Updated Fishery Value Data & Analysis

The State of Alaska has recently released preliminary estimates for final Bristol Bay sockeye prices harvested in the 2020 season and first wholesale sales of primary product forms through April 2021. These data allow for a reasonable approximation of total fishery value and allocation between the harvesting and processing sectors, and provide clues about ex-vessel pricing in 2021. BBRSDA has posted updated market information to its website pertaining to fishery value, revenue share by sector, S03T permit valuations, and export/wholesale/retail prices.

Ex-vessel price and value refers to payments made from processors to fishermen. First wholesale refers to sales made by processors to customers (who are not affiliated or owned by the processing company). Subtracting ex-vessel value from first wholesale sales value provides an estimate of how much revenue was retained by processors after paying fishermen. We refer to this retained revenue figure as Net Processing Revenue (NPR). Tracking these data allows fishermen to understand how the fishery’s value, and the share of that value, changes over time. This provides some level of market transparency for the fleet, a key concern of BBRSDA members. Unless noted otherwise, all of the figures quoted below refer specifically to harvests and sales of Bristol Bay sockeye salmon.

Even though 2020 may seem like irrelevant history with the 2021 season winding down, the financial performance of processors in the preceding year typically has a strong effect on competition and ex-vessel pricing in the following year. So, these data can provide some insights for fishermen regarding ex-vessel pricing.

First wholesale sales declined from $552 million to an estimated $523 million(1) during the 2020 sales season(2). However, because ex-vessel value declined from $343 million to $208 million(3) the Net Processing Revenue retained by processors apparently increased from $208 million following the 2019 season to an estimated $314 million following the 2020 season.

Final 2020 ex-vessel data released by the Alaska Department of Fish and Game (ADF&G) is still preliminary, but revisions after this point of the year are typically small and the final/average 2020 ex-vessel price of $1.04 appears to be a reasonable estimate after accounting for quality premiums and retro payments. Also, first wholesale sales are not available for May 2021, which is the last month in the 12-month sales season that runs from June through the following May. Data for May 2021 won’t be available until the fall, but sales in May are relatively small compared to most other months and so it is still possible to make a reasonable estimate about financial performance in the prior sales season.

In general, higher net processing revenue figures tend to result in higher prices in the following season. Logically, this makes sense. If buyers saw better financial performance, those market participants bring more working capital into the next year and will likely be more aggressive with their purchasing. Even though the 2020 Net Processing Revenue figure of $314 million is still an estimate at this point, it appears likely that 2020 returned a record NPR figure for Bristol Bay processors. The previous high-water mark was $265 million in 2017. Not coincidentally, the final ex-vessel price (for driftnet and setnet fishermen) averaged $1.60/lb. in 2018 and some driftnet fishermen realized final ex-vessel prices of slightly more than $1.90/lb. The base ex-vessel price in 2018 was $1.26/lb.

Considering this record Net Processing Revenue figure, along with high farmed salmon prices, a weaker dollar, increasing retail prices, and low expectations about sockeye harvests outside of Bristol Bay, it wouldn’t be surprising to see final 2021 ex-vessel prices come in even well above 2018. However, the pandemic and poor salmon runs elsewhere in Alaska could have a lingering, negative effect on sockeye pricing.

Bristol Bay processors have had higher operating costs in recent years due to the pandemic. These costs likely fall somewhere between 5-15 cents per round pound of sockeye. Some portion of that was reimbursed by federal government payments last year, but certainly not all costs were offset. In addition, the 2020 Alaska salmon season was probably the worst in at least three decades in areas outside of Bristol Bay. So, it’s likely that salmon operations outside of Bristol Bay performed quite poorly. These factors could have negative impacts on ex-vessel pricing in 2021.

Regardless of where the base ex-vessel price comes in this year, market conditions and processors’ financial performance (pertaining to Bristol Bay sockeye) suggests that the final ex-vessel price for Bristol Bay sockeye should end up being more competitive in 2021.

Outside of knowing this year’s price, the next biggest question posed by BBRSDA members is often what share of the fishery value did we get? Again, ex-vessel and first wholesale sales data can provide some answers about what share of fishery value was retained by fishermen in 2020 and previous years.

It is estimated that Bristol Bay fishermen retained 40 percent of first wholesale sockeye value generated in the 2020 sales season. This is a preliminary estimate, but we don’t expect the figure to change much once data is finalized later this year. Fishermen’s share of fishery value declined sharply in 2020 but was well above the running five-year average in 2018 and 2019. Over the past five years (2016-2020), fishermen have received 51 percent of first wholesale value for Bristol Bay sockeye.

It should be noted that the first wholesale data shown in the chart above does not include fish oil, meal, mince, or other ancillary products. However, it is likely that these products represent less than 3 percent of total first wholesale value for Bristol Bay sockeye. The Alaska Salmon Price Report data also does not include sales made by small processors who sell less than 1 million pounds of all Alaska salmon products, but ex-vessel purchases made by small processors are included in the ex-vessel value. This further understates the actual NPR figure, but again the difference is relatively minor as the vast majority of Bristol Bay sockeye is bought, processed, and sold by large processing companies. Regardless of these imperfections pertaining to calculating the true NPR for Bristol Bay sockeye, the data set is largely consistent over time and it is the trend of the data which is most important.

Therefore, it can be reasonably estimated that fishermen and processors have retained roughly equal shares of fishery value over the past five years, although the share for each varies from year to year. Both fishermen and processors have significant operating costs. These data refer to revenue (or revenue less payments for fish), and not profit.

Fishermen’s share of fishery value has generally increased over the past 15 years. This development indicates that ex-vessel values are being bid up in response to higher first wholesale sales and is consistent with what one would expect to see in most markets where producers are separate from downstream companies. When retail and wholesale prices increase faster than production costs, the value of underlying raw materials almost always increases whether it’s gasoline/oil or fillets/sockeye. Whether prices for Bristol Bay sockeye could‘ve been more competitive or whether fishermen should’ve realized a higher share of fishery value is a different question which these data cannot answer.

1) This figure is a preliminary estimate based on first wholesale sales from June 2020 through April 2021. Data for May 2021 is not yet available and has been estimated.

2) The sales season for Bristol Bay sockeye runs from June of the harvest year through May of the following year.

3) Final, average ex-vessel price of Bristol Bay sockeye is still preliminary. Final 2020 ex-vessel value of Bristol Bay sockeye has been calculated as the preliminary final price of $1.04 multiplied by a harvest of 200.2 million pounds.