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Review of fish pricing system doesn't go far enough; processing cartel/lack of competition ignored

Below is SEA-NL's submission to the committee reviewing the way fish is priced for this province's inshore fleet. From our perspective, the legislated system stands in place of a free market, and the provincial government is duty-bound to ensure a fair market return to the fleet. That has not been happening.

The committee appointed by the provincial government to review the fish pricing system is expected to present a final report to the province on Oct. 12th. Winterton, Trinity Bay.



The ongoing review will not investigate the severe lack of competition in the processing sector or the the cartel-like control companies have over the inshore fleet.


For those reasons SEA-NL takes the stand that the limitations imposed by the province on the review committee will once again challenge the inshore fleet in moving forward.


Ryan Cleary,

Executive Director

SEA-NL


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Thursday, Oct. 5th, 2023

“I took delivery of my new boat, Lord of the Morning, from Bruce Attington in Nova Scotia in the year 2000. I fished 104,000 lbs of crab in the 3Ps area in September and November of 2000, and 3Ps cod. We were paid $2.75/lb for crab and $1.25/lb for cod by Fishery Products run by Vic Young in Fortune, NL. We got a rebate of 25¢/lb on crab (total price of $3/lb). Fuel was 28¢ per litre, and insurance for $400,000 coverage was $3,500. Today my quota is reduced to 6,900/lbs of cod at 40¢/lb to $60¢/lb and not the 200,000 lbs that I caught in 1999. My insurance is $10,500 for the same coverage and fuel is $2.12 a litre. In 23 years of fishing we have gone back to our grandfather days of fishing for the merchants.”

— Inshore enterprise owner Austin G. Nolan, Frenchman’s Cove, Fortune Bay. Oct. 4th, 2023.

Fish Pricing Review Committee,

Please accept SEA-NL’s submission to the committee tasked with reviewing this province’s fish price-setting system.

This submission begins with a quote from Austin Nolan of Frenchman’s Cove to hammer home the point that the inshore fleet was not consulted directly as part of this review of the provincial government’s fish pricing system — the 2nd review in as many years in which this province’s 3,008 licensed inshore harvesters were not consulted.

As well, the financial viability of an inshore enterprise and indeed the entire fleet is based on more than just the price of fish as agreed to by the union and processors, or set by the price-setting panel.

The severe lack of processing-sector competition has a huge impact, as does the cartel-like behaviour of the processing companies/buyers that operate in this province.

That control is afforded to them through the very Fishing Industry Collective Bargaining Act that dictates the pricing mechanism, and is reinforced federally by the exclusion of fish pricing from the Competition Act.


Yet, the parameters of this review as outlined under the Terms of Reference are too narrow to allow this committee to review the entirety of the factors that impact the pricing system.

Indeed, the issue is much bigger than the price of fish, and involves forces that jeopardize the very viability of the inshore fleet.

SEA-NL held a virtual Zoom meeting with inshore enterprise owners (members and non-members) on Thursday, Sept. 28th to discuss the ongoing review of the fish price-setting system, and all factors that impact the price of fish in Newfoundland and Labrador.

The turnout was low, with only 18 enterprise owners taking part, and many of them did not speak up.

At the same time, SEA-NL was contacted before, after, and during the Zoom call by dozens of inshore harvesters who said they did not participate in case their buyer learned what was said. They said they cannot afford not to be able to sell their catches.

That fear is real and widespread, an abuse of power ignored by the powers that be like so many other elephants on a wharf.

•••

“I’m on the Zoom meeting but won’t have anything to say just in case my buyer would find out what I had to say. I’m not a core fisherman so can’t afford not to be able to sell my lobster and cod.”

— An e-mail from an enterprise owner during the Zoom call.

Old Perlican, Trinity Bay.

FEEDBACK FROM ZOOM MEETING

The following bullet points summarize feedback from the Zoom call:

• The $1/lb fall price for codfish paid to the inshore fleet falls far short of the actual worth of the fish when prices of the individual parts are considered — from the tongue and skin to cheek and fillet. How can a fair market return for the inshore fleet be determined when the individual sections of the cod are sold to so many different buyers?


• Buyers stopped purchasing lobster at least twice this past season, although it wasn't clear whether the move was in retaliation for the snow crab tie-up, or in outright protest over lobster prices as set by the pricing formula. The misuse of power by companies over the inshore fleet — to buy or not to buy fish as a means to control boats/fleets — must be addressed.

• One licensed fisherman said he was “punished” by his buyer for speaking out on VOCM Open Line regarding the grading of his codfish. (The fisherman said the buyer would no longer purchase his cod.) In another documented case this past season an owner-operator was “punished” for a Facebook comment. (The buyer also stopped buying his cod.) There were still other cases where processors refused to buy a species such as cod from individual fishermen, for example, if they had sold their crab to another buyer.

• Licensed harvesters should be able to hold lobster in their own holding tanks to sell when the price is highest. They question what blocks them from building such tanks, and shipping lobster off-island themselves as part of a cooperative. Until this past season many inshore enterprise owners did not know they could sell fish at the wharf.

• Enterprise owners question why catches from the inshore fleet cannot be sold through Internet auctions similar to those held in Norway and Iceland. An electronic auction system — open to foreign and domestic buyers — would ensure complete transparency, and address the generational distrust between harvester/buyer.

• Enterprise owners make the point the Urner Barry seafood index only provides sales information into the U.S. market when there are rising seafood sales into Asia. For example, Undercurrent recently reported that live lobster exports from Canada to China have picked up dramatically — from 9,000 tonnes in 2012 to 74,000 tonnes this year. Seafood sales to Asia should be factored into any pricing formulas.

• Inshore enterprise owners should have the right to electronically vote on collective agreements (i.e. fish prices/formulas). Such electronic votes are held by fishery organizations in the Maritimes. Indeed, the vast majority of labour unions/associations around the world allow votes on collective agreements.

• Owner-operators say they should have the right to change buyers. Fishermen around the province say buyers/processors will not purchase fish from them if they’re already connected to another company. The restriction of movement impacts prices.

• While there is widespread evidence of collusion between companies, the exclusion of fish pricing from the federal Competition Act prevents authorities from investigating specific complaints of widespread anti-competitive behaviour.

• The price of fish makes no difference when processors/buyers can dictate to an enterprise owner the amount of product they are prepared to buy from them. This past season some owner-operators were tied to the wharf for weeks at a time, and then put on trip limits that were far less than DFO’s weekly limits. The price of cod could be $10/lb, but that’s irrelevant if there is no buyer.

• There are not enough snow crab processing facilities operating in the province. The huge increase in the reported amount of spoiled crab this year (300,000 lbs) over 2022 (60,000 lbs), combined with trip limits, fishing schedules, and almost 8,000 lbs of quota left in the water all point to a shortage of processing capacity.

• There was a time when processing companies could handle more than one species at a time, but that’s no longer the case.

• Many inshore enterprise owners are tied to processing companies through financial/controlling agreements that dictate where their catches are sold, as well as the price.

Greenspond, Bonavista Bay.

SEA-NL’S SUBMISSION

Failure to investigate widespread accusations of anti-competitive and punitive behaviour by the processing sector against the inshore fleet undermines the credibility of the fish pricing system.

While seafood markets around the world are beyond Newfoundland and Labrador’s control, the pricing system is solely in the hands of the provincial government.

That legislated system stands in place of a free and open market, and, as such, the province is duty-bound to ensure a fair market return to the inshore fleet.

Ultimately, a fair market return to the inshore fleet has yet to be defined, but if the bar is set at even 50% the inshore fleet is underpaid for most species under the final-offer selection model of fish pricing.

In August, SEA-NL compared DFO’s landed-value data with NL seafood prices on the Urner Barry seafood index and found the inshore fleet had a 9% share of the U.S. market price for cod; 29% share of the snow crab price (a huge drop from 2022’s 51% share); 43% share of the halibut price; and 58% of lobster.

Again, a fair market return must be defined, and steps taken to ensure it is delivered to both sides.

Despite repeated calls by the price-setting panel for fish prices to be based on actual market receipts, processors and buyers have refused to hand them over, and the province has, to date, refused to make them.

From SEA-NL’s perspective, any government fish price-setting system that does not include actual market receipts is open to manipulation.

Further, there’s evidence the processing sector is controlling inshore harvesters as much or more today than fish merchants ever did, and misusing government-issued licences to punish owner-operators who speak out publicly.

The final-offer selection system of fish pricing worked for years to ensure commercial fisheries run smoothly, but in recent times has been manipulated by the processing sector to tighten control over the inshore fleet.

LOBSTER FORMULA MAY BE OBSOLETE

In the case of lobster — the province’s second most valuable fishery after snow crab — the price is set by a long-standing agreed-to formula that the panel reiterated again this year may be obsolete.

The formula pays fishermen as if their catch is being sold soon after it’s caught when the lobster may be kept in holding tanks and sold later in the fall for higher prices.


Again, the province has a duty to ensure a fair market return to the inshore fleet by virtue of the fact it controls the pricing system.

If a fair market return cannot be ensured the formula should be discarded.

SHRIMP YIELD RATES NOT UP TO DATE

In the case of northern shrimp, the province’s third largest fishery, that fishery was last reviewed by the province 21 years ago, and basic seasonal yield rates are not even up to date.

Recommendations by the price-setting panel — including bringing in an up-to-date yield rate — should be followed up on by the provincial government to ensure fair market return.

PUNISHING BEHAVIOUR

Once the snow crab fishery finally got underway this year the inshore fleet faced trip limits and fishing schedules that had the potential to jeopardize safety and were generally seen as being used like a stick to punish inshore boats (particularly smaller ones) blamed for the tie-up.

Those actions cannot be condoned, and from SEA-NL’s perspective should result in a fine or loss of the processor’s/buyer’s licence.

Owner-operators in this province have complained for years that they cannot move freely between buyers/processors, and companies have been accused of operating as a cartel to keep prices down and the inshore boats controlled.

As well, fish pricing in this province is excluded from the federal Competition Act, which also stands in the way of a fair market return to the inshore fleet.

It is incumbent on the provincial government that controls the fish price-setting system to ensure the inshore fleet receives a fair market return from the sale of their fish, and action must be immediate when that is not happening.

SEA-NL’s final point surrounds the number of processing licenses in the province.

The huge increase in the amount of spoiled crab this year (300,000 lbs) over 2022 (60,000 lbs), combined with trip limits, fishing schedules, almost 8,000 lbs quota left in the water, as well as the delay with plants handling other species like cod all point to a shortage of processing capacity.

In 2010 there were 36 plants licensed to process snow crab in the province, compared with 25 last year.

At the same time, this province’s total allowable catch (TAC) for snow crab stood at 54,727 tonnes this year — more than double 2019 when the TAC hit its lowest point at 26,894 tonnes.

SEA-NL recommends the provincial government consider issuing new processing licenses, and lift the processing cap on other companies to ease pressure on the processing sector.

If there is no cap on the amount of snow crab a foreign country (Royal Greenland/Quin-Sea) can process in Newfoundland and Labrador, there should be no cap on local companies.

SEA-NL wishes the committee good luck with its review of the pricing system, realizing the limitations imposed by the provincial government will once again challenge the inshore fleet in moving forward.

Ryan Cleary,

Executive Director, SEA-NL

Seaward Enterprises Association of Newfoundland and Labrador (SEA-NL) is a professional, non-profit organization that serves as the distinct voice for licensed, independent owner-operator inshore fish harvesters. Visit sea-nl.ca to join. If you have any issues contact me at sea-nl@outlook.com or 709 682 4862.

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