Algae becoming increasingly relevant due to soaring fishmeal and fish oil demand, prices

Published on
March 17, 2016

Packed with proteins and oils, marine and freshwater algae have long been tipped as promising alternatives to existing but limited sources of functional ingredients. In particular, the ability of algae to produce omega-3 oils makes them suitable for replacing increasingly price volatile fish oil and fishmeal products, especially aquaculture feeds.

Today, the algae industry produces just 9,000 metric tons (MT) dry weight of product annually and is generally regarded as an expensive undertaking, but given the right support, investment and research and development (R&D), farmed output could be conducted on a much larger scale, which should enable for greater cost-efficiencies.

The fish and shrimp farming sectors have been experiencing significant fluctuations with regard to marine raw material markets and prices in recent times. These variations are largely the result of El Niño-related events, and it is widely expected that the depleted marine raw material supply trend will continue in the years ahead, so making feed production increasingly expensive.
Because of these spiraling prices, this could be one of the first areas in which algae products become competitive with existing products, finds the new report, “Algae: A Brave New Industry,” compiled by Rabobank International.

The study delves into the potential of using algae in animal and human nutrition, and forecasts that increased use of algae should be expected in both segments. It surmises that to reach its full potential and become truly commercialized, the algae industry needs support from established finance and accounting (F&A) companies at different stages in the supply chain.

The development of a farming industry is essential for the success of algae, according to the report. However, at present there are too few commercial algae growers who have been able to get investment, because the risks are considered too high. In Rabobank’s view, though, algae production is reaching a “tipping point,” where it goes from being a product with potential to a potential game-changer.

Now is the time for F&A companies that need – or will need – this product to decide how they want to engage with the fledgling algae industry in order to secure their competitive advantage for the future, suggests the report.

With the aquafeed market worth an estimated USD 24.6 billion (EUR 22.2 billion) in 2014, and forecast to grow to USD 30 billion (EUR 27.1 billion) by 2020, it’s well documented that leading companies in the sector are increasingly looking at ways in which algae and other ingredients can play a greater role in their product portfolio. Indeed, Rabobank’s report points to the salmon industry, which alone is responsible for the consumption of around 350,000 MT of fish oil annually and which it says is actively looking for sustainable alternative sources.

At the same time, the growing demand for fishmeal – brought by declining wild catch of key small pelagic species as well as increased human consumption of such species – will intensify the pressure on prices. While at USD 1.30 (EUR 1.17) per kg protein, fishmeal prices are currently much lower than the best-case price for microalgae of USD 1.65 (EUR 1.49) per kg protein, but with technological improvements and lower costs for production, algae can quickly become competitive in price.

This, said Rabobank, will result in the growing commercialization of algae products and make it an appealing ingredient for a number of other industries too.

Contributing Editor reporting from London, UK

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