The Economics of Norwegian Salmon
Farming:
A review of 30 years of Production Growth
Atle G. Guttormsen and Kenneth Løvold Rødseth
2111
2005
NORWEGIAN UNIVERSITY OF LIFE SCIENCES
OUTLINE
Motivation for the review
Productivity growth
Stages of development in Norwegian salmon aquaculture
Concluding remarks
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NORWEGIAN UNIVERSITY OF LIFE SCIENCES
MOTIVATION FOR THE REVIEW
Salmon aquaculture in Norway has been rather
successful
It exist an overwhelming dataset with farm data
(panel) from 1982-2007
The industry is carefully studied by economists for
more than 25 years, reviewing these studies
might provide new insight
Experiences from Norwegian Salmon aquaculture
might benefit other emerging aquaculture
industries
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Norwegian aquaculture production
700000
600000
500000
400000
300000
200000
100000
0
Production of
farmed salmon
Tons
Production of
other farmed
species
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
NORWEGIAN UNIVERSITY OF LIFE SCIENCES
MOTIVATION FOR THE REVIEW
Year
www.umb.no
NORWEGIAN UNIVERSITY OF LIFE SCIENCES
SALMON FARM DATASET
Unbalanced panel data based on annual data collected by the
Norwegian directorate of fisheries since 1982
Covers more than 50% of total salmon industry in most years
About 80 variables is reported
Used in a number of Ph.D-theses: Salvanes (1988), Tveterås
(1998), Guttormsen (2002), Roll (2008) and more than thirty
per reviewed articles
Source: Roll K.H. (2008)
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NORWEGIAN UNIVERSITY OF LIFE SCIENCES
MOTIVATION FOR THE REVIEW
A rich source of
literature discussing
several aspects of the
norwegian salmon
industry
Asche, F. (1997). "Trade Disputes and Productivity Gains: The Curse of Farmed
Salmon Production?" Marine Resource Economics 12(1): 67-73.Asche, F. (2006).
Primary industries facing global markets: the supply chains and markets for
Norwegian food and forest products. Oslo, Universitetsforl.Asche, F., T. Bjorndal, et
al. (2003). "Relative Productivity Development in Salmon Aquaculture." Marine
Resource Economics 18(2): 205-10.Asche, F. and A. G. Guttormsen (2001).
"Patterns in the Relative Price for Different Sizes of Farmed Fish." Marine Resource
Economics 16(3): 235-47.Asche, F., A. G. Guttormsen, et al. (1999). "Environmental
Problems, Productivity and Innovations in Norwegian Salmon Aquaculture."
Aquaculture Economics and Management 3(1): 19-29.Asche, F. and R. Tveteras
(1999). "Modeling Production Risk with a Two-Step Procedure." Journal of
Agricultural and Resource Economics 24(2): 424-39.Bjorndal, T. (2002). "The
Competitiveness of the Chilean Salmon Aquaculture Industry." Aquaculture
Economics and Management 6(1-2): 97-116.Bjorndal, T. and K. G. Salvanes (1995).
"Gains from Deregulation? An Empirical Test for Efficiency Gains in the Norwegian
Fish Farming Industry." Journal of Agricultural Economics 46(1): 113-26.Bjørndal, T.
and K. G. Salvanes (1991). Production technology and regional productivity
differences in the Norwegian fish farming industry. Bergen.Guttormsen, A. G. (2002).
"Input Factor Substitutability in Salmon Aquaculture." Marine Resource Economics
17(2): 91-102.Kumbhakar, S. C. (2001). "Estimation of Profit Functions When Profit
Is Not Maximum." American Journal of Agricultural Economics 83(1): 119.Kumbhakar, S. C. (2002). "Risk Preferences and Technology: A Joint Analysis."
Marine Resource Economics 17(2): 77-89.Kumbhakar, S. C. and R. Tveteras (2003).
"Risk Preferences, Production Risk and Firm Heterogeneity." Scandinavian Journal of
Economics 105(2): 275-93.Ostbye, S. (1999). "A Technical Note on Input Price
Proxies Used in Salmon Farming Industry Studies." Marine Resource Economics
14(3): 215-23.Salvanes, K. G. (1985). Fiskeoppdrett og offentlig regulering: ein
empirisk analyse av kostnadstilhøve i norsk matfiskoppdrett. Bergen, K. G. Salvanes:
vi, 149 bl.Salvanes, K. G. (1988). Salmon aquaculture in Norway: an empirical
analysis of cost and production properties. Bergen, Institute of Fisheries Economics,
Norwegian School of Economics and Business Administration: vii, 142 bl.Salvanes, K.
G. (1989). "The Structure of the Norwegian Fish Farming Industry: An Empirical
Analysis of Economies of Scale and Substitution Possibilities." Marine Resource
Economics 6(4): 349-373.Salvanes, K. G. (1993). "Public regulation and Production
Factor Misallocation: A Restricted Cost Function for the Norwegian Aquaculture
Industry." Marine Resource Economics 8: S. 50-64.Toft, A., T. Bjørndal, et al. (1994).
Kostnadsstruktur og kostnadsutvikling i matfiskoppdrett - ei drøfting av empiriske
www.umb.no
resultat. SNF-rapport. S. f. s.-o. næringslivsforskning.Tveteras, R. (1999).
"P d ti Ri k d P d ti it G
th S
Fi di
f N
i S l
NORWEGIAN UNIVERSITY OF LIFE SCIENCES
SOME STUDIES
Estimation of cost functions , examining economics of scale, input factor
substitution, cluster effects etc.
–
Salvanes (1989, 1993)
–
Bjørndal and Salvanes (1991, 1995)
–
Østbye (2000)
–
Guttormsen (2002)
–
Roll (2008)
Estimation of production functions, risk evaluation
–
Asche and Tveterås (1999)
–
Tveterås (2000)
–
Kumbhakar (2002)
–
Kumbhakar and tveterås (2003)
Other
–
Vassdal and Roland (1998)
–
Tveterås (2002)
–
Vassdal, in Asche (2006)
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Developement in cost and price
35
30
25
cost
20
sales price
15
10
5
Year
Source: The Norwegian Directorate of Fisheries
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20
06
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
0
19
86
NOK
NORWEGIAN UNIVERSITY OF LIFE SCIENCES
PRODUCTIVITY GROWTH
COST SHARES IN NORWEGIAN AQUACULTURE
INDUSTRY
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0%
Other costs
Labor
Feed
Source: The Norwegian Directorate of Fisheries
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20
06
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
Smolt
19
88
19
86
NORWEGIAN UNIVERSITY OF LIFE SCIENCES
PRODUCTIVITY GROWTH
700 000
30
1. Structure of the industry
600 000
25
-
500 000
20
15
10
Salvanes (1989, 1993)
Bjørndal and Salvanes (1991,1995)
Roll (2008)
2. Environmental problems
-
Tveterås (1993)
Asche, Guttormsen and Tveterås(1999)
Tveterås (2002)
400 000
300 000
200 000
5
100 000
0
0
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
Year
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Cost
Tons
35
N O K /k g
NORWEGIAN UNIVERSITY OF LIFE SCIENCES
1. OWNER OPERATOR INDUSTRY
Price
Prod
700 000
30
1.
Decrease in productivity
600 000
25
-
Vassdal (2006)
Roll (2008)
500 000
2.
Risk and diseases
Tveterås (2000)
20
15
10
-
Asche (1997)
Asche, Guttormsen and
Tveterås(1999)
400 000
300 000
200 000
5
100 000
0
0
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
Year
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Cost
Tons
35
N O K /k g
NORWEGIAN UNIVERSITY OF LIFE SCIENCES
2. SALMON CRISIS
Price
Prod
700 000
1.Structure
30
600 000
20
-Guttormsen (2002)
-Vassdal & Roland
(1998)
-Roll (2008)
15
2. Trade disputes 300 000
10
-Asche (1997)
-Asche, Bjørndal
and Sissner (2003)
25
5
0
500 000
400 000
200 000
100 000
0
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
Year
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Cost
Tons
35
N O K /k g
NORWEGIAN UNIVERSITY OF LIFE SCIENCES
3. PROFFESIONALIZING THE INDUSTRY
Price
Prod
700 000
30
600 000
25
500 000
20
400 000
15
300 000
10
200 000
5
100 000
0
0
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
Year
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Cost
Tons
35
N O K /k g
NORWEGIAN UNIVERSITY OF LIFE SCIENCES
4. HIGH PRICES, LOW PRICES, NEW CRISIS AND
RESTRUCTURING
Price
Prod
NORWEGIAN UNIVERSITY OF LIFE SCIENCES
4. CONCLUSIONS
Comparative advantages is important for successful
production.
Obstacles for growth has to great extent been handled
by the industry and its partners.
Knowledge and R&D has laid the foundation for the
industry growth.
– Technological growth has been impressive.
The findings in the studies we have reviewed gives
insight that might benefit other emerging farmed species.
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