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One area of the fish harvesting industry that does not use auctions at the primary level is in Iceland. Perhaps the answer is found in the fact that the Icelandic fishermen end up canning or freezing their catch. Therefore the commodity is no longer a perishable item. In the canned or frozen state the product can be sold as a “stable-price” grocery item like other manufactured goods.
Although fish have been sold by the private treaty method, the auction method dominated the market by the late 1880’s. Probably the most significant year for the transformation from the privately negotiated sale of perishable commodities in general to the auction method was 1887. It was in that year on “a midsummer morning that a grower by the name of Jongerling arrived with his barge load of vegetables at the quay of the inland harbor Broek op Langendijk in North Holland. Here it was customary for producers to sell to dealers or to physically transfer the produce for sale on a commission, but on this particular morning demand was very brisk and the farmer-vendor found it difficult to decide to which eagerly competing buyers he should allocate his limited supply of goods. A passing boatman reportedly suggested that Jongerling put his produce up for sale by auction, which he did with gratifying results. Thus it was that the first auction of horticultural produce in the Netherlands took place. From this tiny beginning developed the present-day vast system of auction markets, with all their auxiliary services.” (The Auction System of Horticultural Marketing in the Netherlands 2nd Ed.; The Hague: Central Bureau of Horticultural Auctions in the Netherlands, 1959 p. 7.)
The German system of fish auctions parallels the produce auctions of the Netherlands. Prior to the late 19th Century, German fishermen delivered their harvest to central consumption areas where they sold them privately themselves. The downside of this method was that the fishermen had to stay in port for extended periods of time. Eventually the fishermen relied on middlemen to broker the catches freeing up the fishermen to more productive work.
The main challenge with brokering any perishable commodity is “time”. Some distributors took advantage of their “absentee-owners” utilizing their strong position in the relationship to bring the primary market prices down. It was not uncommon for fishermen to opt to have entire boat-loads of fish spoil rather then transfer the catch at the dealer prices privately negotiated by agents. In time the system evolved to strict contracts between fishermen and distributors. However, even this system proved unsatisfactory over time.
It was only a matter of time for the development of an open, competitive, simultaneous and timely market for the fishermen. What was needed was an instant price that was reflected daily by supply and demand. A system was needed that would not fall prey to price-depressing tactics of distributor buyers. The result was the first fish auction in Germany, which took place in Hamburg on May 1, 1887. This was the date “when the fishermen sold their catches to dealers on a competitive-bid basis.” (Klaus-Hinrich Krohn and Arnold Alewell, Sea-Fish Marketing in the Federal Republic of Germany. 1959 P.105.) Other fish markets developed in Germany soon after including; Geestemunde – 1888, Bremerhaven – 1892, Cuxhaven – 1908 and finally the Kiel market was established in 1947.
The Far East was much slower to grasp the benefits of a free market system. For instance in Japan the problem of distributor-dominated selling of fish by private treaty was not corrected until the last century. Under the Japanese feudal system the rulers provided the fish merchants a monopoly of marketing. The system, which was called “Ura-ukeoi”, gave tremendous power to the capitalist-distributors over the scattered, unorganized, small fishermen. The favored merchants paid tribute to the overlords for the privilege of exploiting the fishermen. Not until after World War II was the modern wholesale market system established throughout Japan. The new open-market system allowed for auctions. The same was true for Hong Kong. By the end of World War II the control of the “Laan”, or middleman, was abolished. The producers were free to sell their goods under competitive market conditions in a public auction. (The Hong Kong Fish and Vegetable Marketing Schemes” Hong Kong: Co-operative Development & Fisheries Department, Dec. 1962, P 1.)
We might think that the whole world is utilizing the auction method for the primary sale of commercial fishermen, as we know that it is the best system. However, there are parts of the world, such as Africa where distributors still control suppliers. In Africa fish are often caught at night and sold in the morning to distributors. The fish are sold at whatever the distributor is willing to pay. The distributor will pay no more than is necessary to keep the fishermen in their boats. This antiquated, controlled, private negotiated sale system keeps the fishermen indebted to the distributors. The fishermen will remain in economic slavery until the governments of these emerging nations recognize the importance of “balance” and “fairness” that is the result of the auction method of marketing commodities. The auction method can serve as a positive instrument in the social and economic growth of today’s developing nations.
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