Fourth Edition Fishermen's Direct Marketing Manual

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Fourth EditionFishermen’sDirect MarketingManualAlaskaOregonWashington

Fourth EditionFishermen’sDirect Marketing ManualTerry Johnson, EditorAlaska Sea Grant Marine Advisory ProgramEditorial assistance provided by Jeanette Johnson, Alaska MarineAdvisory Program, and David G. Gordon, Washington SeaGrant. Design by Robyn Ricks, Washington Sea Grant. Mailingaddress: 3716 Brooklyn Ave. NE, Seattle, WA 98105. www.wsg.washington.eduThe Marine Advisory Program is a unit of the School of Fisheriesand Ocean Sciences, University of Alaska Fairbanks, and isfunded in part by Alaska Sea Grant College Program. Mailingaddress: 1007 W. 3rd Ave., Suite 100, Anchorage, AK 99501.www.marineadvisory.org.Photos courtesy of Alaska Sea Grant College Program,Washington Sea Grant and Desire Fish Company of Bellingham,Washington.Funding from NOAA National Sea Grant to the Alaska SeaGrant College Program, grant NA16RG2321, A/152-18.A publication of the University of Washington, pursuant toNational Oceanic and Atmospheric Administration Award No.NA16RG1044. The views expressed herein are those of theauthors and do not necessarily reflect the views of NOAA or anyof its sub-agencies.WSG-AS 03-03MAB-53rev. 10/07ContributorsTorie BakerAlaska Sea Grant MarineAdvisory ProgramGlenn HaightAlaska Sea Grant MarineAdvisory ProgramBennett Brooksformerly Alaska Departmentof Commerce and EconomicDevelopmentMichelle KernAlaska Business DevelopmentCenterLiz Brownformerly Alaska Sea GrantMarine Advisory ProgramPaula CullenbergAlaska Sea Grant MarineAdvisory ProgramGreg FiskAlaska Sea Grant MarineAdvisory ProgramSarah FiskenWashington Sea GrantGinny GoblirschOregon Sea Grant (retired)Steve GrabackiGraystar Pacific SeafoodsPete GrangerWashington Sea GrantJohn KingeterNOAA Fisheries Office forLaw EnforcementDonald KramerAlaska Sea Grant MarineAdvisory ProgramDonna Parkerformerly Alaska Departmentof Commerce and EconomicDevelopmentBrian PaustAlaska Sea Grant MarineAdvisory Program (retired)Allison “Sunny” RiceAlaska Sea Grant MarineAdvisory ProgramH. Charles SparksUniversity of Alaska FairbanksCynthia WalleszAlaska Sea Grant MarineAdvisory Program

Table of ContentsForeword. iii1. Defining Direct Marketing. 12. The Seafood Distribution System. 53. Marketing Concepts. 94. Finding Customers. 135. E-Commerce. 176. Planning Your Business. 217. Accounting for Your Fish Business. 258. Considering Quality. 299. Working with a Custom-Processor. 3310. Packaging and Shipping of Seafood Products. 3711. Live Shipping. 4112. Setting Up Your Boat for Direct Marketing. 4313. Direct Marketing Prawns. 4714. Marketing Internationally. 51Appendices. 56A. Fisheries Business Financing and Business Assistance in Alaska.56B. Working with the IFQ Program.58C. Safety and Sanitation Requirements.61D. Common Mistakes in HACCP.62E. Salmon Roe.65F. Refrigeration Considerations.66G. Box Insulation Values and Gel Pack Effectiveness.67H. Processing and Storage Costs.68I. Alaska Seafood Marketing InstituteRecommended Statewide Quality Specifications for Alaska Fresh and Frozen Wild Salmon.69J. Permits, Licenses, Bonds, Reporting, and Taxes Required for Alaska SeafoodDirect Marketers and Small-Scale Processors . .72K. State and Local Regulations in Oregon .78L. Marketing Your Own Catch: State and Local Regulations in Washington .81M. Sources of Information and Materials.82N. Glossary of Seafood Business Terms.840. Business Plan Outline.86i

Fishermen’s Direct Marketing Manualii

ForewordWelcome to the fourth edition of the Fishermen’s DirectMarketing Manual.Since the mid-1990s, commercial fishermen have used earliereditions of this publication to help them think through theissues involved in selling their seafood products further up thedistribution system than the local processor. This is what we calldirect marketing.Over the years, we have distributed thousands of copies ofthe manual and we have heard back from dozens of users whohave told us that they found it helpful. The manual is oftencited as a source of reliable information on the subject and as anexample of university and Sea Grant support of the fishing andseafood industries.This edition is not only updated but also significantlyexpanded from previous editions. We have invited newcontributors and are fortunate to be able to include work bysome talented experts in their fields. We have added sectionson accounting, e-commerce, working with custom processors,direct marketing shrimp, setting up a boat for direct marketing,avoiding HACCP problems and other topics.Readers have given us suggestions on how to make itbetter and we have tried to incorporate those suggestions in thisedition. Even if you have a copy of an earlier edition, you maywant to read through this one; you’ll find many changes and wehope they are improvements.Where did the new material come from? Are your editorand writers better informed than before? Possibly, but moreimportantly, the industry has advanced and the workingdirect marketers are developing new knowledge and skillsand are sharing what they know. We’ve brought in some newcontributors. We’ve updated sections where regulations havechanged and where technology has advanced.In addition to the authors listed on the title page, I wishto thank Jeanette Johnson for checking contact informationand Cynthis Wallesz, George Meintel, Heather Maxceyand Dr. Quentin Fong for reviewing content and providingsupplementary material.We at Alaska Sea Grant wish to thank our partners atWashington Sea Grant for the excellent content, copy editing anddesign work they have contributed to this publication. It truly isa collaborative effort.This is the fourth edition of the manual but probably notthe last. So if you, the reader, find errors or outdated materialor can contribute additional information for the wellbeing of theindustry as a whole, please send me a note and let me know. TheFishermen’s Direct Marketing Manual is a living document andit depends on an open exchange with active participants in theindustry.Terry Johnson, EditorAlaska Sea Grant Marine Advisory Programiii

Fishermen’s Direct Marketing Manualiv

Defining Direct MarketingT1imes are changing in the fishing industry. Because of lowerex-vessel prices, boat limits, reduced tender and other servicesand, in some cases, a lack of buyers altogether, more fishermenare looking into direct marketing. Change can be threatening andmany fishermen are worried about their futures.Change can also provide opportunity. Development ofthe Individual Fishing Quota (IFQ) program, for example, hasgiven fishermen a chance to harvest their quotas a little at a timeand retain ownership of their catches to get the best value. Newchilling and processing technologies are making it easier tohandle, store and transport fish products. The Internet has openedup the world to sellers of all kinds of goods, including fresh andprocessed seafood.Direct marketing usually means more work, greater anxietyand uncertain returns. But growing numbers of fishermen on theWest Coast and in Alaska are finding that the rewards, in termsof financial success as well as greater connectedness with thefood industry and the ultimate consumers, make it worthwhile.Remote locations, high catch volumes, variable species andgrades and a variety of other factors still make direct marketingimpractical for most fishermen. This chapter is intended to helpyou think through what direct marketing means to you.middleman. You do the jobs,incur the expenses and take therisks that someone else wouldhave, and, hopefully, you getpaid those shares of the finalvalue of the product. you don’t get rid of themiddleman, you become themiddleman.A dead fish is a raw material. Its relationship to the retailitem or restaurant entrée is something like the relationship of afelled tree in the forest to a finished house, or at least to milledlumber in a lumberyard. The value of the final product is areflection of the intrinsic value of the raw material plus the valueof the labor, technology and risk involved in bringing it to themarket in its finished form.Fish is highly perishable, subject to wide variation inquality and constantly changing market demand. Risk is a largepart of the value of a finished seafood product. If the productis mishandled, delayed in shipment or sold during less thanoptimum market conditions, it can drop in value or becomeentirely worthless. Each entity in the distribution chain assumessome of the risk involved in bringing the product to market, andthe fisherman who becomes a direct marketer assumes a greatershare of that risk, in direct proportion to the greater share of theprofits he or she expects to realize.What Is Direct Marketing?In this book, direct marketing means selling a product to auser at a point on the distribution chain higher than the primaryprocessor. The word “marketing” is used differently from the wayit is used in other businesses.Normally, a fish flows through the chain in a manner something like this: the catcher sells to a processor, who sells to an importer or regional distributor, who sells to a local wholesaler, whosells to a retailer (store) or food service operator (restaurant orhotel), who sells to the public. Sometimes secondary processors areinvolved, as well as brokers, shippers and so on. A fisherman whodoes direct marketing might sell directly to the public or to oneof the wholesalers or distributors somewhere in the middle of thechain.Some people call this “getting rid of the middleman” but,in reality, you don’t get rid of the middleman, you become theWhat Kind of Direct Marketing Might BeBest for You?The first step as a fisherman considering direct marketingis to decide what kind of operation would best for you. Do youwant to sell directly to the public? If so, you become a retailer andyou may spend a lot of your time sitting in a shop, on your boatin harbor or at a roadside stand, with a scale and a cash box,meeting your customers face-to-face. Even if you ship or deliveryour fish to your buyers, you will have to be a salesman, talkingup the quality of your product, answering lots of questions,making lots of calls.Don’t have time for that? Maybe you want to wholesaleyour product, delivering to individual restaurants or fishmarkets. If so, you won’t have to sit in your pickup by the side1

Fishermen’s Direct Marketing Manualof the road, day after day, but you probably will have to meet adelivery schedule of one or several days a week. And you’ll haveto produce the size, quality, species and form of product yourbuyers demand.Maybe you would rather sell to a wholesaler and let thatperson worry about making the sales, delivering the product andcollecting payment. Of course, the amount you get for your fishwill be lower, but your time commitment will be less.The further up the distribution chain you choose to sell, thegreater portion of the total retail value of the product you getto keep for yourself, but the more time, complexity and risk isinvolved. The only way to completely avoid some level of additionalcomplexity is to sell ex-vessel to your processor and avoid directmarketing altogether.So, What Exactly Does a Direct Marketer Do?A fisherman who wants to take on the challenge of directmarketing must do some or all of the following: Obtain all licenses and permits, pay bonds, collect and payfees, complete forms and file reports, submit to inspectionsand file and pay quarterly and annual taxes Find potential customers, sell them on the productand negotiate prices and terms. This can mean buyingadvertising, writing and printing promotional materials,posting Web sites, sitting at booths in farmers markets oraboard the boat at dockside or going on sales trips to distantcities Gill, gut, slime, wash and re-chill the fish for shipment ordockside sale Chill or refrigerate the catch on-board or immediately aftergetting to shore Box or package the product and physically move it off theboat Acquire equipment (such as a truck) to transport theproduct to the point of sale or delivery, arrange shipment,weigh, prepare airbills, arrange transportation and drayage,transfers and final delivery Purchase packaging and labeling materials and containersand, possibly, arrange backhaul of shipping containers Send bills, collect payment, deal with customers who don’tpay and with complaints, as well as negotiate terms andspecificationsA direct marketer may also want to process the catch beforeselling it. If so, the fisherman then becomes a processor who alsois a direct marketer. This manual does not address processing.For a similar primer on basic seafood processing, see A VillageFish Processing Plant: Yes or No? published by the Institute ofSocial and Economic Research, University of Alaska Anchorage,2For some people, theidea of going intodirect marketing is anemotional response towhat they consider anunjust or worseningsituation.available on the Web at hProcessingHandbook/default.htm.Some direct marketers performor contract custom secondaryprocessing. They make steaks,fillets or portions or produce salted,pickled, canned or smoked products.Some make up fancy packagingwith eye-catching labels. Some put on promotions and do in-storecooking demonstrations. Some open retail shops or kiosks, printmail-order catalogs, design tee-shirts and print postcards withdesigns that complement and promote their fish products. Somestart out as direct marketers of the fish they catch themselvesand end up as buyers, processors and sellers of fish they get fromothers. In essence, they become fish companies.Is Direct Marketing for Me?For some people, the idea of going into direct marketing is anemotional response to what they consider an unjust or worseningsituation: “The processors are ripping us off. They’re making bigbucks on our fish and paying us peanuts. I’m not gonna take itanymore; I’ll just sell my own damn fish.”Whatever your motivation for considering directmarketing, you need to take stock objectively of your situation.This includes an assessment of your personal strengths andweaknesses as a potential direct marketer. A good fishermandoesn’t necessarily make a good fisheries businessman, and abusinessman is what your are if you do direct marketing.Cash flow is a big problem for many direct marketers.Instead of landing fish and getting paid, you are landing fish andpaying money to others. Then, after paying processing, shipping,insurance, packaging, cold storage and distribution costs, youmay have to wait 30 to 90 days to get your money, hope thatyour customers come through with that money and hope youdon’t have a product claim. Remember that all these cash flowconsiderations come on top of all the costs associated with yourboat, crew, equipment and overall fish-catching operation.How Do I Get Started?If you feel direct marketing might be for you, it’s time to startplanning your new enterprise. Every business should begin with awritten plan (described in Chapter 4 of this publication). In it, youneed to put down what your objective is, how you will operate,how you will keep track of your income and expenses, what youproject your income and expenses to be, how you intend to growand so on. The seafood industry is constantly changing and whatworks today very likely will not be effective a few years downthe road, so it is important to incorporate a plan for growing andfor adapting to change in the market. Keep in mind also that itcommonly takes three to five years for a new business to actually

Defining Direct MarketingGot the Goods?What’s your potentialas a direct marketer?Test yourself byhonestly answeringthese straightforwardquestions:If you feel you’repsychologicallysuited to directmarketing, take stockof your strengths andweaknesses in thebusiness: Am I good at bookkeeping and paperwork? How do I feel about being a salesman, either on the phone or in person? Do I enjoymeeting and talking to people? Am I good at taking care of details? Do I need to be paid immediately or can I wait to collect my money? How forceful can I be at making people pay what they owe me, or otherwise do what theyhave agreed to do? Can I stick with one task, week after week, year after year, or do I quickly become boredand need frequent change? Am I willing and physically able to do the extra work and commit the additional time torun a direct marketing operation? Or do I prefer to put the boat away and forget about fishat the end of the day or the season? Is my family supportive of this change, and can they make any necessary adjustments sothat I can spend the additional time and money on the business? Do you have the equipment and a boat big enough to properly handle the product? Do you have, or have access to, ice or chilling machinery? Is there regular, reliable, affordable transportation from your point of landing to thelocation of your potential customers? Is the timing and volume of your catch conducive to taking the time out to handleand transport fish and to meeting the volume and delivery frequency demands of yourcustomers? Is the species mix and intrinsic quality of your catch appropriate to the market? (seeintrinsic vs. extrinsic quality explanation in this manual) Do you have a plan for the roe (if your product is salmon) and for fish that your customersdon’t want because of species, size, condition or other factors? Do you have customers already lined up, or do you have a plan for selling your product? Do you have available cash for up-front operating expenses and to cover cash flow in casesome customers don’t pay or if, for some other reason, the operation is not immediatelyprofitable?become profitable, so your plan has to address cash flow and yourfamily’s financial subsistence while your business is developing.See Chapter 6 of this publication for information on how to writea business plan and where to get assistance.The second step is to draw up a marketing and sales planand start lining up customers. Many fisheries businesses havefailed because their owners bought the equipment, hired thehelp and produced a quality product but couldn’t find a buyerwilling to pay enough to make the venture profitable. With a fewexceptions, seafood products do not “sell themselves.” It is up toyou not only to find potential buyers but to make it clear to themwhy they should buy from you rather than from someone else.Direct marketers often base their sales pitch on two things —superior quality and personal service.The terms “sales” and “marketing” are not the same thing.Sales is the process of presenting the product to a presumablywilling buyer and persuading them to exchange their moneyfor that product. Marketing is a wide range of activities, mostof which precede the actual sale, that may include networking,public relations, advertising, market research, producingsamples, conducting demonstrations, developing consumerattracting packages and labels and providing generic informationto consumers about the qualities and attributes of the kinds ofproducts you hope to sell. For some examples of marketing, look3

Fishermen’s Direct Marketing Manualup the Web sites of some existing direct marketers and see howthey position their products in terms of flavor, purity, nutrientcontent, sustainability, the cultures of the harvesters and harvestlocales.You must be able to determine both who will buy yourproduct and how much they are willing to pay for it. Pricing isone of the most important skills of small business — too low andyou don’t make money; too high and either no-one will buy orsomeone will buy initially but soon a competitor will come alongand undercut you. That means market research. Before youinvest very much capital and time into developing this business,you are well advised to study the current market and markettrends, understand the factors that influence price fluctuationsand make reasonably accurate wholesale and retail priceprojections for the coming season. Until you have a pretty goodidea of how much you will be paid, you have no way of knowingwhether the business will be profitable.Once you’re satisfied that you can find customers whowill pay you a price you can live with, as demonstrated in thepro forma of your business plan, you need to check on all thepertinent laws, regulations and requirements. Fish is food, andwhen food goes into commerce, governments get involved andthey tend to take very seriously their responsibility to protectpublic health. Depending on your type of operation, you willprobably need at least one business license and you may need aprocessing facility permit. You may be required to obtain variousstate and local fisheries business licenses, you may have to posta bond, you may have to complete and submit fish tickets, andmay have to pay various taxes and fees. You can’t do all thishalfway; many a budding small-scale fisheries business has beennipped by state and federal regulations that control, restrict orprohibit certain types of operation.When you’ve figured out all the above, you may need to dealwith financing. Start-up businesses that are undercapitalized —don’t have enough money to buy equipment and supplies and tooperate at a loss for a while — tend to fail. If you have enoughmoney in the bank you can self-finance, but remember that youare borrowing from yourself and that money could be earninginterest or used productively in some other investment (the socalled opportunity cost of capital). Money may be availablefrom outside sources, but, in most cases, it is hard or impossibleto borrow money to start a small-scale fishery business for thesimple reason that it is risky. To borrow, you need to have yourducks in a row, so be prepared to provide financial statements,tax returns, financial references and other required information.Often collateral in the form of property is required to securebusiness loans. Only rarely are cash grants made to start-upfisheries businesses.4After you havesuccessfully addressed each oft is up to you not only tothe issues listed on the priorfind potential buyers butpage, you have a myriad ofto make it clear to them whydetails to attend to. You needthey should buy from youto order packaging materials,rather than from someonereserve transportation space,else.arrange transfer from yourboat to the airline, truckingcompany or other means oftransport, secure appropriate insurance, modify your boat andequipment, and decide whether to hire help. In your “free”time you probably will be studying market newsletters, readingseafood industry journals, informing yourself on the jargon andoperating procedures of transportation companies and learningabout packaging and product quality assurance, credit andfinancing and marketing techniques.IAll this is the language and practice of your new occupation.As soon as you decide to take your fish anywhere other than toyour local tender or processor’s dock, you are no longer in thefishing industry. You’re now in the seafood industry.

The SeafoodDistribution SystemFor a fisherman to compete in the seafood market, it isimportant to understand the seafood distribution system.This helps identify potential customers and potential competitorsand determine where one can best be positioned to build on theirstrengths and capabilities.The distribution system in the United States may seemunnecessarily complex, with too many different entities takingcuts of the product’s retail value. Rest assured that in someother countries, it’s even more complex. However, there arereasons that the seafood industry trades fish the way it does. Thedistribution system ensures adequate supply, minimizes waste,provides convenience and accountability and minimizes risk ateach level of the chain.If retailers and restaurant chefs could get fish that was justas good and get it just as reliably and for less money throughbypassing the distribution chain, they would do so. In fact, someof them do — buying directly from fishermen. If selling your fishstraight to the retailer or food service operator is your goal, it’simportant to understand what all those people who are links inthe distribution chain between you and the people who eat yourfish do.The American Seafood Distribution Chain“Chain” isn’t the best word to describe the seafooddistribution system, because it implies a single direct line oftravel, when there are multiple routes that a fish or fish productcan take from your boat to the final consumer. Some mightmore accurately describe this system as a web or a network, withnumerous interconnected routes. However, for the sake of easefuldiscussion, the more commonly accepted term, chain, is used inthis text.After a fish comes out of the water, the chain begins with theprocessor, who sorts, weighs, grades, slimes and washes the fishand then performs primary processing tasks such as heading andgutting. The processor may also perform secondary processingtasks, such as freezing, steaking, filleting or canning. Someprocessors also do additional value-added processing tasks suchas smoking, battering and breading, cutting portion-controlservings, vacuum packaging and gift boxing.2TAlso known in the tradehe distribution systemas packers, processors may sellensuresadequatetheir products to buyers at anysupply,minimizeswaste,point along the distributionprovidesconvenienceandchain, but, because of theaccountabilityandminimizesnormally large volumes, theyrisk at each level of the chain.usually sell to traders ordistributors (described laterin this section). They mayalso sell to supermarket chains. In some instances, primaryprocessors sell to specialty or custom processors who do thevalue-added processing. In any case, processors take rawmaterials – dead fish – and convert them into products thatcan be used by the consumer at home, the supermarket seafooddepartment, the chef in a restaurant or someone else.Some processors have their own in-house sales staffs, whoare employees of the processing company. They are paid a salaryto make the calls, fill the orders and ensure that the company’sentire pack is sold at the best possible price.Other processors use the services of a broker — anindividual or firm that sells products on a commission. A brokerusually doesn’t take ownership of the product and, therefore,has little risk, or “exposur

grades and a variety of other factors still make direct marketing impractical for most fishermen. This chapter is intended to help you think through what direct marketing means to you. What Is Direct Marketing? In this book, direct marketing means selling a product to a user at a point on the distribution chain higher than the primary processor.

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