Increasing our net gain
Harvesting efficiency is the percentage of the value of the catch after expenses have been paid. If a fisher spends $100 to catch $1,000 worth of fish, his efficiency is 90 per cent. If he had to spend $600 to catch the same fish, his efficiency is only 40 per cent.
Historically, inshore fishermen catching cod and lobster had efficiencies in the 70 to 90 per cent range. My nomination for the most efficient harvesters in Newfoundland’s past would be the Petty Harbour handline fishers. With close proximity to the grounds, low capital investment and minimum expenses, they often achieved efficiencies in excess of 90 per cent.
Harvesters are paid through a share arrangement, not fixed wages. While catching more fish or getting higher prices will improve wages, so will reducing expenses. The expenses in the harvesting sector have been rising steadily and total wages fallen accordingly. Newfoundland has a natural advantage over our competitors due to our proximity to one of the richest fishing grounds in the world. Our harvesting policies must be tailored to benefit from that advantage.
Many species of fish, especially cod, come closer to shore during the spring to autumn seasons and can be fished more profitably and more efficiently using smaller vessels. Government policies should give preferential treatment to the most efficient harvesting methods.
The following example illustrates wrongheaded policy. In the ’ 70s Canada subsidized our offshore fleet and encouraged them to fish Hamilton Bank in the dead of winter. Those fish would have come to the shore during the summer and caught more efficiently using smaller boats. It was a bad decision from a profit and investment point of view. The fact that the stock was destroyed in the process makes the decision even worse.
We should have a concept of Newfoundland Inc., Harvesting Division, a business entity whose goal is to return maximum profits to its shareholders, the fisherpersons of Newfoundland and Labrador. By giving preferential rights to fishing practices that minimize expenses and produce the highest efficiencies, we can obtain more profit from our current resource.
The current efficiency of our harvesting sector is not readily available but is possible to calculate. We know that the landed value of our ocean resources is nearly $1 billion. Profits from harvesting will be declared as taxable income and Revenue Canada breaks out fishing income from other income. A good research project for someone at Memorial University would be to calculate our fishing efficiency and the actual profit that Newfoundland Inc. receives.
This is a followup to my June 7, 2014 letter on effort based management (the lobster model). The aim of these letters is to identify a system “To manage the harvesting of our ocean resources so that we will maximize the economic profit to the province while maintaining the sustainability of the stocks.”
Fisheries, and other renewable harvesting activities, are different than industrial activities in that sustainability of the resource has to be an essential part of the business plan. Processing, on the other hand, is an industrial activity like any other industrial activity and free market principles will generate best practices to maximize profits for that sector.
Free market principles are not practised in the Newfoundland processing sector today and we are missing out on the inventiveness possible in this area.