Oceana’s menhaden move emphasizes power of fishmeal, fish oil

Somebody once told me farmed fish is really just fishmeal, repackaged. It’s obviously far more complicated than that, but the simplistic thought bears some truth, and also provides a good lens through which to view South Africa fishing company Oceana’s acquisition of U.S. menhaden harvester and processor Daybrook Fisheries.

The USD 382.3 million (EUR 341.9 million) deal announced this week is less about Oceana taking a strong position in the U.S. menhaden fishery and more about seizing an opportunity to strengthen its stance in a crucial and competitive commodity market supporting global livestock and aquaculture production. The originator of the transaction told SeafoodSource that the deal is a “game changer on a global scale.”

“It’s the relevance and strategic value of this transaction” that elevates its importance, said Ignacio Kleiman, managing partner of Antarctica Advisors in Miami, which presented the deal to Oceana and handled the initial negotiations. “The strategic drivers for the transaction were diversification and growth.”

Oceana, one of largest fishing companies in South Africa, had extended regionally, but needed to look overseas for further growth opportunities. The location and size of the menhaden fishery were attractive to Oceana, Kleiman said. By extension, the opportunity to be one of the two major menhaden (a fish found only in U.S. waters) harvesters was a key factor (publicly traded company Omega Protein of Houston, Texas, being the other).

“The proposed acquisition represents an opportunity for Oceana to undertake a truly transformative transaction and acquire access to a sustainable and well-managed fishing resource,” Oceana stated earlier this week.

Humans don’t eat the oily and bony menhaden (Brevoortia patronus), at least not directly. The Gulf of Mexico resource is one of the key reduction fisheries fueling the burgeoning global fishmeal and fish oil market, which are continually growing in importance considering their role in protein production, both on land and in the water. Prices for fishmeal skyrocketed from roughly USD 800 per metric ton (MT) a decade ago to more than USD 1,700 per MT in 2014, according to World Bank statistics, with some reports showing prices eclipsing USD 2,000 per MT as recently as this winter. While the key players in Peru’s gigantic anchoveta fishery dominate global fishmeal production, other reduction fisheries like menhaden are also key.

“It’s not about menhaden,” said Kleiman, regarding the Oceana-Daybrook deal, adding that further mergers and acquisitions are likely given the current economic climate. “The real question is what position you have in the fishmeal and fish oil industry. The price of fishmeal and fish oil is growing at a rapid clip, and more people are consuming omega-3s because of the health benefits. The trend is up, because there are limited amounts of fish and increasing demand.”

Without fishmeal and fish oil, there is no farmed salmon, no tilapia, no sea bass or sea bream. Similarly, without vast amounts of corn and soymeal, there wouldn’t be much chicken or beef to go around. And as the recent IFFO report shows, high-quality fishmeal is a crucial ingredient in growing healthy livestock as expeditiously as possible.

“The value of the inputs is becoming highly strategic. He who controls the inputs in the food industry will have a lot of market power in the future. This is a long-term play for Oceana,” said Kleiman. “A major [overseas] seafood company buying into the U.S. should open eyes of other companies to make moves.”