Alaska has kicked off a new salmon season amid a tough environment for fishermen and processors. While last year’s catch was handsome – it was the 10th time Alaska’s annual commercial salmon harvest exceeded 200 million fish – low prices and an early halt to fish purchases frustrated many fishermen.
Subsequently, we’ve seen a succession of worrisome announcements in the processing sector, with companies announcing plant closures and sales. One major processor, Peter Pan, appears to be imploding, swamped in financial claims. A resolution just passed in the Alaska Legislature says state’s seafood industry is in “economic crisis.”
All this has cast an anxious air over Alaska’s salmon industry as the new season begins.
National Fisherman is reaching out to top executives of major processing companies to try to get a read on market conditions and operational plans for the year. Read the interview with Silver Bay here.
Today, we talk with John Hanrahan, CEO of OBI Seafoods.
Seattle-based OBI was formed in 2020 through a merger of Ocean Beauty Seafoods and Icicle Seafoods, two legacy Alaska processors. The company has 10 processing plants around the state. Ownership includes Canadian seafood power Cooke and Bristol Bay Economic Development Corp.
Hanrahan started with Ocean Beauty in 1987 as a staff accountant and worked in many roles during his decades with the company. He was named OBI’s CEO in November 2023, succeeding the retiring Mark Palmer.
In recent months, OBI announced some tightening in its Alaska salmon operations. “Given the current market conditions and poor salmon forecast,” the company said, it won’t be able to offer tendering service to setnetters at Alitak on the remote south end of Kodiak Island. OBI also announced it won’t operate its Larsen Bay plant this year.
OBI was a big winner in a recent round of government fish procurement, with the U.S. Department of Agriculture (USDA) on March 6 announcing it purchased $54 million in canned pink salmon and $14.4 million in canned red salmon from the company.
Here’s our conversation with Hanrahan.
Q: What are the major issues confronting the Alaska salmon industry this season? I’m particularly interested in where we stand with inventory levels.
A: We see two areas of concern as we head into summer salmon season.
Interest rates, which are up 5 percent over March 2022 levels, continue to be a great concern. The Alaska salmon industry purchases most of its product from June through August. High interest rates increase the incentive for our customers to delay purchases, and increased holding costs reduce the value returned to processors and harvesters.
Second, the dollar continues to be strong compared to the yen and Euro, reducing our customers’ purchasing power in those markets. The Japanese yen has lost 30 percent of its value compared to the dollar in the last three years.
Inventory levels for salmon will be low coming into the season. We have seen significant improvement over the last four months.
Q: How important are USDA salmon buys to the industry right now?
A: The USDA purchasing program is a very important tool to remove excess inventory from the market. This program is vital to the success of the agriculture and meat industries. We are thankful that USDA is stepping up support of seafood.
Q: Is the industry facing a credit crunch? Is bank financing becoming tighter or more expensive for processors? To the extent you as a company have financed fishermen, are you still able to do this?
A: Interest rates are a heavy burden for manufacturers. Many industries, including seafood, are suffering, making credit more restrictive.
Q: What is the environment for ex-vessel prices heading into this season? Should fishermen temper their expectations?
A: We do not comment publicly on preseason ex-vessel pricing.
Q: Can you confirm OBI’s plans for Kodiak Island this year? What will happen with the setnetters at Alitak? Also, you don’t intend to operate your Larsen Bay plant, correct?
A: Due to the low pink forecast, we will not process at Larsen Bay this year. It will operate in 2025. Our Kodiak city plant will process fish from the island this year. Our plant in Seward will be available to support volumes if needed.
Q: Aside from the Kodiak moves, is OBI making other changes in its Alaska salmon operations this year? What are you telling fishermen?
A: All other OBI plants are operating in 2024. We have reviewed all areas of the business and have aggressive cost-saving and efficiency initiatives in place to increase value.
Q: Looking outward, do you see any room for optimism in the Alaska salmon industry?
A: We have seen positive signs over the last four months. Inventories from 2023 are mostly sold, and we feel that will strengthen the market and increase the velocity of sales in 2024 compared to 2023 and 2022.
