November — The following is an excerpt from the Daily Press:
As the battle rages over menhaden — whether the population of this big little fish has declined to precipitous levels and over the potential impact of mandatory catch limits — the only menhaden processing plant on the Atlantic announced record revenues.
Omega Protein Corporation reported third-quarter revenues of $77.8 million, the "highest quarterly revenues in the company's history," according to president Bret Scholtes, who cited, in part, a "strong fish catch."
In addition, SEC filings show Omega's top five executives took home more than $13 million in compensation in the last two years.
Environmentalists concerned about the future of menhaden in the Chesapeake Bay and along the Eastern seaboard say it's evidence Omega is playing politics when it warns that deep catch limits could ruin the company, forcing it to shutter its Reedville processing plant and lay off hundreds.
"It seems kind of despicable that a company that seems to be doing so well fiscally would be claiming that doing the responsible thing to protect menhaden stock is going to put people in Virginia out of their livelihood," said Peter Baker of the Pew Environment Group in Massachusetts. "I think it's a false choice, and I think it's politically motivated and think it's unfortunate that people get caught in the middle."
But an Omega spokesman countered the company's record revenues don't necessarily translate to record profit, especially as costs increased and revenues were buoyed by strong pricing. The criticism is uninformed, he said.
"I think that's the view of someone who's never owned a business," said Ben Landry. "We have shareholders, and our duty is to maximize the resources that they've provided us. Executive compensation I don't think factors into fisheries management."
Read the full story on the Daily Press
Analysis: Environmental activists are seizing on a recent positive earnings report from Omega Protein, the largest company in the menhaden reduction industry, to argue that projected job losses from impending menhaden harvest cuts have been exaggerated for political effect. The claim, as it appears in the Newport News Daily Press (“Record revenues in menhaden as management battle brews”), ignores the most relevant issues currently facing menhaden management.
Peter Baker, Director of the Northeast Fisheries Program for the Pew Environment Group, is quoted as saying: "It seems kind of despicable that a company that seems to be doing so well fiscally would be claiming that doing the responsible thing to protect menhaden stock is going to put people in Virginia out of their livelihood. I think it's a false choice, and I think it's politically motivated and think it's unfortunate that people get caught in the middle." In accusing Omega Protein of presenting the public a false choice, Mr. Baker presents readers a red herring.
Focusing on revenues and executive compensation distracts from the central economic issue facing the fishery: the size and scope of the upcoming reductions in the menhaden harvest. Mr. Baker and Pew Environment are advocating an immediate 50 percent cut in landings. A cut of that magnitude is likely to devastate the fishery, no matter how healthy a company’s profit margin.
The menhaden fishery is critically important to the economic well-being of Virginia’s Northern Neck. An economic impact study by the Virginia Institute of Marine Science found the fishery employs around 250 people directly, many more indirectly, and contributes more than $80 million in economic output to the Northern Neck. Without the reduction fishery, employment in the region would decrease by 8 percent and economic output by 14 percent.
The discussion on quarterly revenues has no bearing on the central question of whether harvest reductions, let alone Pew’s preferred 50 percent cut, are scientifically justified.
As the article notes, the menhaden stock was found to be experiencing overfishing in its 2010 assessment, meaning that in 2008 (the last year of the assessment) fishing exceeded the ASMFC's designated mortality limit. But overfishing is actually a fairly rare occurrence in the recent history of the fishery: only twice in the 15 years between 1993 and 2008 and by small margins, such as 0.4 percent in 2008. Importantly, the 2010 assessment also found that menhaden are not overfished: this means the menhaden stock is producing enough eggs to sustain itself.
In 2011, the ASMFC adopted a new, more conservative baseline for determining overfishing going forward. Based on that new “reference point,” the ASMFC Menhaden Management Board determined that overfishing also occurred in 2011 based on harvest increases, the new reference point, and apparent lack of stock growth. Due to adoption of the new reference point and model uncertainty, no overfishing determinations have been made for 2009 and 2010.
Although briefly mentioned, the article does not delve into the uncertainties in menhaden data brought on by the 2012 menhaden stock assessment. The assessment is widely regarded as critically flawed. Because of consistent overestimations of fishing mortality and underestimations of population size, the ASMFC’s Menhaden Technical Committee determined it was not suitable for management advice. While, based on current reference points, the assessment was able to conclude with reasonable confidence that overfishing was occurring and the stock was not overfished, not much else is known about the current state of the stock that would be of use to the ASMFC fisheries managers who need to set new menhaden catch limits in December.
Enacting severe cuts on Atlantic menhaden now could lead to an economic disaster. It could also be considered bad management, with no solid science-based rationale for setting quotas and no recent, reliable stock assessment as reference. Distracting readers with a discussion of a company’s finances does not change that.