As a consumer product, very few types of seafood are able to compete on the same level of supply and international demand as farmed Atlantic salmon (Salmo salar). The global exports of this fish totalled 2.3 million metric tons (MT) last year with a value in excess of USD 14 billion (EUR 12.5 billion).
The salmon farming industry is led by Norway, which produces around half the Atlantic salmon sold in the world and exports more than 1 million MT annually, followed in second place by Chile. In recent months, both regions have been hit by biological challenges: sea lice and harmful algal blooms (HABs), respectively.
There’s no question that both problems will cost the salmon industry billions. At the same time, their effects on the supply and price of salmon are also of growing concern in many key markets.
Back in November last year, Norway was widely expected to have a steady year with small growth of two to three percent, but also that the first-half of the year would be negative because the same period of 2015 was very strong.
“We thought that in the second-half of this year, Norwegian salmon production would increase somewhat and lead to a small rise in overall output,” Gorjan Nikolik, associate director of animal protein with Rabobank International, told SeafoodSource. “However in September, October and November 2015, Norway encountered a major problem with sea lice. This problem was persistent and resulted in enforced early harvesting across the board.
“This resulted in everyone lowering the Norwegian production expectation for 2016. At the moment, the expectation is for production to fall by around three percent this year. Therefore, the forecast has changed from a positive two percent to negative three percent, which is quite a shift over just a few months. And these problems will hit the entire 2016 year, plus part of 2017.”
Meanwhile, it has been well documented that HABs have caused the deaths of millions of farmed Atlantic salmon in southern Chile in the opening weeks of this year, with many of the leading production companies in the region affected. The South American country was already expected to reduce its output by around 10 percent this year due to farms deciding to stock less biomass in attempts to improve profitability. Now, following the HAB event, its 2016 volume can be expected to be somewhat lower.
Rabobank’s view was that due to the financial constraints, the smolt release reduction and new legislation, Chilean production would turn strongly negative in Q4 2016 and that Chilean salmon – particularly in the U.S. and Brazil markets – would benefit from higher prices, said Nikolik.
“However, the algae bloom brought the high price that we expected in September and Q4 to right now, and we still haven’t seen the true effect on the prices from current events. Supplies are being affected right now; they will also be affected in the second-half of 2016, and at least the first-quarter of 2017.
“We already expected Q4 to be tight for Chilean supply, so now it’s going to be very tight. I think this means we are in line for a steep increase in prices from now until at least Q4. Beyond that, a lot depends on how quickly Norway can move.
“The Norwegians tend to be fairly clever with logistics but still I foresee rising prices between now and through to the end of Q4 in the North American and Brazilian markets,” he said.
