Supply and Demand

Under DFO regulations, quotas can be bought and sold by anyone - including people and corporations that don't fish - on the open market.

Quotas represent fractions of the TAC set by fisheries managers. But because these managers raise and lower the TAC to balance the fishery's economic and cultural interests with the need to protect stocks, TACs are often unstable.

Supply and demand have driven prices ever higher, trapping fishermen trying to stay in business. In-season changes can ensnare people too: if a fisherman catches more fish than his quota covers, he must quickly secure access to additional quota or risk penalties - making him more susceptible to price inflation or predatory lending practices.

 

GRAPH: Halibut quota purchase prices, adjusted for inflation (2014 dollars).

Sources: Nelson Bros Fisheries Ltd (2013 and 2006) Analysis of Commercial Fishing Licence, Quota, and Vessel Values; Nelson Bros Fisheries Ltd (2008) Pacific Halibut IVQ Price Forecast; Bank of Canada consumer price index.

ITQs were introduced in the halibut fishery in 1991. Twenty-four years later, quota prices continue to rise with no sign of stopping.

In 2008, DFO assessed the potential impacts of reducing the commercial TAC. They predicted that even with a further-limited commercial fishery, the price of halibut quota would soon level out and begin to decline. Instead, the price of halibut quota has nearly doubled - from $38 per pound to more than $71 just 5 years later.

The Money Pit

A common catch share myth suggests that quotas reduce capitalization in fisheries by allowing even the most poorly-equipped boats to compete with vessels sporting the latest and greatest gear. And to some extent that's true; the arms race to buy the best vessels has indeed diminished.

 

But in its place has come a war of access, where fishermen must sink their money into ever-increasing quota purchase and lease prices.

GRAPH: 2012 market values in BC fisheries by type of fishery management. Quota holdings reflect the average amount of quota held by an active fishery participant.

Source: Nelson Bros Fisheries Ltd (2013) Analysis of Commercial Fishing Licence, Quota, and Vessel Values.

And these investments can take decades to pay off - when compared to income, licence and quota costs are disproportionately high.

The huge gap between costs and earnings places a huge burden on small-scale fishermen already in the industry looking to maintain or expand their ability to fish - and it's downright prohibitive for the next generation looking to start their careers.

How stable is an industry that's confined to or totally in the hands of older men that are now losing energy and you've restricted younger guys from getting in?

GRAPH: The cost of access to fish vs. the income received from that fish.

Sources: Nelson Bros Fisheries Ltd (2013) Analysis of Commercial Fishing Licence, Quota, and Vessel Values; DFO Data Unit (2012) Summary Commercial Statistics - Dockside Monitoring Data.

Science and Sustainability

Many claim that catch shares improve monitoring and data quality, resulting in easier and more cost-effective fisheries management.

The situation in BC, however, tells a different story.

Timeline of BC's Commercial Fisheries

INTERACTIVE: For more details about the history of BC's fisheries, hover your mouse over each fishery's bars and dots.

Introduction of new monitoring system
Open fishery - The fishery is fully open, without any licence or other management restrictions
Competitive fishery - The fishery is subject to limited licensing, but participation is otherwise free
Catch share fishery - The fishery is managed via quotas under an IVQ or ITQ system

Catch shares require intensive monitoring and data collection to ensure that each fisherman does not exceed his quota. To support this need, many monitoring programs are upgraded when catch shares go into effect - creating a perception that catch shares inherently bring greater scientific rigour to fisheries management.

In reality, catch shares and improved fisheries monitoring are not synonymous. High quality monitoring can be implemented for any fishery, regardless of management regime.

A number of competitive fisheries in BC use test fisheries, at-sea and dockside observers, and technology tools to give managers fishery updates. The north coast’s Area A crab fishery, for example, is managed without ITQs and uses one of the most comprehensive electronic monitoring system in Canada to collect video, GPS, and other sensor data on each vessel's activities. Salmon, perhaps the most prominent of the competitive fisheries, uses both at-sea and dockside observers to monitor catch in real time.

Fisheries monitoring does, however, come with a very real price. Paying for fisheries observers or onboard electronic monitoring systems can be very expensive - prohibitively so, in some cases. When catch shares were introduced in BC's groundfish fisheries for example, the combination of bycatch quota costs and monitoring were the straw that broke the back of some of that sector's smaller enterprises.

For monitoring to be a truly effective aspect of any fisheries management system, it needs to be scale-appropriate, carefully designed with the practical needs and capacities of both regulators and fishermen in mind.

What Floats Your Boat

Nearly one third of the halibut fleet focuses exclusively on halibut. Many of these single-licence vessels own the quota they fish, allowing them in some cases to remain more or less profitable each year.

But what happens when the next generation of fishermen enters the industry? If they can't afford the nearly $1 million required to purchase a licence and the median amount of quota, they are forced to lease from a quota owner.

The people who first get these quotas gifted from DFO are the winners.

Every cycle of new buyers in, it gets costlier and costlier, and less and less. And then slowly, individuals don't buy, corporations buy. So there are zero new entrants as we move into more and more ITQ fisheries.

GRAPH: The financial breakdown for a vessel fishing 60,000 lbs of halibut, the typical amount of quota caught by more profitable halibut vessels, with and without quota leasing. The right side of the graph shows what happens when a crew has to lease their quota rather than owning it outright. These are conservative lease prices for today's market; lease fees have risen far above the 2012 prices used here.

Leasing places a major burden on crews and skippers, turning fishermen into sharecroppers on their own boats. And it can carry additional financial risk: many fish companies lease their quota to fishermen under the condition that the fishermen sell them any fish they catch - at prices set by the company. This turns fishermen into "price takers" and removes their ability to negotiate a price.

And how important are these fish prices to a fisherman's viability? If a buyer drops the price they're willing to pay per pound of fish by a mere penny, it can mean hundreds of dollars in lost revenue for a fisherman who is already on the edge of deficits for the season. Entire fisheries have gone on strike over 5 cent per pound decreases.

Catch shares claim to improve fishermen's finances by allowing them to take advantage of good timing, getting higher prices when they land fish in periods of high consumer demand. But any advantages are cancelled out by the stress of high lease prices, ever-thinning margins, and loss of agency around establishing relationships with buyers.

To some extent the pressures of weather and trying to get [all of your fishing] done on a certain date have been replaced by the pressures of carrying a big overhead of lease cost on the boat.

You're pressured to fish all the days you can fish in order to try and get ahead of that cost and actually make something for the boat and crew. It's a real balance for everybody.

I am trying to be unbiased about it and see where the advantages in quota are, but what's the worst anxiety, you know? A 30-knot westerly or a $50,000 lease bill? What's going to make a guy make more sensible decisions?

Commercial fishing is more than just an industry

It's the lifeblood for coastal communities throughout BC.

So what happens when money is siphoned away from an industry through leasing?

Next Section: Ripple effects

Communities in peril on BC's coast.