Marine Harvest concerned about salmon prices
Norway's salmon producers are in line for at least two very profitable years as supplies tighten and prices reach unprecedented levels, but the largest company of all, Marine Harvest, is concerned that prices may rise to levels that cause long-term damage to consumption.
Analysts have predicted prices will hover between NOK 30 (EUR 3.74, USD 5.09) and NOK 35 (EUR 4.36, USD 5.93) throughout the first half of this year, but because of lower fish growth rates this will climb to higher than normal levels in the second half of the year.
"Maybe we shouldn't go for NOK 50 [per kilo] even if it's good for our share prices and our companies," said Marit Solberg, Marine Harvest Norway managing director.
The Marine Harvest Group posted a loss of NOK 3 billion (EUR 3.74 billion, USD 5.09 billion) for 2008 following the infectious salmon anemia (ISA) virus-induced meltdown of Chilean production but bounced back into the black last year with a profit of NOK 1.3 billion (EUR 162 million, USD 220.5 million).
The company is expecting a drop in its own harvest volumes of between 5 and 9 percent this year. This fall will be a result of issues in both Chile and Norway, explained Solberg. And she expects a similarly "tight year" in 2011.
"The implications of the ISA problem in Chile will really be felt this year," she said. "Last year, Chile was able to put a lot of frozen salmon into the market and that softened the blow."
There is very little frozen supply to fall back on this year. Meanwhile, Norwegian production has been hit by a particularly hard winter this year after two consecutive mild winters.
Over the last five years the industry had been able to keep consumer prices in check by presenting the market with more product, particularly in Europe. This strategy has paid dividends and the Norwegian Seafood Export Council estimates European demand is increasing at a rate of 8 percent year-on-year.
Solberg's worry is that the supply shortfall will push prices up to levels that end-consumers will find too great to stomach and they will subsequently shift their attention to cheaper, alternative species.
"If you can maintain output growth of 3 to 7 percent, then you can maintain your price," she said. "We're aware we have to continue to offer a sustainable price."
The total world harvest of farmed Atlantic salmon was 1.46 million metric tons last year, down just 2 percent from the 1.49 million metric tons harvested in 2008. The increase was largely thanks to ramped up production in Norway and Scotland.
Kontali Analyse chairman Lars Liabo expects the global harvest to fall a further 5 percent in 2010 to around 1.35 million metric tons.
Norway will produce around 930,000 metric tons this year, he predicted.