to consolidation
+
| 5%
* Raises questions about how this affects product mix and development?
+
| 1%
| No vertical integration.
+
| 8%
High capacity in processing and strong competition between processors.
+
| 3%
| No vertical integration.
 
High capacity in processing and strong competition between processors.
 
| The industry is split into two main sector inshore fleet and offshore fleet.
 
Approximately 50-60% of landed volume and value is by the inshore fleet <19.8m
 
 
|-
 
|-
| Location
+
| Sweden
| Economics of scale and scope
+
| 6%
* Need to have one location highly focussed on processing of  fillets, freezingand meal production
+
| 3%
| Economics of scale and scope
+
| 4%
* An advantage to have one location with both freezing and meal and oil production
+
| 3%
| Economics of scale and scope
+
| 3%
* An advantage to have one location with both freezing and meal and oil production
+
| 3%
| Inshore fleet has limits of fishing ground depending on boat size
+
|-
|-
+
| EU28
| Employment
+
| 97%
| Seasonality and fluctuation in catches between years affects required employees
+
| 94%
- emphasis on automation
+
| 90%
| Highly seasonal production Highly automated production with fewer employees Mainly
+
| 97%
seasonal, foreign labour
+
| 94%
| Highly seasonal fishing
+
| 91%
| Rather low degree of automation production
+
|-
For the majority of labour force in the NL fishery the industry is regarded as highly seasonal
+
| EEA
and is augmented by secondary income. Labour for the harvesting vessels and
+
| 100%
processing facilities are required for short periods of time with individuals either relying on
+
| 100%
employment assistance programs or having to find alternative employment when the fishing season is closed
+
| 95%
 +
| 99%
 +
| 99%
 +
| 95%
 
|}
 
|}
  
====Price settling mechanism====
+
*EU is the main market for the products purchasing 90-97% of the products.  
 
 
* Price of herring in Iceland is decided by the Official Bureau of Ex-Vessel Fish Prices (Verðlagstofu Skiptaverðs).
 
** The price is decided monthly, where the set-price is changed
 
according to changes in the market price, sometimes with a
 
considerable delay.
 
** This price is not used in any transactions other than calculating the
 
vessel crews ́ wages (based on a share system).
 
** Historically the price was determined by the market price for fish oil
 
and meal.
 
** As the importance of herring to human consumptions has grown,
 
this has changed and the Bureau of Ex Vessel Fish Price now also
 
decides the price for whole herring for freezing.
 
** The quantity behind the price is however very limited so the
 
price for fish meal and oil is still the price that is used by the
 
industry
 
* Norwegian herring is sold through the Norwegian pelagic auction, Europe’s
 
largest pelagic fish auction, with an annual turnover of approximately 1.5
 
million tonnes at a value of almost NOK 9 billion (€ 966 million).
 
** The auction is an electronic auction without physical inspections of
 
products and is based on the first-price sealed-bid method
 
** There is a minimum price in the auction, set at 80 % of the average
 
for all sales of the species for the last two weeks
 
** The first-hand sale of fish in Norway is legally protected through the
 
raw fish act and organized through sales organizations with
 
exclusive rights for co-ordinating the first-hand sale of fish
 
** The Norwegian pelagic auction was established in the 1970s and is
 
owned and operated by Norges Sildesalgslag (NSS), the current
 
sales organization for pelagic fishermen in Norway.
 
** There are some firms owning both fleet and processing capacity in
 
the herring sector, but the auction limits any real vertical integration
 
** There are two main prices in Norway for consumption, and for meal
 
and oil as shown in Figure 30. The quantity in meal and oil is very
 
limited so the consumption price will be used in the comparison.
 
 
 
[[File:D34_fig_30.png|center|Figure 30]]
 
''Figure 30. Herring price and volume in Norway 2001 to 2017''
 
  
* Danish herring is also offered at the auction of “Norges Sildesalgslag.” The
+
The access to the common market is a key (no tariffs) as well as short logistic routes.
Norwegian processors as well as Danish processors buy directly via this
 
auction.
 
** Around 90% of the herring goes through the auction of “Norges
 
Sildesalgslag.”
 
** The rest or 10% is sold through the Danish fish auctions (Ministry of
 
Environment and Food.
 
** In many cases there are some agreement or coordination between
 
the vessel and a processer about deliverance of a certain amount at
 
a certain time.
 
** Even when coordination takes place, the current price at the
 
auction of Norges Sildesalgslag is the basis for negotiations
 
about possible bonus for deliverance.
 
** The market is not fully reflecting the highest quality of herring. In
 
general, the quality of purse seine caught herring is higher than
 
trawl caught herring, as the quality of herring caught by trawl
 
depends of trawl time, and there are pressure risks.
 
* In Newfoundland first hand price is negotiated annually between the
 
harvesters and the processors with an average price per kilogram
 
determined in advance of the season; the negotiated price is subjected to
 
change throughout the season. Unlike other fisheries, the FFAW (the union
 
representing the harvesters and processors) are not actively engaged in
 
the price negotiations for herring.
 
  
Price development in the comparisons countries is expressed in Fig 12. Price was
+
*High stability in customer base indicating loyalty between supplier and  
just available from Canada from 2006 to 2008 and from 2014 to 2017.
 
  
[[File:D34_fig_31.png|center|Figure 31]]
+
buyer. Germany is by far the biggest market not only for the commodities but also taking the largest share of the value-added products
''Figure 31. Price development in Norway, Iceland and Denmark 2001 to 2017; Canada 2006-2008 and 2014-2017.''
 
  
* There is a huge difference between the price paid in Iceland and the
+
''Table 4. Top buyers (based on value) each year for Newfoundland herring products (as share of herring export value, excluding meal and oil)''
consumption price in Norway and Denmark.
 
* The price in Canada is always the lowest (for the comparison years).
 
** Price varies between region in Canada and the herring receive the
 
lowest price of the region in Newfoundland.
 
*There is not much evidence of the role of the auction markets to pay for
 
quality, or according to the fishing gear as all herring in Norway is caught
 
in purse seine
 
** According to unconfirmed personal communication the auction
 
market is not fully reflecting the highest quality of herring.
 
 
 
=====Summary of main influencing factors regarding the price settling mechanism=====
 
  
 
{| class="wikitable" style="width: 100%;"
 
{| class="wikitable" style="width: 100%;"
 
|-
 
|-
! Factor
+
! Country
! Iceland
+
! 2011
! Norway
+
! 2012
! Denmark
+
! 2013
! Newfoundland
+
! 2014
 +
! 2015
 +
! 2016
 
|-
 
|-
| Price settling
+
| United States
| Price settling committee deciding price.
+
| 83%
Less than 1% goes through auction markets
+
| 53%
| Auction market
+
| 82%
| Auction market
+
| 53%
| Negotiated annually and subject to change within a season
+
| 64%
 +
| 64%
 
|-
 
|-
| Market activities
+
| Poland
| Limited
+
| 2%
| High
+
| &nbsp;
| High
+
| &nbsp;
| Limited
+
| 16%
 +
| 15%
 +
| 15%
 
|-
 
|-
| Transparency in price settling
+
| Lithuania
| Limited
+
| &nbsp;
| High (Auction market)
+
| &nbsp;
| Auction market
+
| &nbsp;
| Limited
+
| &nbsp;
 +
| 5%
 +
| 2%
 +
|-
 +
| C´ote d´Ivory
 +
| &nbsp;
 +
| &nbsp;
 +
| &nbsp;
 +
| &nbsp;
 +
| 3%
 +
| &nbsp;
 
|-
 
|-
| Dynamic of the
+
| Germany
price settling mechanism
+
| &nbsp;
| Limited
+
| &nbsp;
| High
+
| &nbsp;
| High
+
| &nbsp;
| Low
+
| 6%
 +
| &nbsp;
 
|-
 
|-
| Different price according to fishing gear
+
| Ukraine
| None
+
| &nbsp;
| Yes (but almost everything is caught by purse seine)
+
| &nbsp;
| Undetermined
+
| &nbsp;
|Undetermined
+
| &nbsp;
 +
| &nbsp;
 +
| 6%
 
|-
 
|-
| Quality
+
| Japan
| Good, and has improved with time due to higher RSW-capacity of vessels
+
| 2%
| Very good, minimal variation.
+
| 13%
Quality has increased with time by better catch  handling and higher RSW-capacity
+
| 2%
| Good, and have improved with time by higher RSW-capacity
+
| &nbsp;
| Dependent on the quality of the flesh and the fat content; seasonal variance
+
| &nbsp;
 +
| 3%
 
|-
 
|-
| Timing
+
| South Africa
| Strong seasonal variation
+
| &nbsp;
| Strong seasonal variation
+
| &nbsp;
| Strong seasonal variation
+
| &nbsp;
| Strong seasonal variation
+
| 4%
 +
| &nbsp;
 +
| 2%
 +
|-
 +
| China
 +
| 3%
 +
| &nbsp;
 +
| &nbsp;
 +
| &nbsp;
 +
| &nbsp;
 +
| &nbsp;
 +
|-
 +
| Nigeria
 +
| 3%
 +
| 13%
 +
| 3%
 +
| &nbsp;
 +
| &nbsp;
 +
| &nbsp;
 +
|-
 +
| Georgia
 +
| &nbsp;
 +
| 5%
 +
| 3%
 +
| &nbsp;
 +
| &nbsp;
 +
| &nbsp;
 +
|-
 +
| Russian Federation
 +
| &nbsp;
 +
| 6%
 +
| &nbsp;
 +
| 18%
 +
| &nbsp;
 +
| &nbsp;
 +
|-
 +
| Egypt
 +
| &nbsp;
 +
| &nbsp;
 +
| 3%
 +
| &nbsp;
 +
| &nbsp;
 +
| &nbsp;
 
|}
 
|}
  
====Fishing====
+
*USA purchases almost 80% of the products. Easy access routes favour
  
=====Fishing gear=====
+
products from Canada
  
Norwegian catch all the herring in purse seine that is believed to deliver
+
*Most of the remainder of the products are exported to East Europe.  
better quality of raw material than the pelagic trawl.
 
  
* Icelandic pelagic vessel are increasingly using pelagic trawl in catching the
+
====== Value creation ======
herring as can be seen from below figure where the trawl used for 90% of
 
the catch during the last 3 years.
 
* The NL/Canadian herring fishery are using a combination of fixed and
 
mobile gear (purse seine) to capture herring; regulations governing the use
 
of each gear type and the region where they can be used.
 
  
[[File:D34_fig_32.png|center|Figure 32]]
+
The below figure shows the value creation within each country based on the total export value for all the herring food products. As it was difficult to obtain accurate information on the total quantity and value of herring meal and oil produced within each country, feed products (meal and oil) are excluded in this comparison and the focus is on exported goods for food purposes.
''Figure 32. Use of purse seine and pelagic trawl in Fishing herring in Iceland 2005 to 2016''
 
  
* The biggest change in the fishing of herring is the improved cooling system
+
[[File:D34 fig 28.png|center|Figure 28]] ''Figure 28. Value creation in euro/kg of export value of herring products from Iceland, Norway, Denmark and Newfoundland''
in the vessel by the introduction of fresh chilled (RSW) on board the vessel.
+
 
** In Iceland this changed the industry in the sense that more of the
+
*Value creation has increased with time mainly due to price increases of  
herring is processed on land instead of frozen at sea as can been
+
 
seen in Figure 33.
+
herring products as herring quotas have been in steep decline from 2009 until 2017.
 +
 
 +
*Similar value creation is observed in all the countries
 +
*The value creation within Newfoundland seems to be increasing in the last
  
[[File:D34_fig_33.png|center|Figure 33]]
+
few years, possibly because of their focus on final consumer goods
''Figure 33. Herring landings 1982 to 2016 – frozen at sea or domestic processing''
 
  
=====Performance and profitability=====
+
===== Processing =====
  
In Figure 34 the profit before interest rates and tax (EBIT) is shown for pelagic
+
====== Profitability and performance ======
fishing in Iceland and two vessel groups from Norway, deep sea and costal fishing
 
of pelagic species
 
  
[[File:D34_fig_34.png|center|Figure 34]]
+
Profitability figures for the processing sector are just available for Norway and Iceland. The figure for Norway is for the pelagic processing mainly herring and mackerel. The only separation in Iceland is the meal production of pelagic species as whole. The production of frozen herring is included in the profitability figure for the whole freezing sector, both demersal and pelagic. Hence, the profitability comparison is limited. Below is comparison of profitability in the processing industry in Iceland and Norway based on EBIT (Earnings Before Interest and Taxes) as share of revenue.
''Figure 34. EBIT as share of revenue for pelagic fishing in Norway and Iceland 1998 to 2015.''
 
  
* The profit is similar between the fishing methods but slightly higher in
+
[[File:D34 fig 29.png|center|Figure 29]] ''Figure 29. EBIT as share of revenue in Iceland and Norway 1997 to 2015''
Norway. The trend line show that the profit has been increasing faster in
 
Iceland in recent years than Norway.
 
* The highest profit is in deep sea fishing in Norway, which varies between
 
10 to 20% of revenue.
 
* There is no available information about profitability in the industry in
 
Newfoundland.
 
* In Denmark information about profitability is at company level and not
 
comparable with the sectoral analysis in Iceland and Norway
 
  
=====Summary of main influencing factors regarding fishing=====
+
*The profitability in processing is higher in Iceland than Norway in most
  
{| class="wikitable" style="width: 100%;"
+
cases.
|-
+
 
! Factor
+
*The profitability as EBIT in Norwegian processing is very low or below 5% in
! Iceland
+
 
 +
most years while the EBIT in Iceland has been over 15% from about 2008.
 +
 
 +
*Profitability for meal and oil production yield an EBIT of around 10&nbsp;% in
 +
 
 +
Norway. This industry bases its production on capelin, blue whiting and rest raw material from herring. The amount of whole herring used for meal and oil is negligible.
 +
 
 +
===== Summary of main influencing factors regarding markets- and production development =====
 +
 
 +
{| class="wikitable" style="width: 100%;"
 +
|-
 +
! Factor
 +
! Iceland
 
! Norway
 
! Norway
 
! Denmark
 
! Denmark
 
! Newfoundland
 
! Newfoundland
 
|-
 
|-
| Profitability
+
| Strategy
| Medium
+
| Vertical integrated companies focusing on value creation and control of raw material
| High
+
flow (inside the seasons)
| ?
 
| ?
 
|-
 
| Productivity
 
| Productivity has increased because of more automation,
 
both in fishing and especially on-land processing of seafood
 
| Productivity has increased because of more automation, both in
 
fishing and especially on-land processing of seafood
 
| Productivity has increasedbecause of more automation, both in
 
fishing and especially on-land processing of seafood
 
| Rather low degree of automation production
 
For the majority of labour force in the NL fishery the industry is regarded as highly seasonal
 
and is augmented by secondary income.
 
|-
 
| Processing
 
| Changes from processing on sea to processing on land, where utilization is
 
better (better filleting yield) and promotes better use of by-products creating more value from each fish.
 
Cooling - Longer fishing trips – you can catch good fish further out at sea; seasonality
 
| Increased share to human consumption (reached 100 % around 2000) Share of processing now stable at around 40 %
 
| Mixture of whole export for further processing abroad or as prepared and preserved
 
that is more in consumer packing.
 
| All landed processedMajority of Atlantic herring is exported Small volume is sold or used
 
within Canada as bait or for fishmeal. Food exports are typically in the form of primary or
 
secondary processed products (e.g. whole fresh/chilled/frozen, frozen fillets, smoked, salted or in
 
brine [not dried or smoked], prepared or preserved whole or in pieces).
 
Some of these products (e.g. first stage marinades) are further processed in the United States
 
and then re-imported back into Canada
 
|}
 
  
====Consolidation====
+
| Auction markets limits vertical integration.
 +
Strong focus on large-scale efficient production.
  
One way of expressing consolidation in the seafood sector in different countries is
+
| Auction markets limits vertical integration.  
to calculate HHI or Herfindahl, Hirschman index which for the seafood sector can
+
Strong focus on large-scale efficient production.
be calculated by summing up the squared quota shares of the firms in question.
 
The index value is found by the sum of the squared market shares of all firms (N):
 
and can be expressed as a normalized figure (0 ≤ HHI ≤ 1), or taking numbers
 
between 5 and 10,000, for whether market shares are expressed in percentages
 
or rates.
 
  
For a company with 100 per cent market share the value will be 10,000 (or
+
| Small degree of vertical integration;
corresponding 1), while for a market with 10 firms and 10 per cent market share
+
recent year increasing focus on secondary processing and higher valued product forms instead of bait or zoo feed
each the value will be 1,000 or 0.1.
 
  
* An H below 0.01 (or 100) indicates a highly competitive industry.
+
|-
* An H below 0.15 (or 1,500) indicates a concentrated industry.
+
| Marketing
* An H above an H between 0.15 to 0.25 (or 1,500 to 2,500) indicates
+
| Main countries that buy herring from Iceland vary a lot between years.  
moderate concentration.
+
Indicating spot markets and always going for highest price?
* 0.25 (above 2,500) indicates high concentration.
 
Other way to express this consolidation is to calculate the concentration ratio for
 
the biggest companies. For Iceland this is done for the biggest (CR1), the five
 
biggest (CR5) and the ten biggest (CR10).
 
  
=====Iceland=====
+
| Stable markets. Mostly intermediate products for further processing in market countries
 +
| Mixture of B2B raw material commodity and consumers packing
 +
| Stable markets as US is largest buyer; marketing done directly by processing companies/retailers; main
 +
countries relatively consistent over time
  
''Table 5. Concentration calculation for Iceland the years 2000 and 2017''
 
{| class="wikitable" style="width: 100%;"
 
 
|-
 
|-
!
+
| Risk in
! colspan="3" | 2000
+
marketing
! colspan="4" | 2000
+
 
 +
| Medium and in many cases, could be improved
 +
| Relatively short catch seasons, with sales over a longer period, makes the
 +
industry vulnerable for exchange-rate risk
 +
 
 +
| Relatively well distributed by selecting numbers of buyers to spread the risk
 +
| Relatively short season; annual quotas decisions unpredictable; focused primarily on existing markets
 +
|-
 +
| Degree of processing
 +
| High degree of automation
 +
*Capital intensive
 +
*Consolidation of processing Fillets and butterflied fillets has been increasing and is currently around 50%.
 +
 
 +
| High degree of automation
 +
*Capital intensive
 +
*Consolidation of processing Fillets and butterflied fillets have been relatively stable at around 40&nbsp;%
 +
 
 +
for the last five years.
 +
 
 +
| The production seems to in two main sections that is Whole unprocessed herring and the end markets with
 +
prepared or preserved products. The biggest share or around 70% of the volume is whole frozen. Fillets counts for around 9% of the volume
 +
 
 +
*Around 20% of the volume goes to prepared or preserved markets (around 40% of the value)
 +
 
 +
| Low level of automation;
 +
Value of the product is increasing as Canadian quotas decrease Fish are processed more in Canada instead of exporting fish for further processing abroad Minimum processing requirement makes processing on sea impossible
 +
 
 
|-
 
|-
!
+
| Flow of raw material
! Herring
+
| Fishing and processing done in harmony by VICs based on
! Capelin
+
*Quota status
! Blue Whiting
+
*Coordination of landings with processing capacity within each season
! Herring
+
 
! Capelin
+
| Raw material flow governed through first-hand auction. Vessels may have to travel
! Blue Whiting
+
2 days extra to reach the highest bidder
! Mackerel
+
 
 +
| Through the auction markets and some degree of coordination with buyers
 +
| Depending on size of boats and fishing grounds. Off shore vessels
 +
are not as bound to location Landing obligation and minimum processing requirements make location of production important to be close to landing stations
 +
 
 
|-
 
|-
| Number of vessels
+
| Structure of the industry
| 36
+
| Almost completely vertical integrated industry.
| 41
+
Small share of catch done by independent small boats Limited competition within the pelagic (herring) sector due to consolidation
| 19
+
 
| 14
+
*Raises questions about how this affects product mix and development?
| 12
+
 
| 15
+
| No vertical integration.
| 67
+
High capacity in processing and strong competition between processors.
 +
 
 +
| No vertical integration.
 +
High capacity in processing and strong competition between processors.
 +
 
 +
| The industry is split into two main sector inshore fleet and offshore fleet.
 +
Approximately 50-60% of landed volume and value is by the inshore fleet <19.8m
 +
 
 
|-
 
|-
| Concentration Ratios
+
| Location
|
+
| Economics of scale and scope
|
+
*Need to have one location highly focussed on processing of fillets, freezingand meal production
|
+
 
|
+
| Economics of scale and scope
|
+
*An advantage to have one location with both freezing and meal and oil production
|
+
 
|
+
| Economics of scale and scope
 +
*An advantage to have one location with both freezing and meal and oil production
 +
 
 +
| Inshore fleet has limits of fishing ground depending on boat size
 
|-
 
|-
| CR1
+
| Employment
| 9.2%
+
| Seasonality and fluctuation in catches between years affects required employees
| 9.6%
+
- emphasis on automation
| 21.7%
+
 
| 19.3%
+
| Highly seasonal production Highly automated production with fewer employees Mainly
| 19.7%
+
seasonal, foreign labour
| 18.6%
+
 
| 14.0%
+
| Highly seasonal fishing
|-
+
| Rather low degree of automation production
| CR4
+
For the majority of labour force in the NL fishery the industry is regarded as highly seasonal and is augmented by secondary income. Labour for the harvesting vessels and processing facilities are required for short periods of time with individuals either relying on employment assistance programs or having to find alternative employment when the fishing season is closed
| 28.9%
+
 
| 32.6%
+
|}
| 56.7%
+
 
| 62.3%
+
==== Price settling mechanism ====
| 58.3%
+
 
| 60.7%
+
*Price of herring in Iceland is decided by the Official Bureau of Ex-Vessel Fish Prices (Verðlagstofu Skiptaverðs).  
| 47.5%
+
**The price is decided monthly, where the set-price is changed 
|-
+
 
| CR5
+
according to changes in the market price, sometimes with a considerable delay.
| 34.1%
+
 
| 38.3%
+
*
| 63.7%
+
**This price is not used in any transactions other than calculating the 
| 70.1%
+
 
| 68.6%
+
vessel crews ́ wages (based on a share system).
| 69.0%
+
 
| 26.9%
+
*
|-
+
**Historically the price was determined by the market price for fish oil 
| CR10
+
 
| 54.1%
+
and meal.
| 55.2%
+
 
| 92.6%
+
*
| 97.3%
+
**As the importance of herring to human consumptions has grown, 
| 97.2%
+
 
| 96.5%
+
this has changed and the Bureau of Ex Vessel Fish Price now also decides the price for whole herring for freezing.
| 89.1%
+
 
|-
+
*
| HHI
+
**The quantity behind the price is however very limited so the 
| 0.0421
+
 
| 0.0459
+
price for fish meal and oil is still the price that is used by the industry
| 0.1205
+
 
| 0.1232
+
*Norwegian herring is sold through the Norwegian pelagic auction, Europe’s
| 0.1190
+
 
| 0.1221
+
largest pelagic fish auction, with an annual turnover of approximately 1.5 million tonnes at a value of almost NOK 9 billion (€ 966 million).
| 0.0902
+
 
|}
+
*
 +
**The auction is an electronic auction without physical inspections of 
 +
 
 +
products and is based on the first-price sealed-bid method
 +
 
 +
*
 +
**There is a minimum price in the auction, set at 80&nbsp;% of the average 
 +
 
 +
for all sales of the species for the last two weeks
 +
 
 +
*
 +
**The first-hand sale of fish in Norway is legally protected through the 
 +
 
 +
raw fish act and organized through sales organizations with exclusive rights for co-ordinating the first-hand sale of fish
 +
 
 +
*
 +
**The Norwegian pelagic auction was established in the 1970s and is 
 +
 
 +
owned and operated by Norges Sildesalgslag (NSS), the current sales organization for pelagic fishermen in Norway.
  
Data for the calculation is from the Directorate of Fisheries in Iceland.
+
*
Calculations based on catches by all vessels reporting pelagic catches in 2000
+
**There are some firms owning both fleet and processing capacity in  
and 2017. Concentration calculated by vessel operators; if an operator has many
 
vessels catches of them all are combined.
 
*It is clear that consolidation has been taking place in Iceland looking at the
 
CR index and biggest company CR1 is close to the quota celling of 20%
 
* The CR10 points toward great consolidation where the 10 biggest have
 
well over 95 % share of most pelagic species.
 
* The HHI index express that the industry has moved from being a
 
competitive industry to being an almost totally concentrated industry in
 
2017.
 
  
=====Norway=====
+
the herring sector, but the auction limits any real vertical integration
  
Concentration in the pelagic fisheries is very low, with 78 large purse seiner
+
*
taking part in the fisheries, and with no quota owner owning more than 2 % of
+
**There are two main prices in Norway for consumption, and for meal 
the quota.
 
  
Concentration in processing is much higher, as shown below. There was a
+
and oil as shown in Figure 30. The quantity in meal and oil is very limited so the consumption price will be used in the comparison.
decrease in concentration from the mid 90ies till around 2005, where more
 
companies established processing plants for pelagic species.
 
  
[[File:D34_fig_35.png|center|Figure 35]]
+
[[File:D34 fig 30.png|center|Figure 30]] ''Figure 30. Herring price and volume in Norway 2001 to 2017''
''Figure 35. Concentration in the Norwegian pelagic industry.''
 
  
The steepest increases in concentration was seen from 2006 to 2008, with the
+
*Danish herring is also offered at the auction of “Norges Sildesalgslag.” The
merger that shaped Norway Pelagic, with 16 processing facilities included. The
 
last steep increase is the result of the merger into Pelagia, also resulting in a
 
strong concentration of herring for both human consumption and oil and meal.
 
  
There is a certain tendency of an increased importance of this sector to the
+
Norwegian processors as well as Danish processors buy directly via this auction.
economy, as demonstrated in Fig 17 below. The increased contribution to the
 
economy coincides with an increased concentration (without any causal relation).
 
  
[[File:D34_fig_36.png|center|Figure 36]]
+
*
''Figure 36. Change in concentration and importance of the sector.''
+
**Around 90% of the herring goes through the auction of “Norges 
  
The pelagic industry does not seem to be occupying a larger share of the seafood
+
Sildesalgslag.
sector.
 
  
=====Denmark=====
+
*
 +
**The rest or 10% is sold through the Danish fish auctions (Ministry of 
  
''Table 1 Atlanto-Scandic herring – Danish ITQ quotas. No vessels, no of vessels with different owners/owner company* and HHI index.''
+
Environment and Food.
{| class="wikitable" style="width: 100%;"
+
 
|-
+
*
!
+
**In many cases there are some agreement or coordination between 
! 2008
+
 
! 2016
+
the vessel and a processer about deliverance of a certain amount at a certain time.
|-
+
 
| Danish TAC (tons)
+
*
| 44.535
+
**Even when coordination takes place, the current price at the 
| 20.919
+
 
|-
+
auction of Norges Sildesalgslag is the basis for negotiations about possible bonus for deliverance.
| No vessels with quota (ITQ)
+
 
| 23
+
*
| 13
+
**The market is not fully reflecting the highest quality of herring. In 
|-
+
 
| No individual owners*
+
general, the quality of purse seine caught herring is higher than trawl caught herring, as the quality of herring caught by trawl depends of trawl time, and there are pressure risks.
| 22
+
 
| 12
+
*In Newfoundland first hand price is negotiated annually between the
|-
+
 
| HHI-index
+
harvesters and the processors with an average price per kilogram determined in advance of the season; the negotiated price is subjected to change throughout the season. Unlike other fisheries, the FFAW (the union representing the harvesters and processors) are not actively engaged in the price negotiations for herring.
| 0,065
+
 
| 0,113
+
Price development in the comparisons countries is expressed in Fig 12. Price was just available from Canada from 2006 to 2008 and from 2014 to 2017.
|}
+
 
''*The specific ownership is not clear. The quotas are allocated to vessels, which can have different owner structure. Reduction only if same company owns two vessels.''
+
[[File:D34 fig 31.png|center|Figure 31]] ''Figure 31. Price development in Norway, Iceland and Denmark 2001 to 2017; Canada 2006-2008 and 2014-2017.''
 +
 
 +
*There is a huge difference between the price paid in Iceland and the
  
* The concentration rate for Danish Atlanto Scandic herring fisheries has increased – almost doubled. But it is still below a HHI-index of 0,15 and istherefore regarded as un-concentrated.
+
consumption price in Norway and Denmark.
  
''Table 2. North Sea herring– Danish ITQ quotas. No vessels, no of vessels with different owners/owner company* and HHI index.''
+
*The price in Canada is always the lowest (for the comparison years).  
{| class="wikitable" style="width: 100%;"
+
**Price varies between region in Canada and the herring receive the 
|-
+
 
!
+
lowest price of the region in Newfoundland.
! 2008
 
! 2016
 
|-
 
| Danish TAC (tons)
 
| 31.243
 
| 98.830
 
|-
 
| No vessels with quota (ITQ)
 
| 8
 
| 7
 
|-
 
| No individual owners*
 
| 7
 
| 7
 
|-
 
| HHI-index
 
| 0,146
 
| 0,182
 
|}
 
''*The specific ownership is not clear. The quotas are allocated to vessels, which can have different owner structure. Reduction only if same company owns two vessels.''
 
  
* The concentration of the Danish fisheries of North Sea herring has
+
*There is not much evidence of the role of the auction markets to pay for
increased. It had the top level to be characterised as an un-
 
concentrated market in 2008, but will be regarded as moderately
 
concentrated by 2017.
 
* A strong consolidation has taken place in the primary processing of
 
herring over the last 10-15 years. Unfortunately, there is no data
 
available on volumes of purchasing of herring by the Danish fish
 
processors to document this process in HHI-terms. At present (2017)
 
we have assessments from industry informants and managers that
 
the documented structure of high concentration of primary
 
processor in the herring with two large processors and a few minor
 
processors probably would give a score at the HHI-index around
 
0,40, which document a high concentration of production in the
 
Danish processing. As will be argued later, this is not problematic
 
from a competition point of view, as the regional (Norway, Germany)
 
competition is high.
 
  
=====Newfoundland=====
+
quality, or according to the fishing gear as all herring in Norway is caught in purse seine
  
The current fisheries management structure in NL, caps the number of licenses
+
*
an enterprise can acquire. Similarly, the fleet separation policy is also having an
+
**According to unconfirmed personal communication the auction 
impact on the level of concentration, the competitiveness and consolidation by
 
harvesters and processing companies. It is clear that there is no danger that
 
consolidation is high in Newfoundland and therefore the HHI index was not
 
calculated for Newfoundland
 
  
=====Summary of main influencing factors regarding concentration=====
+
market is not fully reflecting the highest quality of herring.
  
* According to CR4 it is clear that Norway had more concentration sector
+
===== Summary of main influencing factors regarding the price settling mechanism =====
than Iceland in the year 2000 where the Norwegian pelagic sector had CR4
 
49,1% while the Icelandic herring sector 28,9%.
 
* In 2017 the CR4 is up to 62,3% in herring for Iceland while it is 67,6% in
 
the pelagic sector in Norway. The difference is getting smaller and it is
 
clear that concentration within the sector in Iceland has been increasing
 
fast
 
* Although concentration has been increasing a lot in all the countries it is
 
argued that this is not problematic from a competition point of view, as the
 
pelagic products are mainly B2B commodity and the global/Nordic
 
competition is high as well as regional.
 
  
 
{| class="wikitable" style="width: 100%;"
 
{| class="wikitable" style="width: 100%;"
Line 3,106: Line 2,314:
 
! Newfoundland
 
! Newfoundland
 
|-
 
|-
| Restriction on consolidation
+
| Price settling
| 20% quota celling. The largest company is almost up to that limit.
+
| Price settling committee deciding price.  
| Very low consolidation in the fishing fleet (largest vessel owner at 2 %)
+
Less than 1% goes through auction markets
Increasing concentration in processing and exports
+
 
|
+
| Auction market
| Limits of stacking of licences
+
| Auction market
 +
| Negotiated annually and subject to change within a season
 
|-
 
|-
| HHI index
+
| Market activities
| 0,1232
+
| Limited
|
+
| High
| Quota
+
| High
0,113
+
| Limited
Fishing
 
0,182
 
| Not calculated but very low consolidation
 
 
|-
 
|-
| CR4
+
| Transparency in price settling
| 28.9% (2000)
+
| Limited
62.3% (2017)
+
| High (Auction market)
| 49.1% (2000)
+
| Auction market
67.6% (2015)
+
| Limited
|
+
|-
|
+
| Dynamic of the
 +
price settling mechanism
 +
 
 +
| Limited
 +
| High
 +
| High
 +
| Low
 +
|-
 +
| Different price according to fishing gear
 +
| None
 +
| Yes (but almost everything is caught by purse seine)
 +
| Undetermined
 +
| Undetermined
 +
|-
 +
| Quality
 +
| Good, and has improved with time due to higher RSW-capacity of vessels
 +
| Very good, minimal variation.  
 +
Quality has increased with time by better catch handling and higher RSW-capacity
 +
 
 +
| Good, and have improved with time by higher RSW-capacity
 +
| Dependent on the quality of the flesh and the fat content; seasonal variance
 +
|-
 +
| Timing
 +
| Strong seasonal variation
 +
| Strong seasonal variation
 +
| Strong seasonal variation
 +
| Strong seasonal variation
 
|}
 
|}
  
====Overall economic performance and competitiveness of the fisheries value chain====
+
==== Fishing ====
 +
 
 +
===== Fishing gear =====
 +
 
 +
Norwegian catch all the herring in purse seine that is believed to deliver better quality of raw material than the pelagic trawl.
  
Value chain dynamics depend heavily on the governmental form of the value
+
*Icelandic pelagic vessel are increasingly using pelagic trawl in catching the  
chain and the relationship within the value chain and the governance form.
 
Gereffi claims that many chains are characterised by a dominant party/parties
 
who determines the overall character of the chain. In the
 
same way the lead firm(s) becomes then responsible for upgrading activities
 
within individual links and coordinating interaction between links in the value
 
chain. Hence, the role of governance in the value chain is important and Gereffi
 
(1994) makes a distinction between two types of governance in value chain. In
 
the first buyers undertake coordination in the value chain (buyer driven
 
commodity chains) and the second are those in which producers play the key role
 
of coordination (producer-driven commodity chains). In fisheries that builds on
 
using natural resource it is interesting to analyse the different drive forces in the
 
value chains and the ways of coordinating activities in the value and how this is
 
impacting the results of the value chain.
 
  
=====Iceland=====
+
herring as can be seen from below figure where the trawl used for 90% of the catch during the last 3 years.
  
======Governmental form of the value chain======
+
*The NL/Canadian herring fishery are using a combination of fixed and
  
* The herring sector was until 1991 based on many individual boat owners
+
mobile gear (purse seine) to capture herring; regulations governing the use of each gear type and the region where they can be used.
that had the licences to catch herring. During that time the governmental
 
form was based on individual contracts and where the herring was caught.
 
  
* The period during 1991 to 2000 a lot of consolidation occurred as other
+
[[File:D34 fig 32.png|center|Figure 32]] ''Figure 32. Use of purse seine and pelagic trawl in Fishing herring in Iceland 2005 to 2016''
pelagic boats, mainly capelin boats were allowed to buy herring quota.
 
** In 2016 the real number of companies that hold herring quota is
 
only 11.
 
** One of them is not vertically integrated and operates only one
 
pelagic vessel.
 
** Value chain is governed through high power asymmetry as
 
hierarchy.
 
  
* The export part of the value chain has as well changed a lot during the last
+
*The biggest change in the fishing of herring is the improved cooling system
30 years.
 
** The dependency in the value chain varies a lot depending degree of
 
long term contract in their business instead of ad hoc sale.
 
** Frequent changes in export from Iceland suggest market relationship
 
based on price. Closing of markets in Russia affect this in the last
 
years.
 
* The degree of coordination in the value chain of herring is not as great as
 
the supplies can be stored for a long time as well being global b2b
 
commodities.
 
* The vertical integration has maintained a certain power balance in the
 
industry preventing the fishing sector from becoming too powerful.
 
  
======Drive force in the value chain======
+
in the vessel by the introduction of fresh chilled (RSW) on board the vessel.
  
* It is clear that the VICs companies holding majority of the quota are the
+
*
leading firm in the value chain of herring in Iceland.
+
**In Iceland this changed the industry in the sense that more of the  
* The driving force is economics of scale in fishing and production
 
* Synchronising fishing and production through the VICs.
 
* Consolidation brings in the danger of lack of internal competition in the
 
value chain.
 
** More or less all companies are focusing on the same strategy of
 
automation in production and focus on frozen fillets and butterflied
 
herring.
 
** Only one company focuses on salted herring
 
* Market price
 
  
=====Norway=====
+
herring is processed on land instead of frozen at sea as can been seen in Figure 33.
  
======Governmental Form======
+
[[File:D34 fig 33.png|center|Figure 33]] ''Figure 33. Herring landings 1982 to 2016 – frozen at sea or domestic processing''
  
The value chain for pelagic fish from Norway
+
===== Performance and profitability =====
  
[[File:D34_fig_37.png|center|Figure 37]]
+
In Figure 34 the profit before interest rates and tax (EBIT) is shown for pelagic fishing in Iceland and two vessel groups from Norway, deep sea and costal fishing of pelagic species
''Figure 37. The value chain for Norwegian herring, with three intermediate markets ''
 
  
Herring from Norway is sold in three intermediate markets, with quite different characteristics:
+
[[File:D34 fig 34.png|center|Figure 34]] ''Figure 34. EBIT as share of revenue for pelagic fishing in Norway and Iceland 1998 to 2015.''
  
# The Auction Market. Market relationship mainly based on price on the auction
+
*The profit is similar between the fishing methods but slightly higher in  
* Many sellers (more than hundred), but one sales point
 
* Around 25 buyers, huge landing and processing capacity
 
* First-price, sealed-bid auction
 
* Strong seasonal peaks
 
* Quality is variable and hard to control, but generally good
 
* Efficient auction and high capacity in processing: leads to high
 
profitability in the fleet, low profitability in processing
 
  
# Export of whole frozen or fillets. Relational form of governance, but still
+
Norway. The trend line show that the profit has been increasing faster in Iceland in recent years than Norway.
strong competition.
 
* Few buyers in each market, fish resold to many small producers in
 
some markets
 
* Contract or spot sales
 
  
# Relations are important, necessary for obtaining a sale, but not sufficient
+
*The highest profit is in deep sea fishing in Norway, which varies between
to gain a contract. Relations are not unique relations. All buyers will have
 
relations with several exporters, leaving price to determine the contract.
 
  
# Processed products. Relational form of governance.
+
10 to 20% of revenue.
* Supermarket chains: Strong buyers in consolidated retail markets
 
* Huge diversity of products
 
  
======Driving force in the value chain======
+
*There is no available information about profitability in the industry in
  
* Main traits/implications:
+
Newfoundland.
** Efficient auction leads to highest possible sustainable (sustainable
 
price: the price that brings down profitability to just above zero in
 
processing) prices: high profitability in the fleet, low in processing
 
** Very efficient primary processing in Norway, highly automated, with
 
large quantities produced at high, even and predictable quality
 
** This is an industry not very well suited to differentiated products, as
 
production is based on scale and standardisation, therefore unlikely
 
to move into highly diversified and small-scale retail markets
 
* The power in the value chain seems to be at both extremes in the value
 
chain. The fleet has a very strong position, as it holds a raw material in
 
high demand, and has an auction system able to command the highest
 
possible price for the herring.
 
** On the other extreme, supermarket chains act as very strong buyers
 
from processing firms, leaving processors and traders in the value
 
chain in a weak intermediate position.
 
* In Norway we have seen several mergers in an attempt to weaken the
 
competitive pressure, and thus to gain a higher margin, only to find that
 
other producers strengthen their position in the wake of the dominant firm.
 
* With almost all of the herring sales going through the first-hand auction,
 
the degree of vertical coordination is very low, even though some boat-
 
owners are major stakeholders in processing firms.
 
  
=====Denmark=====
+
*In Denmark information about profitability is at company level and not
  
======Governmental Form======
+
comparable with the sectoral analysis in Iceland and Norway
  
* Herring industry has been consolidated over the last 15 years.
+
===== Summary of main influencing factors regarding fishing =====
** Implementation of ITQ in 2003.
 
** Processing followed some year later but has reached a high level of
 
concentration today, which the assessed HHI-index around 0,4
 
illustrates.
 
* In general, the relation between the fleet and the primary processors has
 
been characterized by a market relation,
 
** with some degree of negotiation and coordination.
 
* Today the relation is formally market based – the vessels sell and land
 
where the price and income is best
 
** there is some coordination between the vessel and the processor.
 
** the relation thus can be characterized as modular, or in some cases
 
even relational, in the cases of strong coordination between the
 
processor and one or a few vessels.
 
* Regarding the processing and export market, the consolidation the last 15
 
and especially 10 years has influenced the governance structure as well.
 
* Earlier, the Danish herring-processing sector was characterised by a
 
relative few high number of primary processors.
 
** The relation was highly competitive at a market basis, while also
 
personal relations and personal knowledge of quality were of
 
importance.
 
* The relation between primary and secondary processor apparently has
 
characteristics from a modular or even relational coordination. Still the
 
relation is highly competitive and market based.
 
* Apparently, every link in the value chain are aware the risk of being
 
dependent of a supplier or customer.
 
** limit input or sales of products to 20-25 % for each customer.
 
** customers have a range of suppliers and can maintain the price
 
competition between these.
 
** This is also a market based limit for consolidation in the Danish
 
industry.
 
  
======Driving force in the value chain======
+
{| class="wikitable" style="width: 100%;"
 
+
|-
* Driving force is economics of scale in fishing and production
+
! Factor
* Market price in the relationship of fishing and production
+
! Iceland
** Certain level of synchronising fishing and production through
+
! Norway
relationship between the two sectors.
+
! Denmark
* Towards less emphasis on prepared and preserved products towards lower
+
! Newfoundland
processing stage as whole herring
+
|-
** Lack of competition?
+
| Profitability
** Too much consolidation?
+
| Medium
** Lack of synchronisation of fishing and production?
+
| High
 
+
| &nbsp;?
=====Newfoundland=====
+
| &nbsp;?
 
+
|-
======Governmental Form======
+
| Productivity
 +
| Productivity has increased because of more automation,
 +
both in fishing and especially on-land processing of seafood
 +
 
 +
| Productivity has increased because of more automation, both in  
 +
fishing and especially on-land processing of seafood
 +
 
 +
| Productivity has increasedbecause of more automation, both in
 +
fishing and especially on-land processing of seafood
 +
 
 +
| Rather low degree of automation production  
 +
For the majority of labour force in the NL fishery the industry is regarded as highly seasonal and is augmented by secondary income.
 +
 
 +
|-
 +
| Processing
 +
| Changes from processing on sea to processing on land, where utilization is
 +
better (better filleting yield) and promotes better use of by-products creating more value from each fish. Cooling - Longer fishing trips – you can catch good fish further out at sea; seasonality
 +
 
 +
| Increased share to human consumption (reached 100&nbsp;% around 2000) Share of processing now stable at around 40&nbsp;%
 +
| Mixture of whole export for further processing abroad or as prepared and preserved
 +
that is more in consumer packing.
 +
 
 +
| All landed processedMajority of Atlantic herring is exported Small volume is sold or used
 +
within Canada as bait or for fishmeal. Food exports are typically in the form of primary or secondary processed products (e.g. whole fresh/chilled/frozen, frozen fillets, smoked, salted or in brine [not dried or smoked], prepared or preserved whole or in pieces). Some of these products (e.g. first stage marinades) are further processed in the United States and then re-imported back into Canada
 +
 
 +
|}
 +
 
 +
==== Consolidation ====
 +
 
 +
One way of expressing consolidation in the seafood sector in different countries is to calculate HHI or Herfindahl, Hirschman index which for the seafood sector can be calculated by summing up the squared quota shares of the firms in question. The index value is found by the sum of the squared market shares of all firms (N): and can be expressed as a normalized figure (0 ≤ HHI ≤ 1), or taking numbers between 5 and 10,000, for whether market shares are expressed in percentages or rates.
 +
 
 +
For a company with 100 per cent market share the value will be 10,000 (or corresponding 1), while for a market with 10 firms and 10 per cent market share each the value will be 1,000 or 0.1.
 +
 
 +
*An H below 0.01 (or 100) indicates a highly competitive industry.
 +
*An H below 0.15 (or 1,500) indicates a concentrated industry.
 +
*An H above an H between 0.15 to 0.25 (or 1,500 to 2,500) indicates
 +
 
 +
moderate concentration.
  
* In Newfoundland it is possible to separate the fishing industry into two
+
*0.25 (above 2,500) indicates high concentration.  
sectors. First is the offshore sector that is vertical integrated in fishing,
 
processing and marketing and then inshore fleet, which is based up on
 
individual boat owners where vertical integration is banned.
 
* The boat owners and producers negotiate a price at the beginning of the
 
season which is subjected to change; unlike other fisheries the price is not
 
negotiated by the FFAW (The Fish, Food and Allied Workers Union) and
 
associations of producers. There are no auction markets and more or less
 
the negotiated price is used in the transaction.
 
* The relationship is in some way captive due to lack of active markets in
 
the relationship but in some cases, it could be regarded relational where
 
boat owner and producers have some contract about landing of cod and
 
other spices.
 
  
'''Power balance/structure'''
+
Other way to express this consolidation is to calculate the concentration ratio for the biggest companies. For Iceland this is done for the biggest (CR1), the five biggest (CR5) and the ten biggest (CR10).
  
* Due to the structure of the fisheries management system that is individual
+
===== Iceland =====
vessel has a TAC but has limited possibility of transferring fishing licenses
 
(stacking up) the power in the value chain lies in the hands of the
 
stakeholders that decides on the system.
 
* The stakeholders are the policymakers that is the politicians and the
 
parliament that decide on the system.
 
* Due to low quota in Newfoundland and more important species as lobster
 
and crab, cod have been looked up as filling and not major species in
 
fishing. With foreseeable increase in quota this can become problematic.
 
  
=====Summary of main influencing factors regarding concentration=====
+
''Table 5. Concentration calculation for Iceland the years 2000 and 2017''
  
 
{| class="wikitable" style="width: 100%;"
 
{| class="wikitable" style="width: 100%;"
 
|-
 
|-
! Factor
+
! &nbsp;
! Iceland
+
! colspan="3" | 2000
! Norway
+
! colspan="4" | 2000
! Denmark
+
|-
! Newfoundland
+
! &nbsp;
 +
! Herring
 +
! Capelin
 +
! Blue Whiting
 +
! Herring
 +
! Capelin
 +
! Blue Whiting
 +
! Mackerel
 
|-
 
|-
| Structure of the industry
+
| Number of vessels
| Vertical integrated rather large companies
+
| 36
| Two sectors: inshore smaller boats, but majority larger companies but not vertically integrated
+
| 41
|
+
| 19
| Two sectors Inshore with ban on vertical integration Offshore sector which is more or less  verticalintegrated
+
| 14
 +
| 12
 +
| 15
 +
| 67
 
|-
 
|-
| Vertical integrations
+
| Concentration Ratios
| High
+
| &nbsp;
| None
+
| &nbsp;
| None
+
| &nbsp;
| Low
+
| &nbsp;
 +
| &nbsp;
 +
| &nbsp;
 +
| &nbsp;
 
|-
 
|-
| Flow of raw material
+
| CR1
| Through VICs
+
| 9.2%
| Auction markets
+
| 9.6%
| Auction markets and some degree of coordination
+
| 21.7%
|
+
| 19.3%
 +
| 19.7%
 +
| 18.6%
 +
| 14.0%
 
|-
 
|-
| Governance
+
| CR4
| Hierarchy
+
| 28.9%
| Market based
+
| 32.6%
| Market based
+</