Rising supplies and falling prices pushed Grieg Seafood into the red in the third quarter of 2011.
The Norwegian farmed salmon producer on Thursday posted an third-quarter operating loss of NOK 30.7 million, compared to an operating profit of NOK 105.1 million in the third quarter of 2010.
Rising supplies and falling prices have hit the farmed salmon sector hard this year. Global farmed salmon production jumped 19 percent in third quarter of 2011, Marine Harvest reported late last week. As a result, the farmed salmon giant’s third-quarter operating income dropped 39 percent, and the company warned of a “challenging market” in the coming quarters.
Also, Cermaq’s third-quarter operating income slipped 19 percent, as salmon prices are off about 30 percent from a year ago, the company reported early last week.
For Grieg, the only a small percentage of its production was covered by contracts in the third quarter, so it was “largely exposed to the spot market.” The company harvested 15,663 metric tons of salmon in the third quarter, up 7.3 percent from last year.
Though they’re falling at the production level, prices remain firm at the consumer level. However, lower prices are strengthening demand and opening up new markets. “In some markets, the effect of price reduction has become more immediately apparent, and this has led to a significant rise in demand. A great increase in demand has been especially noticeable in Russia, but other markets too are showing signs of increased demand and a higher level of activity as the prices have fallen,” said Grieg.
“The price development in the salmon market is clearly supply driven,” added the company. “Good growth conditions and an increase in the number of smolt entered to sea have also resulted in higher production in most fish farming regions. Simultaneous growth in production in Norway and Chile will also result in a further increase in supply in 2012 compared with the previous year.
“So far, the turbulence in the financial markets has not given any signs of reduced demand and the outlook for the supply side therefore still seems to be good. Demand will pick up when the effects of the price reduction are fully felt in the market.”
