Linkages Between Seafood Harvesting and Processing

Prepared for:

Canada Fisheries & Oceans Vancouver Canada

Prepared by:

GSGislason & Associates Ltd. Vancouver Canada

August 2017 Preface

This report was prepared for Canada Department of Fisheries & Oceans (DFO). This report is short and is focussed on key results as to the regional dimensions of the British Columbia wild seafood industry and the direct labour costs of processing seafood.

The consultants have benefited greatly from discussions and interviews with industry and DFO. Notwithstanding this assistance, the consultant has final responsibility for the analysis.

Linkages Between Seafood Harvesting and Processing GSGislason & Associates Ltd. Page i Acronyms

AFPS Annual Fisheries Production Schedule DFO Canada Department of Fisheries & Oceans DMP Dockside Monitoring Program H&G headed and gutted IQ Individual Quota kg kilograms MPA Marine Protected Area MT metric tonnes RD round (whole fish) weight SYIR Seafood Industry Year in Review

Linkages Between Seafood Harvesting and Processing GSGislason & Associates Ltd. Page ii Table of Contents

Preface...... i

Acronyms ...... ii

1.0 Introduction ...... 1

2.0 Regions of Seafood Landings & Processing ...... 2

3.0 Seafood Ex-Vessel and Processed Prices ...... 4

4.0 Processing Labour for Seafood ...... 6

Bibliography ...... 7

Linkages Between Seafood Harvesting and Processing GSGislason & Associates Ltd. Table of Contents 1.0 Introduction

Background. The processing sector is an integral component of the wild (capture) seafood sector in British Columbia. The sector generates substantial value and employment to a variety of businesses, people and communities. This economic activity is an important consideration in analyzing the effects of policy and management changes in fisheries and marine areas.

DFO requires an assessment of the linkages between where wild fish is landed and where it is processed within the province. DFO also requires knowledge of the associated labour costs of processing. This knowledge will help DFO understand and assess the implications of any proposed fisheries management changes.

The Task. The project involves several major analysis components:  region of landing & region of processing of wild-caught seafood in British Columbia  ex-vessel price and processed price from domestic harvests of major seafood species in British Columbia, and  labour intensiveness of processing wild-caught seafood in British Columbia

The focus of the analysis is the year 2016. Processing labour is in-plant processing by workers on the production line.

It is important to preserve confidentiality of information in reporting results.

Information Sources. The research program included both primary (interviews) and secondary (literature review) research. The secondary information or data collection was drawn from:  Canada Department of Fisheries & Oceans (DFO) data on landing levels and landing location by species  BC Agriculture “Seafood Industry Year in Review (SYIR)” figures and the underlying Annual Fisheries Production Schedule (AFPS) survey of sellers of seafood products  the BC Agriculture “Fish Processing Employment Survey” results  other reports (see Bibliography)

We also conducted an Interview Program with processors, both in-house and custom, as to direct labour costs of processing a variety of items. Interviews were conducted with 6 of the 10 largest wild seafood producers in British Columbia.

No. of Interviews by Major Species Category

Salmon Herring Groundfish Shellfish Tuna 10 4 9 9 5

Companies can process seafood in more than one category.

Linkages Between Seafood Harvesting and Processing GSGislason & Associates Ltd. Page 1 2.0 Regions of Seafood Landings & Processing

Landings versus Processing Regions. The region where BC seafood is processed can be different than the region where it is landed or delivered to port by fishing vessels.

For example, much of the seafood landed in the Prince Rupert area of Northern BC and in Pt. Hardy and Ucluelet on Vancouver Island is trucked to the Greater Vancouver area for processing.

Results. Exhibit 1 presents the level of 2016 wild seafood landings in metric tonnes (MT) and the estimated regional distribution of landings and processed value by species. The regions are defined as:  North Coast - the BC Mainland north of Vancouver Island i.e., the Central Coast, the Prince Rupert & Nass Area and Haida Gwaii  Vancouver Island  Lower Mainland (and Other) - Greater Vancouver and the Fraser Valley plus the Sunshine Coast and other areas such as the Okanagan

Confidentiality issues of data in many cases prevented a finer regional delineation especially in the case of processing activity.

Dockside Monitoring Program (DMP) was used to ascertain region of landings for species under Individual Quota (IQ) fisheries management. For non-IQ fisheries, the limited data available from sales slips and judgement was used. The BC Ministry of Agriculture “Seafood Industry Year in Review (SYIR)” information on seafood processed values by processing location, with some adjustments, was used to estimate regional mix of processing location.

Region* Landings Processing North Coast 11% 4% Vancouver Island 46% 15% Lower Mainland 43% 81% 100% 100%

* % breakdown for all species

The Lower Mainland has a much higher share of total processed volume and value than its share of total landings. Transportation issues, such as air connections to Asia, and other logistical issues are an important consideration affecting processing location.

Linkages Between Seafood Harvesting and Processing GSGislason & Associates Ltd. Page 2 Exhibit 1: Landing & Processing Region by Species 2016

% Landing Region Processing Region MT North Vancouver Lower North Vancouver Lower

Landings Coast Island Mainland Coast Island Mainland Salmon - Chinook 1,700 53% 18% 29% 16% 19% 65% - Chum 15,900 12% 25% 63% 5% 20% 75% - Coho 1,000 80% 10% 10% 8% 18% 74% - Pink 3,500 60% 11% 29% 45% 15% 40% - Sockeye 2,600 31% 58% 11% 15% 55% 30%

Herring - Spawn on Kelp 187 91% 0 9% 91% 0 9% - Roe Herring 16,082 13% 12% 75% 10% 0 90% - Food & Bait & Other 7,800 5% 45% 50% 0 45% 55%

Groundfish - Arrowtooth Flounder 11,182 12% 34% 54% 6% 34% 60% - Dogfish 160 0 54% 46% 0 0 100% - Hake 78,146 0 55% 45% 0 9% 91% - Halibut 3,627 47% 49% 4% 19% 15% 66% - Lingcod 1,242 14% 74% 12% 3% 31% 66% - Pacific Cod 897 36% 60% 4% 4% 9% 87% - Pollock 2,187 4% 50% 46% 3% 25% 72% - Rockfish 16,679 12% 79% 9% 2% 12% 86% - Sablefish 1,828 14% 46% 40% 6% 7% 87% - Skate 469 58% 39% 3% 11% 5% 84% - Soles 2,930 37% 52% 11% 8% 13% 79%

Shellfish - Clams 429 17% 77% 6% 3% 19% 78% - Crabs 3,369 21% 40% 39% 8% 2% 90% - Geoduck 1,123 13% 87% 0 0 0 100% - Sea Cucumbers 1,687 24% 76% 0 0 45% 55% - Sea Urchin: Red 3,211 85% 14% 1% 0 8% 92% - Sea Urchin: Green 220 0 100% 0 0 50% 50% - Shrimp 2,870 10% 45% 45% 7% 45% 48% - Prawns 1,177 9% 38% 53% 9% 32% 59%

Other - Tuna 4,100 1% 26% 73% 0 26% 74% Total 186,302 11% 46% 43% 4% 15% 81%

Note: 1. North Coast - includes Central Coast, Prince Rupert & Nass areas plus Haida Gwaii 2. Lower Mainland - includes Greater Vancouver, Fraser Valley, Sunshine Coast plus Interior BC 3. MT - metric tonne (round weight)

Linkages Between Seafood Harvesting and Processing GSGislason & Associates Ltd. Page 3 3.0 Seafood Ex-Vessel and Processed Prices

Ex-Vessel versus Processed Prices. There are several stages in the seafood value chain from fish harvest to consumption. The harvesting sector uses a variety of vessels and gear to harvest wild seafood. The fish handling sector involves unloading the seafood from fishing vessels and transport to processing plants. Fish processors convert raw seafood into a variety of fresh, frozen, smoked, roe and other products.

The price received by fishing vessels is the “ex-vessel price” whereas the price received by processors for finished product is “processed price”.

The prices paid to harvesters are derived from the prices received by processors. The gap or margin between ex-vessel and processed prices reflect a variety of factors including the level and cost of processing involved, the industrial organization of the industry and market demand in general.

Results. Exhibit 2 presents 2016 ex-vessel prices and processed prices for the species categories of Exhibit 1. The prices reflect those in the BC Ministry of Agriculture SYIR work. Prices are reported on a round (RD) equivalent or whole fish basis.

Landings MT RD Values $ million Ex-Vessel Processed Salmon 24,700 78.1 141.1 Herring 24,069 21.3 54.9 Groundfish 119,347 145.1 259.0 Shellfish 14,086 119.6 174.5 Tuna 4,100 20.5 35.3 All 186,302 384.6 664.8

Several shellfish species such as geoduck, crabs, and prawns are sold live, often to Asia, and have high prices. The market for fresh headed & gutted (H&G) halibut much of which is trucked to US markets has been strong as well.

In contrast, markets for some frozen products such as hake and arrowtooth flounder which are primarily sold to Eastern Europe markets in bulk block form have been weak.

Linkages Between Seafood Harvesting and Processing GSGislason & Associates Ltd. Page 4 Exhibit 2: BC Seafood Prices & Processing Unit Labour Costs 2016

Price $ per RD kg Processing Unit Labour Labour Intensity per MT Ex-Vessel Processed $ per RD kg $ per Hour $ Wages Hours Salmon - Chinook 12.90 16.30 .45 20.00 450 22.5 - Chum 1.90 4.25 .60 25.00 600 24.0 - Coho 5.00 9.15 .65 20.00 650 32.5 - Pink .80 3.05 .40 25.00 400 16.0 - Sockeye 7.00 10.00 .85 25.00 850 34.0 Herring - Spawn on kelp 26.85 30.75 .90 25.00 900 36.0 - Roe Herring 0.80 2.40 .55 25.00 550 22.0 - Food & Bait & Other 0.44 1.35 .25 20.00 250 12.5 Groundfish - Arrowtooth Flounder 0.28 1.25 .25 20.00 250 12.5 - Dogfish 0.55 1.60 .25 20.00 250 12.5 - Hake 0.23 0.90 .25 20.00 250 12.5 - Halibut 15.55 19.10 .25 20.00 250 12.5 - Lingcod 5.30 6.60 .25 20.00 250 12.5 - Pacific Cod 1.95 3.65 .35 25.00 350 14.0 - Pollock 0.50 2.00 .25 20.00 250 12.5 - Rockfish 1.65 3.00 .45 25.00 450 18.0 - Sablefish 14.20 15.95 .35 20.00 350 17.5 - Skate 1.90 2.80 .25 20.00 250 12.5 - Soles 1.25 3.00 .60 25.00 600 24.0 Shellfish - Clams 3.25 9.75 .75 20.00 750 37.5 - Crabs 13.10 16.25 .45 18.00 450 25.0 - Geoduck 27.80 33.80 .45 18.00 450 25.0 - Sea Cucumbers 6.15 7.60 .60 25.00 600 24.0 - Sea Urchin: Red 2.15 6.50 2.20 25.00 2,200 88.0 - Sea Urchin: Green 4.95 5.70 .25 18.00 250 13.9 - Shrimp 2.20 3.30 .25 18.00 250 13.9 - Prawns 15.40 28.20 2.40 18.00 2,400 133.3 Other - Tuna 5.00 8.60 .25 20.00 250 12.5

Note: 1. processing labour is direct labour only & processing labour cost includes benefits 2. ex-vessel & processed prices are consistent with those in BC Agriculture “Seafood Industry Year in Review (SYIR)” 3. MT is metric tonne, RD is round (whole fish) weight

Linkages Between Seafood Harvesting and Processing GSGislason & Associates Ltd. Page 5 4.0 Processing Labour for Seafood

The Role of Labour. Labour is an important component of the cost structure of seafood processing. This analysis focuses on the cost of direct processing labour including the packaging function on the production line of British Columbia seafood plants. As such, it does not include vessel offloading, plant maintenance, administration, and sales activities which some processing companies undertake.

The labour costs in $ per kg round (RD) or whole fish weight presented include benefits paid on behalf of plant workers which can amount to 15% or more of the T4 wage.

Results. Exhibit 2 in the previous section gives estimated direct unit processing labour costs and per metric tonne (MT) labour costs and utilization. The estimates reflect:  an Interview Program with seafood processors conducted for this study (both in-house and custom processors)  the results from the BC Ministry of Agriculture “British Columbia Fish Processing Employment Survey” and  prior studies, work and knowledge Direct Labour Costs of Seafood Processing by Species in 2016* $ per kg RD Salmon - Chinook $0.45 Herring - Spawn on kelp $0.90 - Chum .60 - Roe Herring .55 - Coho .65 - Food & Bait & Other .25 - Pink .40 Groundfish - Arrowtooth Flounder .25 - Sockeye .85 - Dogfish .25 Shellfish - Clams .75 - Hake .25 - Crabs .45 - Halibut .25 - Geoduck .45 - Lingcod .25 - Sea Cucumbers .60 - Pacific Cod .35 - Sea Urchin: Red 2.20 - Pollock .25 - Sea Urchin: Green .25 - Rockfish .45 - Shrimp .25 - Sablefish .35 - Prawns 2.40 - Skate .25 Other - Tuna .25 - Soles .60 * processed products - frozen H&G (arrowtooth flounder, hake), frozen round (herring food & bait, dogfish, pollock, shrimp, prawn, tuna), frozen J cut (sablefish), fresh whole or live (skate, clams, crab, geoduck, green sea urchin), fresh H&G (halibut, lingcod), fresh fillets (rockfish, sole, Pacific cod), roe in trays (red sea urchins), roe salted & pailed (roe herring), roe on kelp (herring spawn on kelp), meat & skins (sea cucumber), and mix of whole gutted, fillets, smoked & other (chinook, chum, coho, pink & sockeye salmon) The labour costs for non-salmon species reflect those for an indicator product such as live for geoduck and crab, fresh fillets for rockfish, frozen H&G for hake, and frozen blocks for food & bait herring. For salmon species, the labour costs reflect those for a mix of whole gutted, fillet, smoked and other products. The product mix can change from year to year depending on catch levels in completing jurisdictions such as Alaska, market demand and currency exchange rates. The figures should be viewed as an approximate guide to the labour content or share of processed product value.

As Exhibit 2 shows, the degree and cost of processing can vary dramatically across species. Roe extraction and processing for red sea urchin, for example, is very labour intensive. In contrast, fresh headed & gutted (H&G) halibut has minimal processing and therefore minimal direct labour costs.

Linkages Between Seafood Harvesting and Processing GSGislason & Associates Ltd. Page 6 Bibliography

BC Ministry of Agriculture, “British Columbia Fish Processing Employment Survey Results”, Occasional.

BC Ministry of Agriculture, “British Columbia Seafood Industry Year in Review (SYIR)”, Annual.

BC Ministry of Agriculture, “Fisheries Production Statistics of British Columbia”, Annual.

Counterpoint Consulting, “Economic Dimensions of British Columbia’s Pacific Salmon Resource”, Prepared for Pacific Salmon Foundation, June 2014.

Fraser and Associates, “Linkages Between the Primary Fish Production and Fish Processing Sectors in British Columbia”, Final Phase 2 Report Prepared for the Department of Fisheries and Oceans, 2008.

Gislason, Gordon and The ARA Consulting Group Inc., “Groundfish Processing in BC and the US: A Competitiveness Study”, Prepared for the BC Fish Processing Strategic Task Force, June 1994.

GSGislason & Associates Ltd. et al., “Employment Impacts of IQ Fisheries in Pacific Canada”, Prepared for Canada Fisheries & Oceans, March 2008.

GSGislason & Associates Ltd., “Economic Impacts from a Reduced Groundfish Trawl Fishery in British Columbia”, Prepared for BC Ministry of Environment, June 2010.

GSGislason & Associates Ltd. et al., “Canadian Seafood Benchmarking Study”, Prepared for Agriculture and Agri-Food Canada, Ottawa, February 2013.

Nelson Bros Fisheries Ltd., “Fraser River Sockeye Benchmark Study”, Prepared for Agriculture and Agri- Food Canada, July 2006.

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