BUSINESS

Rolling with the tides

New Brunswick’s salmon farms are prospering

JOHN DeMONT July 8 1991
BUSINESS

Rolling with the tides

New Brunswick’s salmon farms are prospering

JOHN DeMONT July 8 1991

Rolling with the tides

New Brunswick’s salmon farms are prospering

Beneath a cloudless summer sky, dozens of steel cages bob in the calm waters off Frye Island, near the Bay of Fundy’s New Brunswick coast. Below the surface of the sun-dappled water, thousands of young Atlantic salmon swim back and forth in their pens. Brian Rogers, the 34-year-old general manager of Sea Farm Canada Inc. of Saint John, N.B., the largest salmon-farming operation on Canada’s East Coast, stops to admire a cage full of eight-to10-lb. fish that, after more than a year of fattening, will soon be ready for market in Canada or the United States.

“Look at them,” says Rogers. “Don’t they look beautiful?” Indeed, Rogers’s beauties are a source of healthy profits for Sea Farm.

A joint venture between Toronto-based Canada Packers Inc. and Norway’s Sea Farm A/S, the company is among 54 salmon farms scattered throughout New Brunswick’s Fundy Isles that have carved out a small but lucrative segment in the global market for farm-grown salmon. As a result, cultivated Atlantic salmon now grace restaurant tables throughout Canada and the United States. Moreover, New Brunswick’s salmon farmers are earning profits at a time when competitors around the world are fighting to cope with a growing oversupply problem, which has pushed the average wholesale price in New Brunswick for a pound of the gutted fish down to about $4, compared with a peak of $8.84 in 1988.

The strength of New Brunswick’s salmon industry contrasts with the relatively weak state of its larger West Coast counterpart. Many of British Columbia’s salmon farms borrowed heavily during the 1980s to finance their growth. But when prices plummeted in 1989, some of the fish farms were unable to maintain interest payments on their debts. Since 1989, 26 B.C. salmon farms have gone into receivership, leaving an industry dominated by eight large firms.

By contrast, many Atlantic salmon farmers financed their operations with conventional bank loans and expanded only modestly. As

a result, New Brunswick’s salmon farmers say that they expect a record $85-million harvest this year, yielding total industry profits of about $21 million. Says Christopher Saulnier, a partner in Aqua Fish Farms Ltd., which operates a pair of farms in Lime Kiln Bay, N.B.: “Most of us have lived within our means, which has left us in good shape for the downturn in prices.” Nature is on their side. The Bay of Fundy’s

powerful tides—at over 26 feet, the world’s highest—provide one of the best environments anywhere on the globe for salmon farming. In winter, the tidal currents churn the warmer water at the bottom of the bay to the ocean’s surface, ensuring that the water temperature remains moderate enough for the salmon to thrive. In summer, cold water from the ocean floor is forced to the surface, preventing the spread of bacteria that multiply in warm water.

Since it started in 1978, the salmon-farming business has blossomed into an important New

Brunswick industry. Production for 1991 is expected to hit 9,350 tons, compared with 18,700 tons in British Columbia. That is still minuscule compared with Norway, the world’s biggest producer of Atlantic salmon, whose fish-farm harvest is roughly 150,000 tons annually. Still, salmon farming employs 1,600 people in New Brunswick, providing a significant economic boost to an area where there are relatively few job options.

One of the industry’s most efficient operators is Sea Farm. The company earned profits of $4.3 million on revenues of $17 million in the 12 months ending March 31, compared with a $3-million profit on revenues of $11.5 million in the previous fiscal year. Sea Farm’s 96 employees take salmon eggs and grow them in indoor tanks for 18 months, manipulating light and water temperature to simulate the passing of the seasons. From there, the young fish go to sea pens, where they are fed on fish meal spiked with vitamins and nutrients. The result is that Sea Farm’s salmon reach market size—about eight pounds—within 30 months. In the wild, salmon take from five to seven years to reach that weight.

Under the direction of Rogers, a wiry former Newfoundlander who runs marathons in his spare time, Sea Farm has also taken steps to insulate itself from possible future declines in wholesale salmon prices. Most of its competitors sell their salmon to brokers or U.S. importers, who then sell to distributors. But Sea Farm is trying to foster customer loyalty—and increase profits — by processing, packaging and marketing the salmon under the company’s own Sterling brand name. It is also aiming for higher U.S. sales with products such as salmon fillets and steaks, which usually carry a higher markup than whole fish. Says Rogers: “Salmon is a premium product. We intend to treat it that way.”

Still, even the most optimistic farmers acknowledge that the industry cannot expand indefinitely. New Brunswick’s salmon farms now sell their products through 15 salmon-marketing groups. Rogers says that eventually there will have to be some rationalization. “I expect to see some alliances formed,” he says, adding: “That will be good for everyone.” Already, Sea Farm and its East Coast rivals have shown that they can thrive in an industry where falling prices make it hard to stay afloat.

JOHN DeMONT on Frye Island