Commercial fishermen need more opportunities to diversify, study shows

As any commercial fisherman knows, fishing is a risky business. Fluctuations in markets, regulations, fish populations and the weather — not to mention the climate’s growing volatility — can result in fluctuating income that can threaten a fisherman’s livelihood.

Alaska's Prince William Sound fishermen have relied on state-managed salmon since the herring population crashed following the Exxon Valdez spill. Richard Brenner photo

Buffering against these fluctuations might mean taking a page from another risky business: the stock market.

A growing body of research is showing that, in most cases, fishermen are more likely to have stable year-to-year incomes if they diversify their fishing portfolios, much like an investor would diversify a stock portfolio, giving them a safety net to weather whatever the year brings.

“It can really pay for fishermen to diversify,” said Anne Beaudreau, a fisheries professor at the University of Alaska Fairbanks.

But there’s a surprising and troubling hitch to the promise of diversification. Alaskan fishermen are trending in a different direction — fewer people are fishing, and they are fishing fewer types of fish.

“Commercial fisheries are becoming more consolidated to fewer people, and fishermen may have fewer opportunities to diversify,” said Beaudreau.

Beaudreau is part of a research team organized by the National Center for Ecological Analysis and Synthesis that has been working to get the big picture on these trends, particularly in one of the world’s most important and lucrative commercial fishing hubs, Alaska, which contributes more than $4 billion annually to the U.S. economy and reaps more fish than all other states combined.

Working with 30 years of data that trace the income and catch of individual commercial fishermen in Alaska, they found the number of permit holders statewide has declined by roughly 25 percent from the early 1990s to 2014. Falling in parallel is the number of commercial fishermen with more than one permit — 30 percent held multiple permits in 1988, while only 20 percent did so by 2014.

“These kinds of patterns are mirrored across the U.S. and other regions. It just happens that we have the best data in Alaska, so the trends are clearer,” said Eric Ward, another research team member and an ecologist with NOAA’s Northwest Fisheries Science Center.

There are many contributing factors to consolidation, specialization and lack of diversification in the fishing industry, but one that stood out in the data is Alaska’s implementation of individual fishing quotas.

While intended to help stabilize fish populations, improve the safety of what was once a derby-style dash for fish and give every permit holder a piece of the fishery pie, the quota system seems to have incited a drop in the number of commercial fishermen.

For example, the Pacific halibut fishery in the Gulf of Alaska alone lost roughly half of its fishermen in the 20 years following the implementation of individual fishing quotas in 1995.

Statewide, the drop was a result in part because of the rise in permit price, leading many fishermen to either sell their permits or drop out of the business. The quotas are also allocated based on having a history of commercial fishing, which has made it difficult for anyone new to enter the industry.

“It matters that fewer people are fishing now than they used to, because it’s changing the face of our fishing communities across Alaska,” said Beaudreau, alluding to another trend — the graying of the fleet, as fewer young people are able to buy into the business.

Despite the good intentions of individual fishing quotas, “there’s not really a consideration of what that means for individual fishers’ variability in income year to year,” said Ward, noting that fishermen don’t have risk-mitigation programs like crop insurance for farmers.

Indeed, in the latest version of the U.S. Congressional Budget Office report on income variability, 60 percent of the total U.S. population had stable incomes. The report defines a variable income as fluctuations in earnings by 25 percent or more from year to year.

Compare that to the numbers run by Beaudreau, Ward and their colleagues for commercial fishermen, and the relative instability of the commercial fishing profession stands out: Only 34 percent of fishermen had stable incomes throughout the same timeframe.

“Most people would be uncomfortable with those levels of variability in income year to year,” Ward pointed out.

And therein lies the rub of increasing specialization among fishermen. They are losing their buffer against business-disrupting, income-rollercoaster changes, which in Alaska happen at a relatively study pulse.

The history of fisheries in Alaska is riddled with disruptive events, from huge changes in the structure of fisheries management, such as the switch from federal to state management in 1960 and the implementation of the limited entry system in the early 1970s; to disasters, such as the great Alaska earthquake in 1964 and the Exxon Valdez oil spill in 1989; and to shifts in the supply and demand of wild fish.

“You can almost think of these disruptions as something that happens regularly. It’s just the flavor changes from year to year,” said Richard Brenner, a fish biologist at the Alaska Department of Fish and Game.

In more recent history, there’s the unprecedented volatility of the Gulf of Alaska’s pink salmon population in Prince William Sound, where fishermen harvested historically high returns in 2013 and 2015 and then near-record lows in 2016. While the federal government just allocated $50 million to fishermen, processors, researchers and other stakeholders as compensation for the 2016 pink disaster, that took a complicated act of Congress, a multiyear process that doesn’t provide any real long-term (or short-term) insurance to fishermen.

The bright side is there are lots of ways fishermen could diversify their portfolios, including investing in different types of harvest permits, targeting assorted species, or picking up other non-fishing gigs.

And according to the research, it’s investing in a diverse portfolio of permits that seems to be the best bet for income stability.

“You may not make more money, but you’ll have less variability,” said Beaudreau.

For example, when low herring populations closed the fishery in Prince William Sound in 1999, fishermen with other permits were able to move on to other fish — most commonly, salmon — but those who had specialized in herring and were without capital to invest in other permits left the business.

Climate change presents another cloud of uncertainty that that could further prove the payoff of diversifying. Already, fishermen (and fish) are feeling its effects in Alaska’s high-latitude waters, and remaining adaptive to these changes would behoove at least fishermen.

“There’s potential good and bad news with climate change,” said Brenner.

A case in point is the warm blob. From 2013 to 2015, a huge mass of warm water formed and lingered in the Gulf of Alaska, disrupting continental weather patterns and denting some stocks of salmon, cod and other cold-water-loving fish, while also bringing new opportunities.

“There’s market squid all over Southeast Alaska now, and up until a few years ago, that was kind of unheard of,” said Beaudreau.

All that said, there are trend-bucking anomalies, when diversification may not necessarily be a boon to business.

In Alaska’s Bristol Bay, for example, where salmon populations are healthy and relatively stable — and its sockeye fishery reigns as the world’s largest — fishermen have been experiencing record returns on sockeye, perhaps thanks to climate-induced latitudinal shifts in the species’ range.

In fact, across the state, salmon appear to have become a safety-net fish. Fishermen tend to turn to salmon when their primary catch is suffering, like the case of herring in Prince William Sound, resulting in more and more fishermen specializing in salmon.

Salmon also are not managed through the individual quota system, which makes it easier for fishermen to enter those fisheries.

The lure of salmon specialization simultaneously provides more impetus for protecting the state’s five species, which is perhaps a no-brainer to Alaskans, but also highlights the potential vulnerability of these fishermen. If salmon prices or populations were to decline, salmon fishermen could find themselves in troubled waters.

A bottom line from the research is the need for more flexible regulations and management approaches that allow more fishermen to diversify their portfolios and be prepared to adapt to changes.

“There are a lot of examples of diversification in commercial, recreational and subsistence fisheries across the world,” said Beaudreau. “In other words, when given the opportunity, people will diversify.”