Stable quotas increase profitability

Potential benefits are improved predictability in the supply of raw materials and unnecessary build-up of capacity in the fleet and industry in periods when the quotas increase. Both cause economic problems and bankruptcies when stocks decrease and quotas must be lowered.

“The past 30 years have seen three periods, each lasting from 3-5 years, where cod quotas have reached peak levels. The result has been over-investments in fishing vessels and industrial plants, with ensuing problems when, after a few years, the quotas must be reduced to avoid overexploitation”, says Senior Scientist Bent Dreyer.

The last decline came in 2001/2002, with many bankruptcies along the coast.

– Can fluctuations in the fisheries industry be avoided when the size of the fish stocks varies?

“Variations in the size of fish stocks will always exist, but the quotas can be maintained from year to year. By keeping the quotas lower than what is possible to fish this year with a high stock estimate, more fish will be left in the sea. In periods with lower stocks, we can take the same quantity of fish because the quotas are at a sustainable level. The quota adjustments should be gradual, e.g. with an increase or decrease of 10% from one year to the next. Seen as a whole over several years, a stable withdrawal will give just as much fish as when the withdrawal fluctuates with stock size.”

– Why isn’t it most profitable to take the maximum of what nature can give?

“Large catch peaks are followed by big investments, for which there is no basis in the long run. This causes a huge gap between the raw material supply the industry needs and what actually is possible to extract from the sea. Profitability is weakened as the debt increases, which ultimately means a new decline with liquidations and bankruptcies. The problems are enhanced in that new vessels and industrial plants investments, due to time lags, first become fully operative when the quotas are on their way down.”

Dreyer also says that these fluctuations complicate longterm marketing efforts, which are dependent on building up products and markets and holding the supply stable over time.