Salmon Market Analysis Modules (SMAM)

The aim of this project has been to provide a review of demand and market integration studies for salmon. Given that estimating demand elasticities and testing for market integration is an empirical exercise, it is clear that each study must focus on a specific market for a given period of time. This is a problem since, strictly speaking, it gives information only about a given market for a given time period, and there is no reason why for example that the demand for salted salmon in Japan should have any resemblance to the demand for fresh salmon the UK. Moreover, a number of different model specifications have been used, making it even harder to compare results.

 

Demand in most markets seems to be price elastic. This is good news for the salmon industry in general, if one still regards it as a growing industry, as it implies that the total revenues are likely to increase if production continues to increase. However, it must also be noted that demand is not elastic in all market segments. For instance, the reported elasticities indicate that the demand for canned salmon, and maybe also frozen salmon in aggregate most likely is inelastic. Also for other species and product forms one can find examples of market segments where demand seems to be inelastic.

 

There seems to be a tendency that demand gets less elastic the closer to the consumer the data are measured, with retail demand the least elastic. Economic theory gives no reason to expect retail demand to be more or less elastic than demand lower in the value chain. This relationship will depend on the production process of the intermediaries (Gardner, 1975). One might of course speculate whether competition is keener in intermediary markets, as the fish can be processed into several product forms. However, the model specifications used might also be at least part of the reason for this result.

 

For species with a rapidly increasing production, like new aquaculture species such as salmon and catfish, the demand gets less elastic with increases in supply. This is very much as expected, as one in this situation is likely to observe a movement down the demand schedule. Hence, even though there is substantial evidence of successful generic marketing campaigns, it seems like lower prices facilitated by productivity improvements are more important in increasing the quantity sold of these species.

 

Very little has been done on aggregate demand for species. As such, even though we know a bit about different markets, we know substantially less about the aggregate markets. This is a major shortcoming, since the salmon markets are becoming more and more globalised. Knowledge about the global market structure is then instrumental in understanding the price determination process. There are most likely two reasons why aggregate demand structures have received little attention. First, it is very difficult to obtain good data. Second, there are substantial methodological issues both with respect to aggregation and because the simultaneity problem cannot be assumed away.

Additional information
The project has mainly been financed through the Norwegian Research Council (NRC). FHF has contributed with co-financing for the initial phase of the project only. NRC has been responsible for ensuring research quality and for administrative project coordination.

The overall project has been divided in two sub-projects at the NRC. The two projects have dedicated websites at the NRC project portal with supplementing information and publications, respectively:
• the SMAM project 2008–2011
• the SMAM project 2010–2014