Declining primary production has caused the economy to tighten, and the seafood industry is pleading for help as times get even tougher
Despite global demand for New Zealand fish, soaring fuel prices and labour shortages mean fishing companies can't afford to send out their boats.
It's symptomatic of wider problems – our producers are unable to capitalise on global commodity prices that have been driven up by the Ukraine war.
Both Talley's and Westfleet have docked 400 to 550 tonne deepwater fishing trawlers, because it's uneconomic to send them to sea. And many of the country's 800 smaller inshore fishing businesses are in an even more precarious position.
Doug Saunders-Loder, chair of the Federation of Commercial Fishermen, says he is hearing from many with just one or two boats, whose livelihood is tied up at the wharf.
"A Nelson-based trawler, for argument's sake, has to travel some distance to get to the grounds, and needs to consider the fish availability, the cost of the fuel, and whether it's an economic and economical option," he says.
"I've got guys that have been reporting to me that it's having so much impact that they are making management decisions in respect to the businesses, to the extent that they're dropping crew, and reducing the number of days fishing. So that's obviously having an impact on the volume of fish they are landing."
Saunders-Loder and Dr Jeremy Helson, chief executive of Seafood NZ, have sought a meeting with Government ministers David Parker (fisheries) and Megan Woods (energy) about the cost of marine fuel. Unlike petrol and diesel for land transport, the Government hasn't intervened to lower prices.
There is no excise charged on maritime fuel, but fishing companies are still hurting. Last year, about 30 percent of the value of the catch might go to pay for the fuel. Now, Saunders-Loder says, it's up to 70 percent for some boats.
Ministers are being asked to trim a few percent off either the GST or the emissions trading scheme costs.
Helson says the costs of Covid, employment, fuel, and logistics are seeing formerly robust and longstanding businesses make difficult decisions. "Vessels are being tied up and the costs versus returns equation is increasingly unfavourable," he says.
"In the past year, fuel has increased around 150 percent. What this means in real terms is that fuel is consuming up to three quarters of the value of the catch. That leaves little to pay crew, freight, and other costs, without factoring in any return to the fisher.
He points out that with inflation hitting 6.9 percent, the largest rise since 1990, that also puts further pressure on road freight operators, who are passing their increased costs on to the major customers like the fishing industry.
"Despite the Government’s welcome reduction in petrol excise and road user charges in April, that relief did not include fuel used for fishing vessels," Helson says, "and there is serious concern about industry’s ongoing capacity to contribute to the economy, employment, and the satellite industries that rely on the fishing sector’s business.”
Statistics NZ published New Zealand's first quarter GDP this week: a decline of 0.2 percent led by a 1.2 percent reduction in primary production.
According to the economist Gareth Kiernan at Infometrics, the exports decline equated to a 14 percent seasonally adjusted decline in activity – "a GDP killer". "This shockingly bad result meant that export volumes were at their lowest since 2009."
At Newsroom's request, Kiernan has collated more up-to-date export figures from Stats NZ that show April 2022 seafood and fruit exports quantities up significantly on the same month last year, but the industry is playing catch-up.
In total, the seafood sector exported 802,400 tonnes in the first four months of this year, which is a slight improvement on locked down 2021, but far behind the 925,100 tonnes exported in the same period in 2020.
Catherine Beard, the executive director of Export NZ, says the problems are not with global demand for our food, but with our straitened ability to supply that demand.
"Even when times are tough, and consumers worry about spending in their budgets, food tends to be the last thing that you compromise on. It's a good bedrock export to have."
The difficulty, as the fishing companies point out, is supplying the produce cost-effectively. Beard says business will remain "pretty tough" for exporters this year: "They're getting high commodity prices, but profitability is probably no better because of the higher costs."
"The thing that has really been in our favour is the big commodity exporters tend to be scaled up, and a lot of them are collaborating on shipping through groups like Kotahi and that gives them quite a lot of clout. They've just got more bargaining power and the shipping lines are really trying hard to help. So it's really the small to medium size exporters that will be most impacted."
Ray Smith, the director-general of the Ministry for Primary Industries, says demand for New Zealand's seafood is rebounding and officials are predicting an impressive 9 percent jump in export revenues by the end of June, taking the earning to $1.94 billion for the year – close to pre-pandemic levels.
That forecast has been revised up because of good prices on the world market – but longer term, officials expects export revenues to stall at that level.
The revenue forecast assumes that fishing companies can meet that demand. "Higher fuel prices, logistics constraints and higher costs of shipping are creating uncertainty over the outlook period," the ministry acknowledges this month.
"Freight issues are expected to persist throughout the next year, and fuel prices are expected to remain high due to the Russia-Ukraine conflict. Key freight issues include a shortage of chilled shipping containers and ships docking at New Zealand ports as well as various congestion and scheduling issues, which reduce certainty about collection and delivery timing."
There is hope for the sector in Government plans to grant access to skilled overseas workers, through the Accredited Employer Work Visa. From September 2022, sector agreements for the seafood and meat processing sectors will be in place to ensure ongoing access to lower-paid migrant workers in exchange for sector improvements.
There is healthy demand for New Zealand seafood in China, the US, the European Union and Australia. And the new UK free trade agreement also offers some encouragement. Tariffs will be eliminated from day one on hoki, and on mussels after three years. Overall, 46 percent of New Zealand’s current fish and seafood trade will enter the UK duty-free when the agreement enters into force, and 100 percent within seven years.
Rock lobster, mussels, hoki and salmon are key contributors to seafood export revenue and collectively accounted for 53 percent of total seafood exports last year.
But there is little good news on the horizon concerning fuel prices. "The rise in diesel prices has affected fishers all around the world with some crews deciding not to go fishing in recent months as the cost of fuel would make it difficult just to break even," say ministry officials, in their June situation report.
"While the impact of fuel costs is expected to be less severe in New Zealand than in countries that rely directly on Russia for fuel, New Zealand fishers’ profitability is likely to be affected in the coming years."
Doug Saunders-Loder says some fishing company operators have had enough.
"I've had a fisherman today in my office, who's been fishing for 35 years out of Nelson. He's talking about fuel prices, talking about some of the impositions that are coming our way in terms of fisheries amendment bills and the introduction of cameras.
"And he's just thinking, 'Well, why would I continue to bother employing people and counting on catching fish when I'm just continually head-butted?'"
