An intriguing dichotomy now exists between two of the world’s leading farmed seafood items — shrimp and Atlantic salmon. Early this year, prices for both had been at records highs in line with short supply and high demand, but increased global production of salmon has seen its farm gate price come crashing down. Conversely, because of static output, shrimp prices show little sign of falling in the short to medium term.
Just a few months ago, salmon prices were not too far from NOK 50 (EUR 6.42, USD 9.25) per kilogram, but they have since plummeted to around NOK 25 (EUR 3.21, USD 4.62). Providing stark contrast, leading markets like Japan and the United States were last month paying around USD 12 (EUR 8.33) per kilogram for both 21-25 black tiger shrimp (Penaeus monodon) and Pacific white shrimp (Penaeus vannamei). These prices were significantly higher than those paid through 2008, 2009 and much of last year.
Dictating these price points is that most basic of economic principles — the rule of supply and demand.
Gorjan Nikolik, senior associate with Rabobank International, thinks salmon prices will remain low through 2012 and this is largely due to the “amazing job” that Chile has done in getting production back on track after all its infectious salmon anemia (ISA) problems of recent years.
“Looking back at some of our recent forecasts, a few months ago we thought Chilean production would reach 180,000 metric tons; this was then later reforecast to 200,000 metric tons,” said Nikolik. “Our latest model for 2011 puts production at 205,000 metric tons, which is a 57 percent increase on 2010.”
The last time Chile experienced this kind of production increase was in 2001, when its output increased by a massive 60 percent to 245,000 metric tons of Atlantic salmon. However, one should be careful comparing 2001 with 2011 as the market is much larger today than 10 years ago. This year will see a 10 percent global supply increase, whereas the figures for 2001 represented a year-on-year boost of some 13 percent.
Nikolik also believes Norway will have a strong production year in 2012, with around 8 or 9 percent volume growth. This, he said, means in total for 2012 there will be a very significant global volume expansion of at least 13 percent. This will be off the back of the aforementioned 10 percent volume growth this year.
“You are going to have an extra 25 percent supply over two years. And I think that will create strong pressure on prices,” he said.
There have been strong suggestions from seafood analysts that prices will stay at around NOK 30 (EUR 3.85, USD 5.55) in 2012, but Nikolik said these will probably be revised down to NOK 25. This will probably be the lowest price point, as it will coincide with the greatest production increase.
A lot depends on how long Chile will be able to maintain this exceptional biological performance. Its smolt release is ever increasing, but there is a real likelihood that at some stage farmers will have to resort to using poorer quality smolt. There will also be greater concentrations of farms in certain areas. Combined, these elements will unquestionably impact production.
The shrimp sector, meanwhile, has been besieged by disasters over the last year or so, such as the floods in southern Thailand and disease outbreaks in Indonesia and more recently Vietnam. But these adversities don’t seem to have been too detrimental in terms of import-export figures.
Nikolik said Thailand is not having a better year than in 2010 but it is similar — maybe 4 or 5 percent less exports. China is definitely exporting less but then it wasn’t the biggest exporter; Vietnam has increased its exports significantly; and to a lesser degree so has Indonesia. But perhaps the biggest increase in exports is coming out of India.
“India is switching quite rapidly over to vannamei and volumes are much stronger. Therefore, while Thailand is exporting a little less, other counties are making up for this deficit. Nevertheless, global supply is not declining, yet it remains tight,” said Nikolik. “There’s a similar pattern with prices. Prices increased in July and August last year and they’ve stayed at that high level. That’s a reflection of supply.”
Most importantly for shrimp producers and exporters, the markets have absorbed these prices. In both the European and U.S. markets, the imported values increased last year ¬— both paid higher prices, but volumes increased only slightly.
Drawing comparisons between the two sectors, salmon prices had to come down because of the higher volumes being produced, and the extremely high prices were not good for salmon demand. In the shrimp sector, prices will remain high until producers can ramp up the overall global supply. What affect this wait, combined with a sustained period of high prices, has on long-term demand remains to be seen.
