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December 17, 2013

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Home » Business » Economy

Small fish in big ponds may solve one Greek crisis

Source: Agencies | December 17, 2013, Tuesday | Print Edition

Greek fish farmer John Stephanis has a problem. Global demand for his sea bass and bream is strong. But his company is so strapped for cash it cannot expand its farms. One solution is smaller fish.

By growing slimmer fish — to about 370 grams from the current average of 400 — Stephanis can grow more of them in each of his 50 farms. And by keeping prices unchanged, he can start paring his losses.

“We’ve managed to put our fish on shelves around the world,” said Stephanis, a former advertising executive who founded Selonda Aquaculture in 1981. “Ours is a national industry.”

Leaner fish is just one way in which Selonda, like other Greek aquaculture firms, is trying to resurrect itself from a fall in fortunes that has mirrored that of the nation’s economy.

Once the “El Dorado” of the country’s industry — Greece farms about half the world’s output of sea bass and bream — aquaculture companies are now unravelling under the weight of the cheap credit they piled on during two decades of booming growth in the 80s and 90s.

One of Greece’s four major firms filed for bankruptcy in September while others are in talks with Greek banks — themselves propped up by bailout funds — to restructure their debt. The UN’s Food and Agriculture Organization predicts Greece will lose its position as the biggest producer of Mediterranean fish to Turkey, after a 7 percent fall in production expected this year.

Six years of recession

The future of Greece’s aquaculture industry is important for the country as it tries to claw back years of lost competitiveness. Six years of recession have shrunk the economy and shut thousands of businesses.

Fish farming is seen as one of the few sectors that could help pull Greece out of the quagmire — if it sorts itself out first.

Fish, mainly sea bass and sea bream, were Greece’s second-biggest agricultural export last year, even beating its olive oil. The sector currently employs about 20,000 people, and is one of the few industries — alongside tourism — that has enjoyed strong demand, especially from international customers.

“The sector is close to sinking,” Ilias Baras, Selonda’s business development manager, said, drawing parallels to Greece’s crisis.

“The only difference is that Greece was not allowed to collapse. If these businesses fail, this land has nothing to hope for,” he said, as men in bright orange suits worked through heavy rain to keep up with orders pouring in from as far away as Australia.

The mood was not always this glum among Greece’s fish farmers, who set up their firms in the 80s when growing fish in cages was an alien concept.

Sea bass, in particular, has long been popular and known as difficult to catch — the Greek expression “I caught a sea bass” is used to refer to great and unexpected success. Soon enough, round floating cages began popping up all over Greece’s vast coastline.

Thanks to generous investment and easy access to credit, fish farms developed even in tiny islets. The number of firms grew from 10 in 1986 to 370 in 2008, government data shows.

Stock exchange entry

For many firms, including Selonda, the only way was up.

At its height, Selonda managed to convince the country’s stock market regulator to allow it to enter the stock exchange in 1994 — the first fish farming company worldwide to do so.

Today, Selonda’s 50 or so farms produce up to 20,000 tons of sea bass and bream a year, compared to just 20 tons when it began. It exports to countries including Spain, Italy, France and the United States.

For many years, fish farm companies borrowed easily, either to set up their businesses, upgrade facilities or expand. Banks gave out loans without asking many questions.

But prices fell sharply in 2000, revealing a lack of proper hedging strategies and an inability to deal with a lengthy production cycle and sizeable operating capital for food, nets, cages and other running costs.

In 2008, when Greece slipped deeper into economic crisis and prices fell, Selonda was selling fish for less than they cost to produce. Since then, prices have risen but leave little margin for profit.

The 10 biggest firms owe Greece’s squeezed banks over half a billion euros — more than their combined sales. Selonda alone owes 185 million euros (US$254.7 million).

Debt restructuring is urgently needed. In the meantime, fish farms are working hard to improve their businesses.

Selonda is exploring ways to shorten the farming process from 24 months to 18 months to get fish to market more quickly, and part of that will come from growing smaller fish.

 

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