Troubled waters for Estonian sprat

Mart Undrest, Managing Director of the Estonian Fishing Association, Eesti Kalapüügiühistu TÜ

Political uncertainty is an obstacle to the smooth running of Estonia’s sprat and herring production. Still, the future looks bright with possibilities. We explore these developments from the point of view of the Estonian Fishing Association, the largest of the three Estonian producer organisations.

Founded in 2005, the Estonian Fishing Association (EFAPO) is a producer organisation representing five trawling companies operating in Estonian waters and Pärnu Rannakalurid, an organisation of 200 coastal fishermen from the Pärnu area. The trawling companies own 12 trawlers, and the Pärnu fishermen own more than 160 boats. Members also have three trawlers based in Finland, fishing the Finnish quota. All of this ensures that the plant has a constant supply of fish.

The EFAPO inaugurated a processing and freezing facility in 2011, which provides storage for up to 3,200 tonnes of frozen fish and can freeze up to 200 tonnes of fish in a 24-hour period. Located in Pärnu County, the plant is well situated logistically. The plant cost EUR 6 million, about half of which was funded by the European Fisheries Fund. The plant runs two shifts of eight people each. It has HACCP certification and a traceability system in compliance with EU requirements.

Members of the cooperative hold 48% of Estonia’s historical sprat fishing rights and 43% of the Baltic herring fishing rights. Pärnu fishermen take 6,000–8,000 tonnes of Baltic herring annually. Estonian production includes frozen blocks as well as marinated sprat and herring. Different products are made by each of the three Estonian producer organisations. Membership in the organisation has stabilised since it was founded. Most fishing companies already belong to one of Estonia’s three POs, and those that do not have already made a conscious decision not to join.

Estonian sprat is better quality

All Baltic herring is of similar quality, but sprat fished by Estonia in its own waters is of higher quality. The fishing grounds are close to the coast, allowing fast offloading, which leads to fresher fish that are frozen sooner after being caught. Sailing to the fishing grounds takes approximately three hours each way, plus six to ten hours spent fishing. Other countries, like Finland, do not have such immediate access to their fishing grounds, and the fish are not frozen as soon after being caught. It should be noted that partly or wholly Estonian-owned companies own vessels that entitle them to use Lithuanian (ca. 500 tonnes) and Finnish (ca. 10,000 tonnes) quotas. This increases the overall Estonian catch.

Since 2008, quotas for sprat and herring have been reduced from approximately 70,000 tonnes to approximately 55,000 tonnes. At the same time, fishing capacity has fallen, with a reduction in the number of vessels. Mart Undrest, managing director of EFAPO, believes that the quotas have been well utilised during the past two years and speaks positively of the flexibility that has been built into the system. Unused quota can be reassigned to the following year, and they can even be traded. Quota swaps have taken place with their Finnish and Latvian partners, improving management of the fishery.

The consequences of uncertainty in Ukraine

Although Latvia and Belarus are among Estonia’s main markets, Ukraine is Estonia’s largest market for sprat and herring, accounting for more than half of exports. With the Crimea and eastern Ukraine lost as markets, importers of Estonian sprat and herring must concentrate their efforts in the western and central areas of the country. Despite prudent planning, the upheaval in Ukraine means that work is done on a week-by-week basis, responding to market demands. Mart Undrest says that, if the situation remains more or less stable and there are no new sanctions or war, the Estonian fishing industry will not face any major hardships; still he recognises that things can change at a moment’s notice.

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According to Ukraine’s largest importer of sprat and herring, sprat is imported from Baltic countries, including Estonia, Lithuania, Finland, and Sweden. He prefers, however, dealing with the Estonian producer organisations because they ensure stability in price, quality, and management. Sprat and herring are mostly imported as frozen blocks and sold to local producers, who make a large range of products, including marinated, salted, smoked and oiled, and smoked and spicy, among others. Since the fall of the Ukrainian hryvnia, sprat’s affordable price has increased its popularity. Another development in Estonia’s favour has been the loss of more than 50% of the Ukrainian fishing fleet in the Crimea. The demand for domestic product has been taken up by Estonian suppliers. Altogether, Mart Undrest is saddened by the developments in Ukraine, but believes that if stability can be achieved, the situation will prove advantageous for Estonian suppliers.

Shrinking Russian market

A further source of uncertainty has been the Russian ban on seafood imports from the EU and Norway, which was implemented last August. Since then, Estonia has been unable to sell its frozen products there, which amount to about 30,000 tonnes, or nearly half of Estonian sprat and herring exports. Much of it has found its way to Ukraine. One positive point is that canned fish products have not been banned. Finding alternatives for these products, however, would not be easy.

Currently, a study is being conducted into ways of giving added value to sprat and Baltic herring. The initial task is to consider an innovative design for a factory with a minimum, 24-hour production capacity of 300 tonnes. It should be able to process up to 50,000 tonnes of raw material – sprat and Baltic herring – a year, although other species, including round goby, bream, and white b
ream, will provide up to 5% of the output. Running costs, return on investment, premium protein standards, and innovation each have equal weight in the planning. Although the quantity of the raw materials is small, the aim is to produce the most valuable product possible.

EFAPO has been criticised for producing a relatively inexpensive product for the eastern market, rather than making products of greater value for sale in Estonia. They have been encouraged to look into derivatives from the fish, such as omega-3, proteins, lipids, and collagens. Although the current facilities would continue to be used for human consumption, the study is considering whether it would be profitable to build a factory for turning sprat and herring into animal feed and fishmeal. All three POs are behind the idea.

Detailed mapping exercise

Danish and German vessels fish off the Estonian coast, and it is hoped they can be convinced to bring their catches to such a facility. With 300,000 tonnes of Baltic Sea catches being processed as fishmeal and animal feed, Mart Undrest believes there is a chance to get part of it to land in Estonia, thereby saving the cost and time of sailing farther to land it. Such a plan would also help ensure their livelihoods in case of a real regional crisis. The question is whether the catches, in vessels of at least 500 tonnes and up to 1,000 tonnes, can be landed quickly enough. Currently, few ports in Estonia can handle such huge volumes and large vessels. The logistics must also be considered: How far are they from the fishing grounds? And what are the initial costs? Is water and electricity available? And finally, can it be done profitably? In the long term, however, basing a business plan on crisis situations, is short-sighted. It is necessary to develop innovative plans to provide high-quality fish for human consumption.
All of the producer organisations are working with new markets. EFAPO is already sending fish to Africa and China, and is searching for additional markets. Some companies are working with individually quick frozen (IQF) foods, where each piece is frozen separately, not in blocks for markets in both east and west. According to Mart Undrest, everyone is trying to find an extra edge that will lead to a larger share of the eastern market. He sees these trends continuing for the next couple of years.

Future bright despite uncertainty

Mart Undrest reflects that it has been a good three and a half years in the new building. What’s more, the cooperation between producer organisations has proven to be very helpful. Having three POs encourages competition and so increases the will to work even harder. They see that, at least at the moment, there is enough fish for everyone. The POs have supported each other in tough times. Says Mart Undrest, “These buildings have safeguarded us in many ways, and that has proven to be very useful to the fishermen”.

William Anthony