A 50-year situation: the market dynamic between fishing fleets and processors in Bristol Bay

This year, Bristol Bay’s 50 cents per pound base price had fleet members questioning the industry’s longevity. The dynamic between fleets and processors has existed for decades, with permit-holding fishing crews delivering their catch before knowing its cost, and processors relying on them to do so. KDLG’s Christina McDermott sat down with economist Gunnar Knapp, who spent decades studying Bristol Bay’s salmon markets, to learn more about the history of this relationship, and what it means going forward.

Gunnar Knapp: My name is Gunnar Knapp. I’m a retired professor of economics at the University of Alaska Anchorage Institute of Social and Economic Research, and I spent several decades studying Alaska salmon fisheries, in particular salmon markets, and in particular Bristol Bay salmon markets. So, I’ve been following that fishery for a long time.

Christina McDermott: Just a little background: this past summer, many fleet members were upset when the price was announced at 50 cents per pound, which is the lowest in the past 40 years when adjusted for inflation. The announcement came fairly late in the season. There was protest, and there was a lot of discussion on the processors’ respective power to set that price. And I’m interested in going back a little bit. What opportunities [did] the fleet have to sell their fish 50 years ago, let’s say, or 20 years ago? Has it always [been] this relationship [that] there are these processors and there are these fishermen?

Knapp: Over the years, certainly if you go back at least to the 1980s, the basic situation by which fish are bought and sold and prices are set has been pretty much the same. It hasn’t changed that much. What has changed is, the markets have changed amazingly. They’ve changed drastically. For most of the history of Bristol Bay, up until the 1970s, the fishermen, basically, were employees of the processing companies. And they fished for them in boats that the processing companies owned. All this changed drastically when limited entry came in, in the 1970s.

Then there was the system that we have now, under which there’s a certain number of limited entry permits. And only the people who had those limited entry permits had the right to fish. That gave fishermen a new kind of power because the processors couldn’t just hire people to fish for them. They could only get fish from fishermen who had these limited entry permits.

So that created the system that remains until today, where you have a system of two groups that actually both have power and both depend on each other. That’s the fishermen, who have the exclusive right to catch fish, and the processors who can… anybody could be a processor. But that’s really expensive to do. There’s a limited number of companies that that process there.

So, you created this situation, and this has been the case for almost 50 years, where you have fishermen who could only sell to the processors that were there, and processors who could only buy from the fishermen who were there.

That created very interesting market dynamics, and they’re complex. But basically, it’s a situation that tends to favor fishermen when markets are strong because processors really want fish if the wholesale prices are really good. They will bid up the price and they’ll offer fishermen really high prices for fish when the markets are strong.

On the other hand, if the markets are weak, it tends to put fishermen in a really difficult position because the processors are very leery of in their mind what they call overpaying so that they actually would lose money on the season. So, they will offer low prices. You’ve had other years in the past where prices have dropped drastically from the previous year, and where fishermen have been offered very low base prices, and have been as upset about the situation as I imagine they’ve been this year.

On the other hand, you’ve had years where the prices have been really strong. In that sense, it’s not new. But what is new is how drastically low the prices are this year. In fact, if you adjust for inflation, a 50-cent base price, if there was no postseason payment, that would be the lowest price going back many decades.

If that price doesn’t get added to, it will be an extremely low and difficult price situation, but I think that the true story of this 2023 season remains to be seen.

McDermott: It makes sense. It’s kind of a long process.

Knapp: What’s ironic is if you’re an individual fisherman, you feel like a total pawn in this because you have no control. Your processor just announces something, or does something, or doesn’t do it. You can go in there and say ‘this is crazy’ and the guy says ‘that’s the best I can do’ or ‘the best I’m going to do.’ Yet, ironically, if fishermen could all act together, they would have total power.

Processors generally give bonuses throughout the year, increasing the amount paid to their fleet members. Knapp says that processors often announce these bonuses in November, at the Pacific Marine Exposition. This year’s expo is scheduled for November 8.

Note: In this interview, Christina McDermott says the 50 cent per pound base price is the lowest in 40 years. This comment is based off the ex-vessel prices on the Alaska Department of Fish and Game’s web records, which start in 1984.

Correction: The Pacific Marine Exposition starts November 8.

Get in touch with the author at christina@kdlg.org or 907-842-2200.