What's the deal with Norway’s “production fish” drama?

In recent weeks, we’ve heard a great deal about the Norwegian salmon industry term “production fish” - or prodfisk, as they say in Norwegian. Now the EU has waded into the matter, backing up calls from European seafood processors to change Norway’s approach to the trade of this fish category.

But what’s all the fuss about? 

The term prodfisk somewhat euphemistically refers to salmon of the lowest quality, exhibiting signs of damage, injury or deformity, as opposed to “superior grade” perfectly-formed healthy fish which command the highest prices for the most demanding markets.

Production fish are subject to an export ban within Norway, whose laws prohibit damaged salmon from being exported whole. The fish must first be processed within Norway’s borders to eliminate the damaged parts before the resulting salmon products can be transported outside the country. 

And there has been plenty of prodfisk output recently in Norway, if we look at recent statistics from both the salmon firms’ fourth-quarter results and from Norwegian state authorities. 

According to Norway's Food Safety Authority Mattilsynet, the share of production fish has steadily increased from 5% in 2018 to 15% in 2023 - but this winter season has shown the industry's worst results, with the proportion of prodfisk soaring to over 36% some weeks this year.

Norway's salmon farmers have had a particularly difficult winter season, blighted by an array of biological problems, from “pearl chain” jellyfish to sea lice, to winter sores, ILA infections and even a couple of outbreaks of pancreatic disease.

Fish mortalities have soared: last year, Norway recorded its highest mortality rate of sea-phase salmon ever. 

According to Mattilsynet’s Fish Health Report for 2023, a total of 62.8 million salmon (16.7%) and 2.5 million rainbow trout (14%) died in the sea-phase production in Norway last year.

The most common causes of death were injuries sustained during delousing operations, complex gill disease, and winter ulcers – this latter condition often develops following skin injuries sustained during the mechanical removal of sea lice.  

However, last autumn's unusually high numbers of stinging jellyfish in Norwegian waters meant jellyfish injuries also ranked among the top ten health challenges.

Norway’s Insitute of Marine Research warned about a bloom of pearl-chain jellyfish in November; shortly afterwards SalMar said it had been lost 1.2 million fish due to an "unusually intense influx" of stinging jellyfish, while Leroy Seafood and Grieg Seafood also reported mortalities due to the jellyfish.

With such a challenging biological scenario, it’s not surprising that many of the salmon produced during this period are not up to the “superior grade” standard.  

And, with so much prodfisk on their hands, offloading the glut of low-quality salmon through irregular means can sometimes prove too great a temptation for certain companies. 

The Norwegian press has been reporting on a series of cases involving the illegal export of production fish, some of which have resulted in hefty fines and seizure of products by Norway's Food Safety Authority Mattilsynet. For example, Norwegian news outlet DN reported in January that export company Bravo Salmon had been fined for illegal exports of production fish to Denmark in 2018-2019.

The same month, it emerged that Masoval majority-owned processor Pure Norwegian Seafood (PNS) had sold fish not fit for human consumption, as well as illegally exporting “production grade” salmon. Masoval reported the situation to Mattilsynet after suspicions were raised in October 2023. A subsequent investigation revealed that between 300 and 400 tonnes of production fish had been exported by PNS over the preceding four years.

And these are not isolated cases, according to Mattilsynet, who recently announced a crackdown on illegal exports after receiving a steady stream of reports on rule-breaking.

Other companies have tried to deal with the prodfisk glut by seeking a legal work-around. 

In February, industry heavyweight Mowi formally requested an exemption to the export rule, arguing that there was insufficient processing capacity in Norway to correct the large amount of production fish witnessed so far this year.

Mowi CEO Ivan Vindheim also reportedly called the export ban a "competition-inhibiting and protectionist rule."

Mowi's stance prompted outrage from Sjomat Bedriften’s CEO Robert Erikkson, who called the proposed exemption “cheating", arguing that such an exemption would “make it easier to turn a blind eye to the regulations.” 

"The record high proportion of production fish we have witnessed so far this year is a reputational problem for the industry, and rectification must take place in Norway before the fish is sent to consumption in the market. It is therefore crucially important that the authorities and political leadership are clear on how today's regulations should be handled and practiced. The rules are not open to misinterpretation," Erikkson said at the time. 

However, exemptions to the trade ban are not completely unheard of. During the COVID-19 pandemic in 2020, the Norwegian Food Safety Authority granted controversial exemptions to both Mowi and Leroy Seafood, but justified this due to the "extraordinary situation" at the time.

Outside of Norway, the European seafood processing industry takes a different view of the ban.

Third-party seafood processors located within the EU – particularly those in Denmark and the Netherlands - have called for the production fish export ban to be rescinded, and the European Commission itself has recently officially listed the Norwegian legislation as a trade barrier. 

Denmark is one of the world's largest importers and exporters of fish and fish products, and one of the largest salmon processing hubs in Europe. Processing industry players argue that Norway's export rules lead to unfair market conditions.

The European dispute comes on the heels of a separate EU-level controversy focused on Norway’s salmon industry, following the European Commission’s allegations of anti-competitive conduct by some of Norway's biggest salmon producers during 2011-2019 – which the companies in question all strenuously deny. 

Last week, Norway's Food Safety Authority, Mattilsynet, announced it would be getting tougher on companies illegally trading unprocessed production fish outside Norway's borders.

“We expect all businesses to follow the rules on domestic rectification of production fish. Nevertheless, our inspection campaign last year showed that there are too many players who break the regulations, and we are now constantly receiving reports that this is still happening,” said Inge Erlend Næsset, Director of Regulations and Control at the Norwegian Food Safety Authority.

"This is a violation of regulations. Mattilsynet follows up on cases we are notified of, and we will escalate the use of measures if we see that businesses continue to violate regulations," Næsset added.

Such "escalating measures" could include bans on export and trading, orders to withdraw from the market, and the destruction, scrapping, or seizing of inventory. Mattilsynet said it will also consider police reports in relevant cases.

"Our goal is for the illegal practice to cease. This will create equal competitive conditions for business operators and contribute to the purpose of the quality regulation about high quality for consumers and international market access for Norwegian seafood," Næsset said.

Meanwhile, land-based farmers have been watching the whole prodfisk drama from a safe distance, possibly with popcorn in hand.  

Reporting their quarterly results in January, Salmon Evolution were able to celebrate a significant advantage over sea-based competitors. "Currently in Norway, there is too much prod-fish and too little superior, and this has an impact on the price realisation," said CFO Trond Vadset Veibust at the time. 

Increasingly, the big salmon producers are moving towards a “large smolt” strategy, growing their fish to a larger size on land, in order to reduce the time their salmon spend in the risky sea phase.  

Others are exploring high-tech sea-based strategies,such as SalMar's "marine donut" closed-containment system, as a high-tech means of preventing sea lice and infection blighting its fish. But these are long-term strategies and involve hefty Capex. 

In the meantime, pressure is mounting on the salmon firms to dramatically improve fish health and welfare. In December, Norway’s Food Safety Authority announced it was undertaking an audit on six of the country's largest aquaculture companies to oversight the welfare and health of their fish following de-licing operations.

More recently, fish health specialists from the Norwegian trade union Tekna have called for salmon farmers to limit mortality to 5% - and are calling on the Norwegian Directorate of Fisheries to consider mortality rates instead of only sea lice statistics when handing out licences. 

Now that spring is on its way, salmon producers expect the output of prodfisk to normalize, as warmer weather brings with it better biology – although summer can also spell trouble due to algal blooms and marine heatwaves, as sea water temperatures continue to rise.  

And, if the status quo continues, the prodfisk problem is likely to return next winter. The question is, what will the Norwegian authorities and the industry players do to tackle the issue before then?