Icelandic Whaling : Show me the money
It's widely assumed by many people that Icelanders and other whaling nations want to go whaling in order to make money. I'm pretty sure that there are people in Iceland, Japan and Norway who think this too. So I set about working out whether there is profit in whaling - and how much that might be.
Here's what I've learned
To model a business you need to know a few things. What are you selling, who are you selling it to, what does it cost you to produce and how much can you sell at what price? Answer these questions and you're well on your way...
So what are they selling? Well whale meat. That one's easy.
Who are they selling it to?
Since trade in endangered species is illegal the primary market has to be Icelanders. Iceland and Japan have a deal with CITES that lets them trade Minke whale, but almost none has been traded because the Japanese already have too much. That just leaves Norway, but in common with every other whaling nation the Norweigans also have a surplus - so no chance of selling them anything either.
There are 300 000 icelanders. As you can see from this discussion thread somewhere between 1% and 25% are claimed to be willing to eat whale meat at least once a year. For the purposes of this model we'll go with the 25% number. That's 75 000 icelanders prepared to eat whale meat one or more times a year. As we'll see later though this number is rather optimistic.
The next bits of data I needed were about how much meat is actually on a whale and how much it costs to catch a whale. It was while looking for this data that I came across this excellent paper produced by IFAW and an Iceland Nature Conservation Association. The numbers though were provided by the Icelandic Fisheries Ministry, Icelandic supermarkets and the whalers themselves.
From these figures we learn that in 2003 36 Minke whales were caught, and produced 37 tonnes of meat. About 1 tonne per whale, which assuming average sized adult Minke's means about 25% of a whale is meat. Since a Fin whale weighs about 40 tonnes we could assume that it contributes 10-15 tonnes of meat if caught and butchered.
So, thirty Minkes plus nine big Fins gives us 165 tonnes of meat. 165 000 kilos. More than two kilos for every Icelander planning to eat whale meat this year. Sounds like a lot, but it's peanuts compared to the amount of meat Icelanders eat annually. The icelandic meat consumption, including lamb, beef and so on was 22 000 tonnes in 2003.
My model was coming along nicely at this stage, but here the report I was reading got really interesting. Here's what happened to those 37 tonnes of Minke whale they landed in 2003
"When the catch from the scientific whaling project entered the market in 2003 minke whale meat had not been generally available in Icelandic supermarkets for some 20 years. The catch was bought by Ferskar Kjötvörur hf., one of the main meat distributors in the country and sold mainly through Hagkaup hf., a leading supermarket chain. The product enjoyed considerable media attention, chefs were drafted to publish recipes and the product was introduced on television shows. The marketing campaign lasted approximately one month.
To start with sales were good and consumers were willing to try out the product but retailers say repeat sales scarcely took place. According to retailers’ estimates total sales amounted to 10-15 tonnes in 2003 which means 23-27 of the 37 tonnes that went into the market did not sell."
This sits badly with our estimate that 75000 icelanders want whale meat on a regular basis. It's about an eleventh of our projected demand. That would give us about 2.3% of Icelanders wanting to eat whales. But the report goes on
"The initial price was close to 1000 ISK/kg. In further efforts to market the meat price has gone as low as approximately 500 ISK/kg. Retailers believe price is not a determining factor in sales but the meat might still sell for 100-200 ISK/kg, which is well below the price of chicken."
One Icelandic Krona is about 1 euro cent. So whalemeat was initially priced at 10 euros a kilo, but even when the price was cut to half that it couldn't be sold. The bit about repeat sales scarcely ever taking place is interesting too. Backed by a huge marketing blitz a lot of folks tried it, but not many of them liked it enough to buy it again. Even with that big 50% discount.
This year Iceland is planning to land about 165 tonnes of whalemeat. Enough to meet demand for ten years. The three whales they've landed so far will keep Iceland's whale meat eating population going for at least two years (one of the whales may be unfit for consumption apparently).
The report then goes on in great detail into what it costs to produce a kilo of whale meat. The 2003 scientific whaling cost 43 mio ISK or about 430 000 Euros, about 15 000 Euros per whale. Assuming it costs no more to catch a Fin than a Minke this years hunt will come it at 565 000 Euros.
For just over half a million Euros the whalers will get to sell at most 15 tonnes of whale meat. Despite the price in store being 10 (or 5) Euros per kilo the whalers only got 3.5 Euros per Kilo in 2003 and a much lower 1.3 Euros per kilo in 2004. The rest gets taken up in shipping, storage, marketing, distribution and a margin for the supermarkets. So, a maximum of 15 000 tonnes will be sold at a cost of a maximum of 3.5 euros per kilo gives an income of 52 500 Euros, compared to a cost of 565 000 Euros. That's a loss of half a million Euros a year.
Ouch.
Of course the figures above don't include money the Icelandic government spends on whaling. It doesn't allow for the cost of storing 150 tonnes of unsold whale meat. It doesn't cover the fact that this years so called scientific whaling will also take around 30 Minke whales and that meat has got to go somewhere.
Now running a business at a loss isn't uncommon. But running a business at a loss *when you don't have to* is just plain crazy. If you were a whaler and you wanted to make money here's what you'd do. You'd sign a deal with someone to buy your whalemeat before you killed a whale. Then you'd kill just enough whales to fill the contract, and if things went well you'd move on to another contract, more whales and so on. The last thing you'd do is lumber yourself with 165 tonnes of whalemeat that you can't sell.
The only possible conclusions? Well either the whalers are extraordinarily bad businessmen, or they're treating this as a cold, wet and miserable bloodsport. They're playing at Captain Ahab and the whale, only this time the captain has an explosive harpoon and the whale hasn't got a chance.
Comments
Can't any1 do maths?
Posted by: Ashleigh Price | October 26, 2006 4:55 PM
I recently wrote an email protesting against whale killing and this was the repsonse I got from the Icelandic Embassy in London. I am sure it was a automated response, but I promised to do my research and come back to them. I promised to boycot their products, travelling to their country, etc. I would like to know what else I could say and I am sure every bit helps. But it you have any intelligent and cheaky responses please let me know I am eager to write back. Ps, here is the letter....
Thank you for your correspondence concerning Iceland?s policy on
whaling.
I wish to assure you that Iceland has no intention of catching any of
the endangered species of whales, killed on a large scale by other whaling
Posted by: Felicitydarkcloud | October 26, 2006 6:41 PM
I trimmed that message from the ambassadors, because a long discussion about that and related matters is going on in our forum. Take a look at this thread
http://forum.greenpeace.org/int/showthread.php?t=17
where you can see a lot of views on show, for and against. Plus some great posts by someone called Icelander.
Posted by: Martin | October 26, 2006 6:56 PM
Hi,
Your assumption that there would be no demand from Japan for Iceland's whale meat is a bit dubious. I have heard reports of such claims from even Japan's ambassador to Iceland, but actual figures from the ministry of forests agriculture and fisheries show that while 8275 tonnes of whale meat was shipped into frozen whale meat stockpiles over the year to the end of August 2006, 7806 tonnes of whale meat was shipped off these stockpiles as well.
Figures are here in english at my blog:
http://david-in-tokyo.blogspot.com/search/label/whale%20meat%20market
So, the amount of whale meat shipped out of frozen storage was thus 94% of the amount shipped in. The difference is only around 400 tonnes of whale meat, but even this is more than Iceland has to offer. This indicates pretty strong consumption in Japan, and media reports from Japan have been indicating that sales in various areas are on the increase, and whale meat is finding it's way into different markets. Maruetsu has had 10 whale meat products on sale since last year which are apparently selling well, a restaurant chain called "Hananomai" also put whale meat items on their regular menu, with one of them in their top ten selling products, as two examples. Another company lunch vendor, Nikkoku Trust has also just added whale meat items to their menus.
Given the high prices and the recent increasing consumption trend in Japan (whale meat wholesales for just under 2,000 yen per kilogram), Iceland's whalers could probably find a buyer for their relatively small quantity of meat if they undercut that price (if the Japanese government permits the imports). If Iceland's whalers charged say 1500 yen per kilogram they could potentially bring in around 250,000,000 yen, which is a pretty significant amount of money. How does that look in Iceland's currency?
Posted by: david@tokyo | October 27, 2006 6:01 AM
I wonder if Martin Lloyd, or someone, could do the maths on Japanese "scientific" sic "commercial" whaling! Apparently the Japanese Govt. subsidises the Cetacean research Institute to the tune of about US$20Million p.a. for the upkeep & running of the whaling fleet. The sales of whale meat is to offset the cost of this "scientific" work. But having of 5000 tonnes in storage means that this is a huge loss making venture. Why? First because Japan won't be told what to do by anyone. Secondly some right wing friends of the Govt. & the Japanese 'mafia' are involved in making money because of the subsidy. My mates Japanese wife was forced as a child to eat whale meat which she hated and said tasted vile. Maybe we just all stop buying Japanese stuff- a trade ban no anti-whaling government is prepared to action to enforce Japans compliance with all the Multi-lateral environmental agreements is has signed but continues to break. So its a case of free trade or whales - not fair rade and whales. Dave.www.stopwhaling.co.nz
Posted by: Dave Head | October 27, 2006 10:13 AM
I'll pick up on the question Japanese demand and what ) those stockpile numbers mean later today.
Posted by: Martin | October 27, 2006 10:46 AM
Martin,
What do you mean? The stockpile numbers and shipments in and out are just that.
I actually live here, so perhaps I can be of some guidance (just my personal experience of course).
I can walk down the street and find whale meat in the first sushi shop I come too, about 5 minutes walk from my place. It's pretty expensive though.
I've seen whale bacon listed on the menu at another restaurant further down the road. Bacon is apparently one of the more popular types of whale meat.
Another restaurant on the other side of the closest train station to me serves a "kujira tataki - yukke-fuu" dish which my friends and I had there a couple of times.
At my old office in downtown Tokyo my favourite sushi restaurant had whale meat available, but wasn't served as part of any standard sushi set, you had to order it in the "as you go" style.
Another place near there which I only went to once had a sashimi dish which mixed red meat with the blubber. The blubber was pretty disgusting, I thought, but then a lot of stuff I try for the first time here tastes disgusting.
And also there's the famous "kujira-ya" restaurant underneath the famous 109 building in Shibuya, which has nothing but whale dishes. Some Australian friends and I had the steak lunch there earlier this year.
Well, that's my perspective as someone living here, in the world's largest centre of whale meat consumption. Still, it's not like you can find it everywhere like with tuna dishes, but it's available, although always more expensive than other options. That's just an economic reality of limited supply (even though it has been increasing in recent years, the prices still remain relatively high compared with substitutes).
Oh, and I did the currency conversion of Yen to USD - assuming a wholesale price of 1,500 yen per kg, we're talking about 2 million USD. That must look pretty attractive if you are a single whaling operator in Iceland, at least, it would to me if I were in the business.
Posted by: david@tokyo | October 27, 2006 2:26 PM
If you check my post above (Piles of Meat) you'll see that you've misread the numbers in the statistics. On an annual basis, eg 1 August 05 (4226) to 31 July (4671) the Japanese stockpiles are increasing. Given the slightly odd way they lay them out end previous month - end current month - it's an easy mistake to make, but basically you've ended up measuring 11 months not 12.
That, compounded by the fact that the month you end up missing is August explains why you think there's a decrease but there is actually an increase of around 400 tonnes.
Posted by: Martin Lloyd | October 27, 2006 2:40 PM
Martin,
My figures were calculated by summing the values from the amount of whale meat shipped during each month starting with the month of Sept 2005 through to the month of August 2006, which if you check again, is indeed 12 months worth, not 11. (I did this in Excel, so it's definitely correct).
Also, I didn't claim there was a decrease; as I noted in my first comment, the amount of whale meat shipped was 94% of the amount of meat that came in for the year, i.e., and increase in stocks for the year. This was to be expected since the JARPA II programme resulted in a significant jump in supply of whale meat by-products to the market. I updated my blog post this evening with figures for March 2005, and if you take a look you can see that year on year there is a huge difference in incoming stock (supply) for March/April between 2005 and 2006. This is a direct result of JARPA II's increased minke sample size and the addition of the 10 fin whales.
And despite the significant increase in supply of roughly 2,500 tonnes, the gap between consumption and supply for the year to August was only 400 tonnes. Thus, while supply increased, consumption clearly must have increased as well, which is how the other 2,100 tonnes can be accounted for.
So the important conclusions:
1) Increasing stockpiles do not indicate a lack of demand in this case, because we have witnessed a big increase in supply year-on-year, which has masked the almost equivalent increase in consumption. Indeed, media reports of sales increases in whale meat markets of as much as 50% do not reconcile with a supposed lack of demand we have been hearing from some quarters. By my analysis of not just stockpile growth but actual figures of incoming and outgoing stocks, it is clear that there has been a significant increase in consumption, which reconciles with media reports.
2) With increased supply the peak stockpile level will increase again in March/April 2008 due to the commencement of the full JARPA II programme, which will include 50 humpbacks and fins. This is just a characteristic of the whale meat stockpile, since whaling only takes place in the Antarctic during the austral summer, but then consumption continues all year round.
So again, based on these figures I don't think you can write off the possibility of the Icelanders finding a market in Japan, especially if they price their product competitively. It could be worth 2 million USD to them. I wouldn't be surprised if they are aware of this, and licking their lips.
Posted by: david@tokyo | October 27, 2006 5:00 PM
Hi David
'only 400 tonnes.' - David
RAOTFLMAO! ONLY 400 tonnes!
Lets see, David lives in the capital city of the largest seafood consuming nation on earth, which is also a country that whales and he knows some restaurants that sell whalemeat....my what an impressively 'scientific' guidance study that was David. :o)
It would be interesting to discover what David's pro-whaling Japanese friends and the Japanese Fisheries Ministry think of the gaijin in their midst suggesting other Gaikokujin undercut hardworking Japanese fishermen by dumping cutprice product to steal their limited market.
I have no doubt that as Japan increases its whaling and includes protected species in its hunt in 2007, the Japanese Fisheries Ministry will continue to lower stockpiles by dumping unwanted surplus whale meat into the school food system, whether they will allow other countries to dump their unwanted surplus into the home market at discounted prices is rather more uncertain.
Posted by: Lamna nasus | October 28, 2006 3:12 PM
Martin,
Just in case you or your readers would like to see the figures in a graph form, just click on my name above - I've linked it to a page on my blog.
Regards,
David
Posted by: david@tokyo | October 30, 2006 5:10 PM
Ummmm..
"Since trade in endangered species is illegal the primary market has to be Icelanders."
Incorrect Martin, both Japan and Iceland have reservations to various cetacean species, I suggest you correct your illegal comment as trade between the two countries would be in fact, Legal.
Posted by: George McC | November 9, 2006 4:15 PM
While I believe Iceland and Japan have a reservation for Minke whale they don't have them for any other species.
They also don't have a market. To date Iceland has only managed to export 1/2 a tonne of minke to the Faroe Islands and while they could import to Japan, as noted elsewhere in this blog there's no demand for import meat there.
Posted by: Martin | November 9, 2006 4:58 PM
Martin,
I don't know if I can agree that there is "no demand for import meat" in Japan.
Japan of course imports lots of Aussie and USA beef, so I don't see why consumers would be averse to Icelandic whale, once the product has been tested for levels of contaminant concentration.
Reports in the media in the last day or so have also indicated that Iceland is in negotiations with Japan to allow such a deal, as apparently Loftsson wants to export some meat to Japan.
As for consumption in general, I've just posted updated stockpile figures on my blog (click my name below to go straight there), and again outgoing stock volume was high - around 7 times the amount of meat that Loftsson has to offer in fact, and also more than the amount of JARPA II whale meat set aside for non-profit activity.
Unless Japan can see a political reason not to allow the import (I can't) I'm not sure why they would not allow it, as it seems the Japanese market is quite healthy and could easily absorb an extra 100 tonnes from Iceland.
Posted by: david@tokyo | November 9, 2006 11:10 PM
While I believe Iceland and Japan have a reservation for Minke whale they don't have them for any other species.
Once again Martin, incorrect - check the CITES website. Japan, Norway and Iceland have reservations to Fin whales. I suggest you correct your illegal comment as trade between the two countries would be in fact, Legal.
Lets see if this gets published this time ..
Posted by: George McC | November 14, 2006 8:16 AM
Once again David and George disingenuously fail to address the fact that the IWC can recommend an RMP and an RMS but any pro-commercial whaling nation can register a reservation to those restrictions and then legally ignore them.
Exactly as Japan, Norway and Iceland have already done by registering reservations to the CITES listing of nearly every endangered whale species. Which is why Iceland and Japan are hunting protected species this season.
There will be no 'sustainable' international whale market if the moratorium is overturned because Japan is the largest market in the world for seafood, it is also a market that has consistently put profits before sustainability. Japan was recently caught red handed ignoring its own Tuna quotas -
http://news.bbc.co.uk/1/hi/world/asia-pacific/6057576.stm
Japan also buys over quota Tuna from other nation members of international commercial supervisory organisations like ICCAT and buys Tuna from countries which refuse to recognise international Tuna quotas.
Posted by: Lamna nasus | November 23, 2006 8:27 PM
hey my name is jake and im in the middle of coursework and exams right now, but i came across this website and started to read about it, i find it amazing that there was 37 tonnes of whale meat and 27 tonnes of it was wasted! I'm behind you and all organizations of stopping whale hunting all the way! I find it really cruel that on this other website and whale was hunted down and when they were sort of getting the meat and all that, they found an arrow that dated from the 1800's stuck in it's side!!!
Posted by: Jake Rutter | October 7, 2007 4:21 PM
What is the significance of 16-25 yr olds? I still don't understand this cooked off figure. I see it everywhere. 1% of icelanders eat whale once a week. 1% of Americans probably eat steak once at week. These statistics and figures are not whole and are only included for your one sided argument.
Posted by: Nathan | June 27, 2008 5:57 PM