Slide 1Overview of Trends in Alaska FisheriesPrices and ValueGunnar KnappProfessor of EconomicsInstitute of Social and Economic ResearchUniversity of Alaska AnchorageUpdated October 2009Note: Fish prices and value can vary widely from yearto year. Some of the trends shown in the graphs mayhave changed since the graphs were prepared.Slide 2Fish prices are very volatile. Likeother natural resource prices (oil,minerals, timber, etc.), they cango up fast and they can come downfast.That means that the value of fish harvests can change dramaticallyeven if the harvests don’t change.The purpose of this presentationis to show you how prices andharvest value for major Alaska fish species have changed in recentyears.Slide 3Why do prices changefrom year to year?Examples of factors which affect supply anddemand . . .• SUPPLY– Alaska production– Alaska’s competitors production• Wild• Farmed• DEMAND– Consumer Incomes– Consumer tastes– Exchange rates– Prices of otherfish and other foods– Distribution costs– Trade barriers– Marketing– Market power of buyersSupplyDemandEconomistsMany different factors affect fish prices.These include both factors which affectSUPPLY and factors which affect DEMAND.We’ll discuss supply and demand and howthey affect prices for fishlater in this course.An old joke is that if you need aneconomist, just teach a parrot tosay “supply and demand.”Slide 4We’ll start by definingand explaining three termsfrequently used by fisheries economists:• Ex-vessel price• “Real prices” and “nominal prices”• Price indexesSlide 5Ex-vessel priceis the price a fisherman gets paid.• “Ex-vessel” means “from the vessel.” So it’s the price of the fishwhen it leaves the boat--which iswhen fishermen usually get paid.Slide 6“Nominal” vs. “Real” Prices• The “nominal” price of any product is whatever the actual dollar price is atthe time of the transaction.• The “real” price is the “nominal” price adjusted for inflation.• The “real” price is always expressed in terms of the buying power of a dollaras of some particular year.• To calculate real prices, economists use the consumer price index (CPI),which shows what average prices were in some particular year as apercentage of what average prices were in some base period.• For example, the Anchorage Consumer Price Index was 189 in 2008. Thatmeans prices in 2008 were 189% of what they were in the base period(which was 1982-84).• The formula for the real price is:Real pricet= Nominal pricetx (CPIr/ CPIt)• You don’t have to learn this formula for the moment. Just remember:– for years in the past, real prices are higher than nominal prices– compared with past years, nominal prices have risen more than realprices.Slide 7The nominal price of halibut rose from just $.67/lb in 1980 to $3.25/lb in 2008—almost five times as high! But a dollar bought a lot more in 1980 than in 2008.The “real price” in 1980, expressed in terms of what it would have bought in2008, was $1.49/lb. That means that the “real price” was only a little more thantwice as high in 2008 as in 1980.Average Ex-Vessel Prices of Alaska Halibut, 1980-2008:Real and Nominal$0.00$0.50$1.00$1.50$2.00$2.50$3.00$3.50 1980 1985 1990 1995 2000 2005

$/lbReal price(in 2008 $)NominalpriceSlide 8Price indexes are a way of showing prices as a percentage of the priceduring some “base year” or “base period.”• Suppose the average price was $.40/lb during the base year or thebase period.• Then the price index would have been:– 100 when the price was $.40/lb (100% of $.40/lb)– 150 when the price was $.60/lb (150% of $.50/lb)– 200 when the price was $.80/lb (200% of $.40/lb)Slide 9These graphs show the sameprice information in two differentways.The price index graph on thebottom is useful because itshows you the real price in anygiven year as a percentage ofthe average price for the wholeperiod.Average Real Ex-Vessel Price of Alaska Halibut, 1980-2008$0.00$0.50$1.00$1.50$2.00$2.50$3.00$3.50 1980 1985 1990 1995 2000 2005

$/lbReal price(in 2008 $)Average Real Ex-Vessel Price Index for Alaska Halibut, 1980-2008020406080100120140160180200 1980 1985 1990 1995 2000 2005

price index (base period = 1980-2008)Real price index(base period= 1980-2008)Slide 10This graph shows real (inflation-adjusted) ex-vessel prices for Alaska’s fivesalmon species, expressed in $2008 dollars. Note that the prices are muchhigher for sockeye, coho and especially chinook salmon than they are for pinkand chum salmon. Note that prices fell dramatically between 1988 (thehighest price years ever) and 2002, andhave increased since then. Exceptfor chinook salmon, real prices remain well below the levels of the 1980s.Real Alaska Salmon Ex-Vessel Prices, 1980-2008$0.00$0.50$1.00$1.50$2.00$2.50$3.00$3.50$4.00$4.50$5.00 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008Source: ADFG.

$/lb (2008 $)ChinookCohoSockeyePinkChumSlide 11This graph shows the same information as the previous graph, except thatthe prices are expressed as price indexes. That allows you to see relativechanges in prices more easily. You can see that while the prices of allspecies increased since 2002, the price of sockeye increased much rapidlythan the prices of the other species.Indexes of Real Alaska Salmon Ex-Vessel Prices, 1980-20080%20%40%60%80%100%120%140%160%180%200% 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008Source: ADFG. Note: 1988 price indexes peaked well above 200%for most species.

Real price as % of 1980-2008 averageChinookCohoSockeyePinkChumSlide 12The most important cause of the decline in salmon pricesbetween 1989 and 2002 wascompetition in worldmarkets from farmed salmon. Because of the dramaticgrowth in world farmedsalmon, production totalworld salmon supply has more than doubled since 1990. Between 1980 and2007, Alaska’s share of worldsalmon supply well from 42% to 15%.This is an example of how competitors’ supply can affect fish prices.World Salmon Supply: Wild and Farmed05001,0001,5002,0002,5003,000 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

thousand metric tonsFarmedtroutFarmedsalmonOtherwildsalmonAlaskasalmonSources: Alaska data fromAlaska Commercial FisheriesEntry Commission and AlaskaDepartment of Fish and Game;other data from National MarineFisheries Service and FAOFishstat+ database. Farmedtrout includes rainbow troutfarmed in saltwater.Slide 13Farmed salmon is not the only factor affecting salmon prices.Numerous other factors also have contributed to the decline insalmon prices. Some of these include:• Large Alaska salmon harvests• Large packs of canned salmon• Declining demand for traditional products such as canned salmon• Stagnant Japanese economy• Increasing quality standards in world markets• Consolidation in retail food and food service industriesThe relative effects that these factors have had on salmon pricesdiffer for different salmon species.Slide 14Real Ex-Vessel Price Indexes for Pacific Herring(100 = average real price for the period 1980-2008)050100150200250 1980 1985 1990 1995 2000 2005

real price indexAlaska herring prices have fallen dramatically since the 1980s, mainlybecause of the stagnant Japanese economy and declining demand forluxury herring products.Slide 15Prices of Alaska pollock fell from the mid 1980s to the early 2000sfor several reasons,including declining Japanese demand for pollock surimi andcompetition from Russianpollock products processed in China and Korea.Pollock pricesstrengthened after 2002due to strong world demand forpollock fillets, and declining competition from Russianpollock as Russian harvests declined. Russian harvests are beginning to rise again—whichcould would normally push pollockprices lower, except thatAlaska harvests are declining.Real Ex-Vessel Price Indexes for Alaska pollock(100 = average real pricefor the period 1980-2008)050100150200250 1980 1985 1990 1995 2000 2005

real price indexSlide 16In recent years, prices for crab, halibutand sablefish have generally been strong.These are considered high-value fish species. Halibut and sablefish markets havebenefited from the adoption of an “IFQ” fisheries management system in 1995 whichspread fishing out over much longer seasons.Real Ex-Vessel Price Indexes for Selected Species(100 = average real pricefor the period 1980-2008)050100150200250 1980 1985 1990 1995 2000 2005

real price indexKing crabPacific halibutSablefishSlide 17The combined effect of changes inharvests and prices have resulted in different trends in the value ofharvests and prices for differentAlaska species, expressed in“real” (inflation-adjusted) prices:SALMON value fell dramatically from 1988 to 2002—but has started to rebound.GROUNDFISH value fell during the1990s but has risen since 2002.HALIBUT value has risensteadily since the 1990s.SHELLFISH value is stablebut much lower thanduring earlier boom periods.HERRING value has fallen to a relatively insignificant level.Real Ex-Vessel Value ofAlaska Seafood Harvests02004006008001,0001,2001,4001,600 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005Source: National Marine Fisheries Service

millions of 2008 dollarsSalmonHerringHalibutShellfishGroundfishSlide 18The total real ex-vessel value of Alaska fishharvests declined by morethan $1 billion—and bymore than half—during the early 1990s. The fall was mainly due to the decline in value of salmonharvests. However, between2002 and 2008, the value of harvests increased for all species groupsexcept herring—and total value grew by more than$600 million. In general, the economic conditionof Alaska’s seafood industry improved significantly from 2002 to 2008.Real Ex-Vessel Value of Alaska Seafood Harvests05001,0001,5002,0002,500 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005Source: National Marine Fisheries Service

millions of 2008 dollarsGroundfishShellfishHalibutHerringSalmon