Soaring raw material costs are becoming a growing problem for Europe’s aquaculture industry and the broader retail value chain, according to speakers at a recent webinar organized by the European Commission’s European Market Observatory for Fisheries and Aquaculture (EUMOFA),
Ireland’s salmon-farming industry, which is entirely focused on the delivery of organic products, is suffering as a result of higher prices for raw materials. While Ireland is a modest producer of farmed salmon compared to Norway and Scotland, it is Europe’s foremost producer of organic fish, harvesting between 15,000 and 20,000 metric tons (MT) annually.
Mowi Ireland Director of Farming Operations Catherine McManus said the industry’s shift to 100 percent organic, achieved over the past decade, came about because the country couldn’t compete with the production costs of the other European countries.
“We had to find the margin elsewhere. Also, organic principles fit very well with the types of coastlines we are farming. It was a natural choice to go into organic salmon production,” she said. “In a way, our industry is considered niche and with that exclusiveness comes a cost – the input costs into our production and processing sectors tend to be higher than for the non-organic sectors.
Feed and packaging have both increased in cost, harming the profitability of salmon aquaculture in Ireland, McManus said.
“The biggest input costs we have are our feeds – they account for about 47 percent of our total input costs. Particularly, organic feed and the basket of ingredients that can be used for organic salmon is quite limited and must also all be organically certified. That naturally brings a higher price to the production of feed,” she said.
When compared to non-organic diets, organic feed prices have historically been “relatively high,” but since 2021, they have increased greatly, McManus said.
“In 2022, we saw a 24 percent increase in feed prices, and we project for 2023 that they will be up 34 percent compared to the 2021 price. Obviously, with almost half of the costs being feed, that has a significant impact on the industry,” she said.
Mowi Ireland has also experienced huge increases in is its packaging costs. The company mainly relies on expanded polystyrene (EPS) but saw the cost of these products rise between 35 and 43 percent in 2022. And, with a lot of the producer’s fish being exported, mostly into the E.U., its transport costs have also increased.
“Between electricity and marine diesel, which we rely on heavily, we see at least a 6 percent increase in those energy sources versus 2021. And the outlook for these inputs is uncertain given the geopolitical situation,” she said.
But Mowi Ireland won’t be passing all these rising costs on to its customers, McManus said. Indeed, many of its customers are on long-term contracts, she pointed out.
“We anticipate some increase in our prices in 2023, but not significant ones – maybe 10 percent. So we have to find a way of absorbing these costs. It means really tightening our belts and trying to manage our costs very strictly for at least the next year and maybe more. That’s what’s so uncertain,” she said.
Therefore, as far as Mowi Ireland and 2023 is concerned, “it’s business as usual,” said McManus.
“Our growth objectives remain the same, but we are under increasing pressure in terms of costs, particularly feed costs,” she said.
Photo courtesy of Mowi
