Farmed salmon prices expected to rise

Published on
September 30, 2016

Over the next two years, global buyers will continue to pay more for farmed salmon.

New projections from Sweden-based Nordea Bank show that overall salmon prices will rise 3 percent in 2017 and 2 percent in 2018.

“We raise our salmon price by 2 percent for 2018, which we believe will be offset by an increase in cost,” wrote Kolbjørn Giskeødegård, director of seafood for Nordea in the bank’s most recent salmon Equity Report.

The outlook for new growth that could bring salmon prices down below NOK 40 (USD 4.98, EUR 4.44) per kg. is “bleak”, according to Nordea.

“The cost side is a major concern. We expect a tight supply-side, driven by constraints in Norway and Chile in the coming years,” Giskeødegård wrote.

In addition, Nordea continues to favor Grieg Seafood as its “sector top pick,” although “we have a more cautious take on the remainder of the sector owing to an all-time-high valuation,” Giskeødegård wrote. However, Nordea downgraded SalMar and Norway Royal Salmon to “sell” from “hold,” and Bakkafrost from “buy” to “hold.”

While Nordea increased its production estimates for Chile , it is projecting lower production in Norway.

Nordea estimates that Chile’s 2017 harvest will be close to 500,000 tons, up 40,000 tons on the estimated 2016 level.

“This is also 30,000 tons higher than the most recent Kontali estimate (presented in the Leroy Q2 report) and considered representing a consensus in the market,” Giskeødegård wrote.

Meanwhile, Chile’s 2018 harvest should return close to 2015 levels, or an estimated 576,000 tons for 2018. “This is 50,000 tons higher than our previous 2018 estimate,” Giskeødegård wrote.

While there is uncertainty with the Chilean government’s new regulations, which have not been finalized, Nordea supports the sustainability efforts.

“What seems to be clear…is that the producers who lost fish during the algae bloom will be allowed to rebuild their biomass, and that there will be a cap on growth in smolt release,” Nordea wrote. “Overall, we believe a 3 percent cap would improve the biological risk, to the benefit of all.”

Meanwhile, Norway’s salmon production costs will continue to increase, Nordea said, because of the rising costs of sea lice treatments and fish feed.

“We also see a risk that feed costs might remain high or even increase if fish farmers use more expensive special-diet feed to bring more fish to well-paying markets,” Giskeødegård wrote. “Due to massive sea lice challenges in Central Norway this year, too, several farmers might see lower allowed smolt release, which is good for the market balance, but bad for the cost per kilo.”

During the first eight months of 2016, total Norwegian salmon exports dropped by 6.1 percent or 45,800 tons. Buyers in the EU, Scandinavia, France, Spain and the United Kingdom imported less Norwegian salmon, while United States’ buyers, such as Costco, increased their purchases.

Contributing Editor

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