MFR PAPER 1130

An Analysis of Prices Paid to Fishermen Before andAfter the Establishment of a Fishery Cooperative

CHARLES W. LAMB, JR.

INTRODUCTION

"A fishery cooperative consists ofa group of individual fishermen act­ing together for mutual benefit andis designed to accomplish group ob­jectives" (Smith, 1974). These groupobjectives are primarily economic innature and often directly related tothe prices paid to the fishermen fortheir catch. Common motivations tocreate fishery cooperatives includeexcessive price fluctuations, weaknessof prices at the primary producerlevel, and/or insufficient storage andprocessing facilities.

This paper reports the findings ofa case study which compared theprices received by fishermen prior toand after the establishment of a uniquefishery cooperative organization.

BACKGROUND

In January, 1965 the Federal-Pro­vincial Conference on Fisheries De­velopment in Ottawa, Ontario includeddiscussions on the marketing problemsfacing the inland freshwater fish in­dustry of Canada. These deliberationsled to the establishment of the Inter­Governmental Committee on Market­ing Organization for the FreshwaterFisheries, which later became theSub-Committee of the Federal-Pro­vincial Prairie Fisheries Committee onMarketing Organization. This sub­committee was charged with the re­sponsibility of evaluating the feasibilityof adopting marketing board tech­niques within the industry. Its rec­ommendations resulted in the forma­tion of the Commission of Inquiryinto Freshwater Fish Marketing under

the leadership of George H. McIvor.The charge to the Commission read:

The Commission is hence in­structed to inquire into and reportupon the possibility of better coor­dination which will achieve moreorderly marketing ... and reportupon whether the current marketingsituation warrants an export mo­nopoly. whether persons and orgal1.­izations involved in the marketingprocess want organized marketing;and whether an export monopolyor marketing board technique ofselling can work for marketingfreshwater fish (Mcivor, 1965).

Finally, based upon the findings of theMcIvor Commission, the Senate andHouse of Commons on 27 February1969 passed legislation creating aCrown corporation named the Fresh­water Fish Marketing Corporation.

The Corporation was established asthe sole interprovincial and exportseller of the products of the commer­cial freshwater fisheries of the prov­inces of Manitoba, Alberta, and Sas­katchewan, the Northwest Territories,and the northern portion of Ontario.The objectives of the Corporation, asestablished by law, are: a) the market­ing of fish in an orderly manner; b)increasing returns to fishermen; andc) promoting international marketsfor, and increasing inter-provincial

Charles W. Lamb, Jr. is Assis­tant Professor, Department ofMarketing, Texas A&M University,College Station, TX 77843. Thispaper is a result of researchsponsored by the Commerce De­partment's Office of Sea Grant,National Oceanic and Atmospher­ic Administration under GrantNo. 2-35364.

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and export trade in, fish (Acts of theParliament of the Dominion of Can­ada, 1969).

Products

The primary species of the Canadianfreshwater fishery are whitefish, pick­erel, pi ke, sauger, and trout. In 1968these five species accounted for rough­ly 37 percent of the total commerciallandings of freshwater fish in Canada,and over 62 percent of its landedvalue (Anonymous, 1972). Other spe­cies indigenous to the freshwater fish­ery include tullibee, perch, goldeye,mullet, cisco, sucker, redhorse, turbot,sheepshead, and buffalo fish. Histori­cally, these species have been of lowcommercial value and at best consid­ered by-products of fishing for thehigher priced species. Many of theseunderutilized or underexploited spe­cies are available in abundant supply.

Markets

The Canadian freshwater fishery isheavily dependent on export marketsfor the sale of its products. More than80 percent of all commercial fresh­water fish landings are exported and95 percent of this volume flows tothe United States.

OBJECTIVE

The objective of the study was todetermine whether or not returns tofishermen have increased since theestablishment of the Freshwater FishMarketing Corporation. Three criteriawere selected to evaluate the Corpora­tion's efforts to increase returns to

Source: Canada, Department of the Environment, Intelligence Services Division. Marketing ServicesBranch, Fisheries Service. Annual Statistical Review of Canadian Fisheries, Vol. 4,1972.

Teble 1.-lndex of prien received by fIIherrnen, 1966-1971 (1935-1939= 100) (veluee In cenle perpound)

Five Primary Species All Species

Wholesale Dellated Dellatedprice Ave rage landed Average landed Average landed average landed

Year index va lue per pound value per pound value per pound value per pound

1966 2595 21.1 6.13 12.2 4.71967 264.1 16.9 6.40 11.1 4.21966 269.9 16.6 6.97 11.3 4.21969 262.4 22.6 8.00 13.1 4.61970 266.4 21.6 7.54 14.8 5.21971 269.9 20.3 7.00 16.2 5.6

fishermen. These criteria are: a)changes in average prices received byfishermen for the combined landingsof the five primary species; b) changesin average prices received by fisher­men for the combined landings of allspecies; and c) changes in the percent­age of export price paid to fishermen.

PRICES RECEIVEDBY FISHERMEN

Prices received by fishermen, whichare best measured in terms of reallanded price per pound, can be ana­lyzed both by species and by province.Since the primary concern is to deter­mine if fishermen are receiving greateroverall returns per pound in the totalarea under the jurisdiction of theFreshwater Fish Marketing Corpora­tion, changes in prices for particularspecies or in specific provinces willnot be considered. Therefore, analysiswill be restricted to a) the averagereal prices per pound received byfishermen for the combined landingsof the five primary species in thepartici pating provinces, and b) theaverage real prices per pound receivedby fishermen for all species landed inthe participating provinces.

In order to determine if landedvalue per pound increased followingthe creation of the Corporation. thefollowing null hypotheses were tested:

1) The average real price perpound paid to fishermen for thecombined landings of pickerel,sauger, trout, and whitefish harvest­ed in Ontario, the prairie provinces.and the Northwest Territories wasnot higher following the establish­ment of the Freshwater Fish Mar­keting Corporation than before itwas created.

2) The average real price perpound paid to fishermen for thecombined landings of all speciesharvested in Ontario, the prairieprovinces, and the Northwest Ter­ritories was not higher followingthe establishment of the FreshwaterFish Marketing Corporation thanbefore it was created.Defining /J.l as the mean real price

per pound paid to fishermen for thecombined landings of the five primaryspecies of Ontario, the prairie prov­inces, and the Northwest Territoriesbefore the Corporation was estab­lished. and !J.2 as the mean real priceper pound paid to fishermen for thecombined landings of the five pri-

mary species in Ontario, the prairieprovinces, and the Northwest Terri­tories after the Corporation was creat­ed, the first null hypothesis can bestated HO:!J.J - !J.2':30, with theassociated alternative hypothesis H J:!J.I !J.2<0. Similarly, defining!J.3 as the mean real price per pound

paid to fishermen for the combinedlandings of all species in Ontario, theprairie provinces, and the NorthwestTerritories before the Corporationwas established, and !J.4 as the meanreal price per pound paid to fishermenfor the combined landings of all speciesin Ontario, the prairie provinces, andthe Northwest Territories after theCorporation was created, the secondnull hypothesis can be stated Ho:

!J.3 - !J.4 ':3 0, with the associated

alternative hypothesis HI: 113

!J.4 <0.The I-test of the difference between

two means was used to test the nullhypotheses. The assumptions of thistest are: a) the real prices are randomvariables from normal populations.and b) the variances of the parentpopulations are equal. In this case afurther assumption must be made;namely, that neither the means northe variances of the parent popula­tions are a function of time. Thisassumption is supported by the resultsof multiple regression analysis whichindicated that time trend, price inthe previous year, and landed poundswere all poor indicators of the averagereal price of fish for any given year.

To tesl the two null hypotheses, theappropriate mean real price for thethree years prior to the establishmentof the Corporation was compared tothe mean real price for the three yearsafter establishment of the Corpora­tion (Table I). Therefore, each testhad four degrees of freedom.

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As Table 2 shows, the first nullhypothesis could be rejected at the0.148 level of significance. This indi­cates that the change in average realprice per pound paid to the fishermenfor the combined landings of the fiveprimary species after the Corporationbegan operations is not statisticallysignificant at a reasonably low levelof significance. Therefore, the nullhypothesis !J.I - !J.2;;'0 cannot rea­sonably be rejected. In other words,it cannot be concluded that the averagereal price per pound fishermen re­ceived for the five primary speciesincreased after the Corporation wasestablished.

Table 2 also shows that the secondnull hypothesis could be rejected atthe 0.005 level of significance. This

Teble 2.-R.eull. of I-T.el·

Signif-icance

Com- prob-puted abil-

X, X2 !Xt-X2 t ity' •Avg realprice/lbfor the 5primaryspecies 7.15 7.51 0.300 -1.20 0.148

Signif-icance

Com- prob-

SX3 - X4puted abil-

X3 X. t i1y' •

Avg realprice/lbfor allspecies 4.36 5.13 0.169 -4.55 0.005

·Values used to compute XI, X2, X3 , andX. can be found in Table 1.• 'Significance probabilities reported in Table 2correspond to the minimum levels of signifi­cance for which the associated null hypolhesescould be rejected.X, = The sample mean of average real pricesper pound for the primary species for the threeyear period before the Corporation was created.X2 = The sam pie mean of average real pricesper pound for the primary species for the threeyear period after the Corporation was created.Xa = The sample mean of average real pricesper pound for all species for the three yearperiod before the Corporation was created.X. = The sample mean of average real pricesper pound for alt species for the three yearperiod after the Corporation was created.sxa - Xb = the estimated standard error of thedifference between the two means.

MFR Paper 1130. From Marine Fisheries Review, Vol. 37, No.3,March 1975. Copies of this paper, in limited numbers, are availablefrom 083, Technical Information Division, Environmental ScienceInformation Center, NOAA, Washington, DC 20235.

indicates that the change in averagereal price per pound paid to the fisher­men for the combined landings of allspecies after the Corporation beganoperations in 1969 is statistically sig­nificant. Therefore the alternative hy­pothesis J.l3 - fJ.4 < 0 is to be accept­ed. In other words, it can be concludedthat the average real price per poundpaid to fishermen for species otherthan the five primary species increasedafter the Corporation was created.

A possible explanation of why av­erage real prices increased for otherspecies, but not for the five primaryspecies, is that species of fish previous­ly not commercially exploited are nowbeing introduced on the market innew product forms. These essentiallynew products command a higher mar­ket price which can ultimately bepassed back to the fishermen.

This explanation, although tenta­tive, is supported by findings previous­ly presented elsewhere (Lamb, 1974).For example, prior to the creation ofthe Corporation, processing opera­tions in the industry were limited tosimple filleting. The Corporation, onthe other hand, has invested in expen­sive, sophisticated machinery andequipment which is capable of per­forming a variety of technologicallyadvanced processing operations. Thisnew production capacity combinedwith large, modern cold storage fa­cilities and the Corporation's expan­sion into the convenience food markethas made the underutilized speciesmore desirable, thus more profitableto the fishermen. The five primaryspecies, which were previously con­sidered the mainstay of the industry,have continued to be marketed pri­marily whole and filleted. Since theseproducts are marketed in essentiallythe same form as before the corpora­tion was created, their real price perpound has not increased.

PERCENT OF EXPORT PRICESPAID TO FISHERMEN

The third criterion selected to evalu­ate the Corporation's efforts to in­crease returns to fishermen is a com­parison of the percentage of exportprices paid to fishermen before andafter the Corporation began operations.

For the 3-year period prior to thecreation of the Corporation, fishermen

in the participating provinces re­ceived an average of 69 percent of theexport price of fish. For the 3-yearperiod following the creation of theCorporation, fishermen in the partici­pating provinces received an averageof 67.4 per cent of the export priceof fish (Anonymous, 1972). In otherwords, the percentage of export pricespaid to the fishermen decreased slight­ly after the Corporation was created.

One possible explanation why theCorporation has not increased the per­centage of the export price paid tofishermen might be that marketingcosts have not changed; therefore thepercentage of export prices paid tofishermen has not increased. This is aweak argument however, because oneof the reasons the Corporation wascreated was to reduce the margin be­tween prices to fishermen and exportprices. The Mcivor Commission noted:

There is a large spread betweenthe price received by the exporter­processor and the price paid to thefisherman ... The Commission findsthat on average the spread is exces­sive because handling, processingand storing are inefficient (Mcivor,1965).

It is therefore concluded that, re­gardless of the reason, the Corporationhas failed to reduce the margin be­tween 'prices paid to fishermen andexport prices. This is clearly an areafor more detailed study by the Cor­poration.

SUMMARY

In sum, the change in average landedprice per pound for all species sincethe Corporation began operations in1969 is statistically significant. Fisher­men have benefited from the Corpor-

ation's development of markets forpreviously underutilized species. Pricespaid the fishermen for these specieshave increased, apparently as a resultof advanced processing techniquesthe Corporation has adopted and itsdevelopment of markets for these spe­cies in new product forms.

Two areas are apparent where thefishermen are not better off than theywere prior to the establishment of theCorporation. Landed price per poundfor the five primary species did notsignificantly increase after the creationof the Corporation, and the percentageof export price received by the fisher­men did not increase. The availabledata fail to suggest why these benefitswere not forthcoming!.

LITERATURE CITEDActs of the Parliament of the Dominion of

Canada. 1969. An Act to regulate inter­provincial and export trade in freshwaterfish and to establish the Freshwater FishMarketing Corporation. 17-18 ElizabethII, Chapter 21, 17 p.

Anonymous. 1972. Annual statistical re­view of Canadian fisheries, 4, 195 (r 7 J.[In Engl. and Fr.) Intell. Servo Div.,Mark. Servo Branch, Fish. Serv., Dep.Environ., Ottawa, 128 p.

Lamb, C. W., Jr. 1974. An analysis ofmarketing systems for Canadian freshwaterfish in two time periods. Unpubl. D.B.A.Diss., Kent State Univ., Ohio.

McIvor, G. H. 1965. Report of commis­sion of inquiry into freshwater fish mar­keting. The Queen's Printer, Ollawa.

Smith, F. J. 1974. Organizing and operat­ing a fishery cooperative. Oreg. StateUniv., Corvallis.

I For further information concerning theimpact of the Freshwater Fish MarketingCorporation on the marketing system andparticularly its benefits to fishermen, see:Lamb, Charles W., Jr. and D. F. Mulvihill,"The Freshwater Fish Marketing Corpora­tion of Canada," I nstitute for 21st CenturyBusiness, Kent State University, Kent,Ohio, 1974; and Lamb. Charles W., Jr.,"A Comparative Analysis of Marketing Sys­tems for Canadian Freshwater Fish," in"National Needs & Ocean Solutions: Pro­ceedings of the Tenth Annual Conference,"Marine TechnolOgy Society, Washington,D.C., 1974, pp. 1029-1038.

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