Market Conditions for Organic Aquaculture - Market and Price Analysis. RobustFish work package 6.2 report.

Organic aquaculture production is attaining impressive growth and demand is strongest in Europe. Countries like Germany, France and Switzerland particularly have stronger consumption markets. In 2010, the European Union implemented a harmonized system of organic aquaculture production principles for all member states. The regulation requires that fish production should exclusively be based on organic fry from 2016. Given that antibiotic use is only allowed in very strict limits, robustness of the fry to diseases is very crucial, particularly for countries like Denmark where serious trout fry diseases are a major concern. In spite of this, Denmark is making headway in organic aquaculture production, currently being the leading supplier of organic rainbow trout where Germany is the number one major market, consuming about 90% Danish trout production. The focus of this working package was to provide knowledge about the market conditions, consumer attitudes and preferences and the competitive effect of increased production that could result in strengthening the development of Danish organic trout production. Given that the organic trout is not a very established market, we extent the analysis to other organic aquaculture products, particularly salmon in order to map out what could be the case for trout. Lessons from major markets like Germany are also drawn given that the Danish market is relatively small. The analyses are conducted on two foundations; a descriptive statistics and review of the value chain, farm economic performance and identification of price premia for ecolabeled desktop review; and a science based analyses based on Danish and German markets. A number of interesting issues emerge and the following conclusions are reached: • There is unprecedented growth in the organic aquaculture industry, new product lines are emerging, stakeholders in the value chain have increased; processors have increased their supply portfolio to include organic fish products, distribution outlets are also expanding and include supermarket chains, catering services, restaurants and online shop operators. Hence, the value chain follows that of the conventional aquaculture products. • Producers of organic aquaculture are economically performing well, particularly for the case of portion sized rainbow trout in Denmark. The organic farms are at least equal to conventional trout and organic agricultural farms in terms of generating income per unit value of assets (8% per unit value of assets) and have a lower probability of default (28% solvency rate). • On the demand side, a review shows organic aquaculture products (mainly salmon) command price premia (24%-38%) which is higher than ecolabels in the capture fisheries (10%-13%) based on actual market data. These premia is within the range of organic agricultural food products. Generally, consumers are more sensitive to price changes of organic products. • A price premium of 20% was identified for organic salmon in the Danish retail market. This is a premium over both conventional farmed and wild (ecolabeled) salmon. The identification of a premium signifies that; consumers recognize and value the product; and that there is also trust in the Danish organic ecolabel which is widely known among consumers. For product development, the value (decreasing order) of fresh, marinated and smoked products attract premium over frozen products, brand labels are valued higher than private labels. • In a survey in Germany, consumers show high preference for organic produced portion size trout while seeing the ASC ecolabel to be equivalent to the conventional. However, the greatest value is placed on local German farmed trout, followed by Denmark relative to Turkey trout. Further evidence shows that in the event of campaigns to increase the perceive value of organic trout which eventually determines the market price, stronger emphasis should be placed on attributing organic principles such as GMO, hormones and synthetic additives; antibiotics use; feed and stocking densities to animal health and welfare concerns than environmental issues. The second best is the combination of both. That’s because animal health and welfare has been shown to be linked to food safety and food hazard risks by consumers. For product development and value addition, filets have are valued higher than whole trout products; the more the processing (skin and bones removed), the higher the preference. Fresh products are however preferred over smoked and frozen trout. The point of sale (supermarkets or specialized shops make no difference) • At the farm levels, price premium for organic produced rainbow trout in Denmark (about 33%) appear to be constant over time. Hence, increased production of organic rainbow trout would not cause a fall in premia to the farmer. Organic trout prices are however, determined by prices of the conventional products. This indicates that farmers could be assured of safeguarding their investments in organic trout farms. At the retail level, the evidence shows that relative organic salmon prices are non-constant, meaning that premium tend to fluctuate above the conventional prices. This is due to the fact that salmon prices are globally volatile in nature. • Consumer demand for salmon in Denmark reveals that the market is segmented. There is about 50% chance of choosing ecolabeled salmon (organic + ecolabel wild fish combined). Though on average, there is a lower chance of buying organic salmon due to the high market prices, preference is heterogeneous and so there is a segment of the population (about 20-30%) with high preference for organic salmon. The relative smaller share might be due to the smaller share of organic in the total aquaculture market.