Rabobank: Peruvian anchovy industry will return to profitability

Published on
March 2, 2015

Producers of Peruvian anchovy that can cope with the volatility of the sector will have a long and bright future thanks to unprecedented global demand for the product, according to a new report compiled by Rabobank International.

In 2014, climatic conditions shut down the Peruvian anchovy industry’s second fishing season, resulting in lost revenues of over USD 1 billion (EUR 891.4 million). More than 9 million metric tons (MT) of wild anchovy biomass is unaccounted for, with only speculation as to what has happened to it, and the prospects for the first fishing season of 2015 are still uncertain due to the continuing potential for an El Niño weather event.

Despite the current difficulties, Rabobank’s latest report, “Where’s the Catch? Challenges and Volatility in the Peruvian Pelagic Industry,” forecasts that fish stocks will recover and profitability will return to the industry, with prices supported by the strong longer-term global demand for fishmeal and fish oil.

According to Rabobank’s report, the industry will continue exploring other business models to better deal with current and future volatility. It will also continue to consolidate and will diversify revenue streams into higher-value markets, such as products for human consumption.

“While most leading producers have already done this, the second stage of investments could include the production of high-value, human-grade proteins and oils, which can be used as functional food ingredients or as protein targeting the pet food market. Human-grade fish oil concentrate for the omega-3 encapsulation sector is the best-known example, but there are also others, such as high-quality marine proteins used as food ingredients, for instance in baby foods or athletic diets,” it says.

The Peruvian anchovy is the world’s single-largest fishery, and biggest source of fishmeal and fish oil, providing some 40 percent of the traded volume. However, the industry has one of the most volatile business environments of any large-scale food and agribusiness industry, says Rabobank.

Historically, it has experienced short-term impacts from recurring El Niño events and long-term changes due to overfishing in the 1960s, overcapacity in the 1970s, the emergence and disappearance of sardines, and considerable regulatory changes. Furthermore, a strong El Niño has been occurring every eight to 13 years, making the next big event “long overdue.”

While a new El Niño has not officially materialized, the climatic conditions in the second half of 2014 were such that the second 2014 fishing season was closed. This was an unprecedented event with an enormous financial impact. As a result, only 2.2 million MT of anchovies were harvested last year, the lowest figure since 1998, which was the year of the last very strong El Niño.

Recent research points to the potential for good fishing in the second half of this year and that fishmeal and fish oil supplies out of Peru will rebound. It is projected that the current juvenile biomass will double in weight as it matures over the next few months, and that a “normal range” biomass of 8 to 10 million MT is possible by April.

However, there is still a risk that a mild El Niño could still form, acknowledged Rabobank.

“Globally, the production of fishmeal and fish oil has been stagnant at best, and supply has even contracted compared to production levels a decade ago. In an environment of growing demand, this has resulted in steep price increases. In less than a decade, fishmeal prices have doubled, while fish oil prices have almost tripled,” says the report.

This bodes well for the long-term prospects of the Peruvian industry, says Rabobank.

Contributing Editor reporting from London, UK

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