SEAFOOD.COM NEWS by John Sackton — July 2, 2013 — It appears likely that Walmart’s need for MSC approved or FIP Russian pink salmon will vastly exceed the actual supply available this year.
First, in their recent letter to suppliers, Walmart acknowledged that there was only a single Fishery Improvement Project (FIP) approved by SFP, which they called a ‘very small project led by WWF for chum salmon in the Tugur River of Russia.’
They said that there were other ongoing discussions in both Russian and the US, but that at present none of these had resulted in publicly announced improvement projects.
Meanwhile, the available Russian MSC salmon is not sufficient to meet Walmart’s needs.
Industry estimates are that Walmart has ordered over 400 containers of Russian pink salmon from its Chinese suppliers. This represents about 8,000 tons of finished product.
Chinese suppliers would need to purchase 12,000 tons of H&G or semi-dressed pink salmon, which would be equivalent to 16,000 tons live weight.
We reviewed the best information on Russian pink salmon availability in MSC fisheries, and found a mis-match.
First, the Iturup fishery, in the Kurile Islands, is expected to produce about 7,000 tons of pink salmon this year. This was the first Russian fishery to be certified. MSC’s website wildly overstates the size of this fishery, claiming 37,000 tons of pinks, yet in recent years the figures have been 3,000 tons (2011), 15,000 tons (2012) and 7,000 tons (2013 quota).
The other major MSC fishery is on the North east of Sakhalin, and this fishery has a 2013 quota of 38,000 metric tons. However, even though this fishery is MSC certified, some of the largest processors are not part of the MSC client group.
As has happened in other jurisdictions, the first group of processors certified have resisted allowing other participants into the MSC process, trying to keep their competitive advantage. Despite efforts of these additional suppliers, no NGO has been able to provide a transparent and honest way for them to join the program. Instead, the reaction has been largely that this is up to the ‘locals’; leaving the original group in charge, but denying access to a significant amount of Sakhalin MSC certified pink salmon.
NGO's do not produce fish, and the lack of ability to force processors who are competitors to work together is another weak link in their efforts to provide certainty of supply.
According to Walmart policy, this salmon cannot enter the distribution chain as the companies do not have chain of custody certification, or permission to join the original client group.
As a result, a significant portion of the Sakhalin fishery will not be eligible under MSC chain of custody, despite the fact it is certified.
If we estimate then 7,000 tons from Iturup, and perhaps 15,000 tons from Sakhalin, and no further tonnage from “FIP” fisheries, that means that the total MSC supply chain may have about 22,000 tons of pink salmon live weight. That equates to 16,500 tons of H&G, and about 11,000 tons of finished fillets.
If Walmart has indeed asked for 8,000 tons of pink salmon fillets, that represents about 73% of the total available supply, by our estimates. Such a position is untenable, because other suppliers, such as High Liner, plus many European buyers – will all be seeking the same fish. If Walmart actually seeks to take over 70% of the available MSC pink salmon supply, this will lead to a bidding war and higher prices. This is the opposite of Walmart's aim for the Russian fishery, which was and is to establish a low global price for pink salmon. This is why they moved their sourcing away from Alaska in the first place.
This obviously creates an untenable situation for Walmart; for the MSC, and for suppliers.
First, the price of this fish will immediately be bid up, forcing Walmart to pay higher prices.
Secondly, the pressures to circumvent MSC chain of custody will be immense, as a significant portion of the fishery is outside the MSC chain of custody program. As a result, it will call into question the honesty of ‘MSC’ suppliers, unless extraordinary measures are taken to audit the Russian salmon supply chain.
Finally, it does not advance sustainability. Instead of focusing effort on the actual problems of illegal fishing, lack of knowledge about escapements for particular river systems, and the impacts on non-target species, the excessive demand for this fish creates incentives to ignore other requirements as well.
There is a famous ‘broken window’ theory of crime fighting which says paying attention to minor infractions – broken windows – helps control major infractions – serious crime like robberies and muggings. The same is true in the Russian fishery. If unreasonable pressures are placed on the MSC system, widespread cheating will ensue, and once such cheating is established, it is easy to cheat on other things as well – such as not reporting by-catch, illegal harvests etc.
The great irony of this problem is that none of these issues exist in Alaska, and the only reason Walmart is refusing to buy more Alaska pink salmon is because they have taken the judgments of their NGO partner over the actual track record of American fisheries management.
This policy will continue to have a negative impact – both hurting Walmart publicly with American consumers and politicians, and hurting the cause of sustainability as well.
Finally, Walmart has another problem with their largest Chinese supplier, Yihe Co. Multiple reports from China suggest this company is not operating in the same manner as in the past, with little work being done at its five contract plants, and a skeleton crew at the one plant it actually owns. Some have called the plant ‘closed.’
Even from the outside it can be seen that something is wrong with Yihe – not operating at the height of the season suggests a problem in either raw material, finance, or orders. Last year this company was a major supplier of pink salmon to Walmart. It is unclear they can fulfill that role this year.
All in all, Walmart has many business reasons for sticking with Alaska pink salmon, and simple path do to so, which is to recognize that the Alaska RFM certification and its long track record of successful fisheries management are in fact ‘equivalent’ to the MSC certifications that Walmart seeks.
This story originally appeared on Seafood.com, a subscription site. It is reprinted with permission.