Farmed salmon is continuing to show its market resilience, and despite some easing of demand in Europe and the United States, prices will remain high in the first half of this year, albeit at lower levels than the peak seen in the corresponding period of 2022, according new analysis from the RaboResearch unit of Rabobank.
The bank’s report, “Global Aquaculture Update H1 2023,” compiled by Rabobank Senior Global Seafood Specialist Gorjan Nikolik, found in spite of the “recessionary behavior” seen in both the retail and foodservice sectors in the United States and Europe, steady demand for salmon, combined with tight supply, will likely lead to high prices in the first six months of 2023, and potentially beyond.
Rabobank is predicting 2 percent growth in global salmon supply in H1 2023, which is up from the corresponding period of 2022.
The Norwegian government’s proposed additional 40 percent tax on salmon farmers, on top of the existing 22 percent corporate tax, has brought some uncertainty to the global salmon market. If this tax remains in place, it could have significant consequences for the sector in terms of overall salmon supply and prices, Nikolik told SeafoodSource.
“The Norwegian growth rate will be reduced, perhaps by 50 percent. This will initially support prices. But it will also support alternative supply, thus the high prices will correct in the long-term,” he said.
In a previous report issued in early January, Rabobank predicted global salmon production will increase by an estimated 4 percent in both 2023 and 2024, nearing 3 million metric tons (MT) in 2023 and then surpassing that total in 2024. Cumulative supply growth for Norway and Chile between 2022 to 2024 is expected to drop to 3.1 percent, compared with the previous decade’s 7 percent compound annual growth rate (CAGR).
However, the bank’s updated forecast suggested global seafood demand has reached an “inflection point,” with a likely recession in store due to the current inflationary cycle. This could harm progress on new, investment-heavy land-based salmon operations and ventures.
Nikolik acknowledged there had been a “relative lack of success stories” in this space in 2021 and 2022, but said he believes the industry is still looking to innovate.
“Yes, we have a high price environment for salmon, but we also have rising interest rates and high energy costs and high construction costs – all of which challenge the viability of RAS [recirculating aquaculture systems]. But it does not mean that some will not succeed,” he said.
Unlike for salmon, demand isn’t holding as firm for shrimp in markets like Europe and the United States.
Rabobank predicted shrimp supply growth in H1 2023 will be much lower than H1 2022 but will nevertheless remain positive, mostly due to rising production in Ecuador.
According to Nikolik, softer demand for shrimp and the growing supply have generated a low-price scenario (below pre-pandemic levels) that should “bottom out” in H1 2023 or a bit later in the year.
While farming costs are below peak levels, Nikolik said he expects 2023 to be a very challenging period for shrimp farmers globally and that many shrimp farmers globally will exit the sector.
“Some that have other crops will focus on those, while others will initially reduce densities to deal with the lower price,” he said.
Rabobank identified India as the country most impacted by the situation, predicting shrinkage of its production total in the second half of 2023, and the bank expects shrimp farmers in India, Indonesia, and Vietnam to take a more cautionary approach seeding in the first six months of 2023.
But amid the currently unstable financial situation, as consumers are being squeezed, low shrimp prices could spark greater interest in the category. At present, though, Nikolik said Rabobank hasn’t yet spotted that trend.
“My speculation is that retail prices have not yet fully adjusted to the lower wholesale price of shrimp. We do expect indeed for demand to pick up in 2023 due to this low wholesale price, it is just hard to pin down the timing,” Nikolik said.
Rabobank’s report also points out there has been an upturn in China’s shrimp demand. In the third quarter of 2022, China led global shrimp purchasing as it scaled back its COVID restrictions. While China’s ongoing struggles with Covid may restrict demand in the Q1 2023, particularly in foodservice, the second quarter is looking more optimistic, according to Rabobank..
Global fishmeal supply will be up slightly in H1 2023 year-over-year, and prices will remain strong thanks to steady demand, Rabobank reported. Possible supply increases in Peru and Chile are likely to be balanced by a declining supply from Europe, it said, while China’s demand is rising.
Peruvian fishmeal prices reached USD 1,600 (EUR 1,479) per MT in 2022, which is well above levels from previous years and fish oil prices climbed above the USD 3,000 (EUR 2,773) per MT mark for the first time last year – a level that’s close to double those paid in late 2020 and early 2021.
Nikolik said he believes the soaring fish oil prices makes a better case for the proliferation of alternative ingredients and will support investment in the sector.
“But it may take some time before we see more volumes of alternatives, as it is more about scaling-up the pilot plants or building larger production facilities. There is a long lead time for supply to respond and it is not only dependent on price but R&D also,” he said.
Photo courtesy of Global Seafood Alliance
