COVER STORY; Reasons to Be Cheerful

By McCRONE John

It is a grim time to be in the fishing business, thanks to a high dollar and fuel costs. But JOHN McCRONE finds surprising optimism in this Nelson-based industry.

Hands up all those who think the fishing industry is a rough, dirty business in steep economic decline?

There are the stories about the albatross snared by long-lines, dolphins caught in nets, sharks becoming an endangered species, the sea floor trawled to lifeless mud. The image is of an industry ruthlessly strip-mining the ocean’s assets.

It cannot go on, warn marine biologists like Boris Worm of Canada’s Dalhousie University, who claimed last November in the leading journal Science that a third of the world’s fishing grounds were already shot and there could be a complete collapse of seafood stocks by 2050 due to rampant over- fishing.

Closer to home, the woes of the New Zealand fishing fleet have also been making headlines. Since 2004, high fuel prices and a high dollar have seen many boats tied up and smaller “Dad and Dave” private operators pushed to the wall.

As the nation’s fishing capital — and indeed the largest fishing port in Australasia — Nelson has been hit particularly hard.

Locals say most of the small inshore fishing boats at Fisherman’s Wharf would be up for sale if anyone would have them.

Even the larger businesses, with deep-water boats and factory trawlers, have been hurting.

Charles Hufflett, managing director of Nelson tuna and swordfish long-lining specialist Solander, says the company’s main New Zealand vessel, the 51-metre Daniel Solander, has been lying idle for two years at the cost of 22 Nelson jobs.

Hufflett says it is just not economic to be at sea. There was a brief moment in mid-2006 when the dollar fell back and he started to get the Daniel Solander out of mothballs. But then oil did its latest jump and now it is a matter of waiting to see how this year goes.

It would be easy for outsiders to see fishing as a sunset industry, fast disappearing along with its favourite prey, the hoki, hake, squid, blue cod, orange roughy and snapper.

Yet while the industry certainly has its immediate problems, the long-term story seems surprisingly upbeat.

After all, New Zealand possesses the world’s seventh largest fishing ground. Then it has a world- leading quota system that has not only protected our fish stocks but created a secure foundation on which our biggest seafood firms, like Sealord, Talley’s and Sanford, have been able to build.

Last year, for example, Nelson’s Sealord broke $600 million in sales — or $1 billion once its many foreign joint ventures are taken into account — and is now ranked among the 15 top fishing businesses world-wide.

Sealord chief executive Doug McKay says with diversification and internationalisation, his company has reported two years of record profits.

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From page 3 McKay says Sealord’s plan is get out of just fish- catching, a low-margin business, and exploit its export know-how to become an international seafood processing and marketing chain.

Talley’s, a closely held family business headquartered in nearby Motueka, has likewise been using its fishing interests as a springboard to greater things. Director Andrew Talley says the intention is to leverage the firm’s expertise in food processing to create a frozen food empire. Talley’s already deals in ice cream and frozen vegetables and last year took a majority stake in Affco Holdings, the country’s third largest meat company.

Developing alongside the traditional ocean-fishing businesses are new aquaculture ventures, like mussel and salmon farming in the Marlborough Sounds. Mike Burrell, newly appointed chief executive of the New Zealand Aquaculture Council, says seafood cultivation has the potential to become as big a dollar-spinner as fishing over the next decade.

So industry insiders see a very different business, one with a bright and sustainable future based on premium exports — another Kiwi success story.

Sealord’s McKay says forget the dollar or diesel prices. Public misunderstanding is really the number one problem.

“If I was thinking about what puts our business at risk in the next 10 years, it isn’t the fishing stuff, the management of the resource. That’s all being done pretty well.

“Our biggest challenge is the perceptions out there in the community and the perceptions that are driving government decisions. That’s what I’m worried about.”

Mark Gibbs, a fisheries researcher at Nelson’s Cawthron Institute, says to understand the New Zealand fishing industry you have to know its history.

After some early sealing and whaling, the first pakeha settlers more or less turned their backs on the sea for the next hundred years, focusing all their attention on exploiting the land.

Frozen flounder was shipped to Britain in the 1880s, but fishing remained so small scale that for a long time the government had to restrict exports to ensure enough fish made it to the domestic market.

In the 1960s, Japanese and Russian factory trawlers “discovered” the abundant orange roughy, hoki and squid to be found off New Zealand shores. Gibbs says it was not unusual to stand on a beach and watch some foreign boat systematically dredging the waters just outside the three nautical mile limit.

In 1965, the territorial limit was extended to 12nm. However, this was widely ignored and in the early 1970s foreign vessels were still landing three times more fish than local boats.

Then in 1978, international treaties created 200nm Exclusive Economic Zones (EEZs) around countries. New Zealand, with no near neighbours to share with and able to claim the 200nm around Chatham, Campbell, Kermadec and other far-flung islands, ended up with one of the largest expanses of protected sea area of any nation.

Gibbs says the government of the day over-reacted; it subsidised a quick expansion of the Kiwi fishing fleet, resulting in too many boats operating under too few controls.

In 1986, a quota management system was introduced. Gibbs says that, in keeping with the Rogernomics era, New Zealand plumped for a radical, free-market approach to sustainability.

“Basically you’ve got two ways of managing fish stocks — input or output controls. With input controls you regulate the size of the nets, the number of boats, the days which you can fish. That’s the way most countries have tried to limit the catch and it’s not really worked very well.

“With output controls you just have a quota for how much of a particular species can be taken and then companies own shares of that quota.”

A quota system is more effective because it is absolute; it does not attempt to control catch levels in roundabout ways. However, it is also more expensive.

Gibbs says the fish have to be counted before a sensible quota can be set. Sending out a fisheries ship to count hoki can cost up to $2m. There are now 96 fish and seafood species covered and doing the proper research on something like the blue moki can exceed the commercial value of the catch.

Quotas also need to be policed — and paid for. Small trawler boats complain that paying to take a fisheries officer as an observer makes it not even worth going to sea.

Yet the quota system has given New Zealand a powerful tool to preserve its fish stocks, and one responsible for the reshaping of the industry itself. Talley says the quota system has completely changed the mentality of fishing companies. In the old days, it was a race to net the fish, every boat for itself. Fishing was like hunting.

Now the companies know in advance they have bought a guaranteed slice of any year’s allowable catch.

Talley says the fishing companies have in effect become farmers with secure property rights. And with the purchase of a fish quota being a capital investment that can take 20 or 30 years to pay back, the fishing industry now has every incentive to plan for the long term.

This is why the big companies have been so keen on the recent halving of the hoki quota, and why they have voluntarily imposed their own ban on bottom trawling over nearly a third of the EEZ.

Conservationists were suspicious that the industry was only giving up areas it could not fish productively anyway. But Talley says the ocean closures are completely representative of all the different kinds of fishing ground. It is now in the industry’s own financial self-interest to maintain steady fish levels.

Talley says this does not mean the industry is trying to preserve a virgin marine ecosystem. Just as agriculture has transformed the New Zealand landscape, so it should be expected that exploitation of the sea must create change. The only argument is that the change be balanced with other national interests and, of course, be sustainable.

Current fishing models say the most productive tactic is to fish a species like hoki down to around 30% of their natural levels. With more food to feed less mouths, growth rates will be faster and overall more fish can be caught.

However, marine biologists worry that once a fish population falls below a certain level, other species can creep in and steal their niche. They point out that North Atlantic cod has failed to bounce back from over-fishing, with dogfish taking their place in the food chain.

Talley admits that knowledge of our fisheries is still sketchy but the industry now errs on the side of caution. Big mistakes were made with orange roughy, but hoki has been better managed.

Quietly, the quota system has also been responsible for the industry’s rationalisation — the squeezing out of the small private boats. Cawthron’s Gibbs says New Zealand had far too many boats 10 years ago but it would have been politically impossible to take away the livelihoods of the “Dad and Dave” operators directly.

Quotas have the same effect. Every time fuel prices rise or fish prices fall, a few more had to sell their quota and leave the business. Sealord, Talley’s and Sanford hoover up the quota as it comes on the market — McKay says between the three they own around 65% of the total — and they are unlikely to be selling any of it back.

“The quota system has not just sorted out the fish stocks, it has proven to be very successful at sorting out the fishing fleet as well.”

Again, what seems to outsiders another symptom of the industry’s malaise — the steady disappearance of small operators — is really evidence of a maturing, consolidating business.

McKay says New Zealand has created a sustainable fishery and is focused on a premium export market. Quotas mean that the industry is, by nature, capped. So the challenge now is to add value and grow the business that way.

McKay points out that we are still a small fish in a big pond.

“You’ve got to remember that New Zealand only supplies 1.5% of the global seafood market. Our hoki quota is only 100,000 tonnes and hoki is our largest fishery.

“We compete against Argentinian and Chilean hoki, which is 350,000 tonnes. We compete against Alaskan pollack, which is 1.4m tonnes. We compete against Russian pollack, which is 1.6m tonnes.

“So we’ve got to be niche and we’ve got to be high value,” says McKay.

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(c) 2007 Press, The; Christchurch, New Zealand. Provided by ProQuest Information and Learning. All rights Reserved.