Farmed salmon has been encroaching on markets for Alaska's salmon for years, but in recent months Chilean farmers have been producing at record levels in a bid to gain market share, University of Alaska fisheries economist Gunnar Knapp says.

The result is a crisis in the salmon farming industry, the equivalent to farmed fish that $9 per barrel oil prices in 1998 was for the world's petroleum industry.

Knapp outlined the gains salmon farmers have made at the expense of Alaska fishermen in a Feb. 1 talk before the World Affairs Council luncheon in Anchorage.

"It's a classic problem of agricultural overproduction," Knapp said in an interview. "It's a short-term problem, but major adverse effects are felt by the wild salmon fisheries, like Alaska's."

Despite the short-term nature of the current price dip, the long-term trend in salmon farming is toward more production, continued gains in efficiency and productivity, and lower prices.

Farmed salmon is also beginning to encroach on other salmon markets. For now most of the competition is in the market for fresh or frozen salmon. But more and more farmed salmon is being canned, Knapp said.

For example, Fred Meyer stores in Anchorage are now carrying a Bumblebee seafood smoked canned salmon that is labeled, "Product of Chile," Knapp said. It is obviously farmed because Chile has no wild salmon fisheries.

Salmon farmers might also move into the lucrative salmon roe field, an area now reserved for wild salmon. If this happens it could further undermine wild fisheries, Knapp said.

But the problem for Alaska fishermen is just not farmed salmon, he said in an interview. "Other challenges include variable and uncertain salmon runs, overproduction for the traditional canned salmon markets when there is a big run, changes in consumer taste and demand and the current world economic slowdown," Knapp said.

Like salmon farmers, "these challenges are not going to go away and there aren't any quick or easy fixes," he said.

"But if we don't make changes, we face a bleak future in our salmon fisheries," Knapp said, painting a grim picture of an industry in a death spiral, with fewer and fewer processors, fewer fishermen and shrinking support infrastructure.

Knapp thinks it's possible that Alaska fishermen can innovate and find ways to meet the competition of farmed salmon, but they must find ways of cutting costs.

Those efforts could be thwarted "by a management system that is not designed to create a competitive and cost-effective industry. Instead it is designed to achieve social and political goals of spreading the wealth, of maximizing jobs and income."

"For a period of time this worked well, but not any more," Knapp said. "The reality is that we can't achieve social and political goals from the Alaska salmon industry unless the industry is economically viable."

One competitive advantage Alaska has is the increasing awareness of food quality issues among many consumers. There are more concerns about chemicals fed to farmed fish, and Alaska's wild-caught salmon could develop an important marketing advantage, Knapp said.

There are new regulations in Europe to label fish as to countries of origin, and the U.S. Congress is debating similar requirements.

However, the vast majority of consumers are unaware of these distinctions, so there is a big marketing challenge for Alaskans, he said.