Your Business | The Processors' Side

Bristol Bay porcessors explain 2008 season limits

by Glenn Reed

Editor’s note: Glenn Reed is president of the Pacific Seafood Processors Association, a trade association that has, since 1914, represented seafood processors operating in Alaska. Next month, a rebuttal from fishermen.

As I write this in mid-August, the 2008 Bristol Bay sockeye season has just closed. It will take some time for all the facts and figures to come in and a full analysis to be done, but a lively discourse about the season is already underway on the docks, in the blogs, and elsewhere.

We look forward to participating in the ongoing review of the season and a meaningful dialogue about what went well, what could have gone better, and how everyone — fishermen, processors, communities, and the state — can maximize future benefits from the incredible Bristol Bay salmon resource.

With that goal in mind, we offer the following early observations from processors with long experience and deep commitment to the Bristol Bay salmon fishery.

First, as we all consider the processing needs and goals for Bristol Bay, it is important to keep in mind the unique characteristics of the salmon runs in the region and the extreme challenges they present for everyone involved.

These challenges include managing several of the world’s largest salmon runs that return virtually simultaneously to adjacent rivers — salmon runs that can vary dramatically in size from year to year; the impossibility of predicting when and (most significant to current debates) how “compressed” the peak of the run will be; and determining appropriate levels of capitalization and risk in such an unpredictable fishery.

In light of such enormous challenges, we should not lose sight of our collective successes. Together, Bristol Bay managers, harvesters, and processors put in nearly 28 million salmon over the last few weeks — a remarkable accomplishment.

Last December, ADF&G released its 2008 Bristol Bay sockeye salmon forecast. The release of the annual forecast triggers each sector’s process of gearing up for the season. Shortly after the release of the 2008 forecast, ADF&G conducted an expanded and earlier-than-usual “processing capacity survey” of major Bristol Bay processors to assess their plans for the season.

For the first time, in addition to annual capacity estimates, this year’s survey asked processors to estimate their daily processing capacity. The survey results estimated total processor capacity to be 1.698 million fish per day for 12 or more consecutive days.

As opposed to years when the peak of the run is spread over a longer period of time, the peak of the 2008 run was quite compressed. Due to an extraordinary effort to keep up with the influx of fish, 17.449 million fish were processed during the peak 10 days of the season, for a daily average that exceeded the daily capacity estimate from the survey. On the peak day (July 2), processors took in 2.575 million fish. During the highest days of the peak, processors were forced to use some limits or suspensions to avoid waste and ensure quality.

Both fishermen and processors have a very brief time in which to put in their season in Bristol Bay. We certainly understand that any limits on harvest are painful and frustrating for fishermen We too have made huge investments in this fishery and are impacted by escalating energy and other costs and by lost opportunity. We all benefit from harvesting, processing, and marketing as many high quality Bristol Bay salmon as feasible.

It is important to recognize that seafood processors in Bristol Bay have made, and are continuing to make, significant capital investments to increase the amount, quality, and variety of product forms their plants produce. In fact, daily production during the peak of the run has increased each year over the past five years. Average daily production during the 2008 peak was nearly 400,000 fish higher than in 2004.

As in past years, harvest limits were necessitated in 2008 by compacted run timing, not overall run size. For example, in 2006 the total harvest was slightly larger than this year (and 21 percent above the ’06 forecast), but the peak of that run was less compressed, processors were able to keep up with the flow of fish, and most companies imposed no limits. In 2008, limits were necessary for several days when the compressed peak exceeded daily processing capacity.

In any line of business, operations must be sized appropriately to stay in business. For one or more processors to expand their operations enough to ensure sufficient capacity to handle the highest conceivable peak days would require adding capacity that would go unused for all but those few possible
extraordinary days.

Overcapitalization causes businesses to fail. By way of analogy, let’s imagine you have a restaurant in a resort town. Your restaurant is closed most of the year, but does a fairly steady business during summer months. Even during those months the restaurant is not full for much of each day, but is usually quite busy at dinnertime and is well equipped to handle that level of business.

Some years, there is an influx of tourists for a few days over the 4th of July holiday, and the restaurant does not have enough space, staff, and food to handle the larger crowd that wants to eat there.

Would it be a sound business decision to double the size of your restaurant, staff, and stores of supplies to make sure you never have to turn a customer away, if or when a brief extra influx of customers should occur again sometime? Would you be able to stay in business very long if you made such decisions?
Some have suggested a foreign-flagged floating processor be allowed into Bristol Bay. At first glance that may seem like a simple, harmless approach, but the entry of foreign-flagged processors without long-term commitments to Bristol Bay could harm processors, fishermen, and the region.

It is important to note that Bristol Bay is already open to any U.S. enterprise, large or small, that wishes to come in to process salmon — as long as they are willing to participate “on a level playing field.” That is, they must follow the same rules and standards that govern operations of other processors (labor, food safety, and pollution regulations, etc.)

Processors do enter and exit this fishery. ADF&G records show 24 processors registered in the bay in 2001, and 39 in 2007. Would regulatory standards be lowered or un-enforced for foreign-flagged floaters to entice them in?

Further, could any standards be fully monitored and enforced on a foreign floater?

We welcome competition; it keeps our industry vibrant, innovative, and healthy. It is “competition” operating under different rules and with no long-term commitment to the bay that concerns us and should concern everyone.

Consider some of the risks: the possibility of poor quality or unsafe product entering world markets and jeopardizing the hard-won “Alaska Brand” for all Alaska seafood; the possibility of fishermen or processing workers not being paid or other labor laws not being enforced; loss of spin-off benefits that locally based plants provide to local governments and businesses.

All of us who rely on the Bristol Bay salmon fishery — fishermen, processors, local communities, and the state — are in this together. No one benefits from a “solution” that discourages processors with a long term commitment to the bay from continuing to invest and expand capacity, or that leads to overcapitalization and bankruptcies.

Encouraging well-considered, operational improvements and sound, long-term capital investments will best ensure that Bristol Bay will have a healthy processing industry to serve fishermen and benefit the region and the state for many years to come.

Pacific Seafood Processors Association is a trade association that has, since 1914, represented seafood processors operating in Alaska.