Growing global demand for salmon and predicted drops in supply will lead to a sustained period of higher prices for at least the next two years, according to Rabobank.
“We expect increased global demand to support the high price environment and the strong profitability of farmers,” Rabobank said in a new statement this week. “This expectation holds true, even with Russia’s ban on Norwegian and EU salmon, which will likely create large scale trade shifts and price volatility.”
The new statement from Rabobank released today outlined predictions for what will happen to the markets and why. The bank predicted that despite expansion of the industry earlier this year, worldwide salmon production will revert to the “high-cycle scenario” that emerged in late 2012.
The bank blamed new legislative and biological constraints in Norway and Chile, the two largest sources of farmed salmon, for expected stunting of the industry’s growth starting late in 2014.
“Growth will undoubtedly return, but when, where and how remains unknown,” said Rabobank analyst Gorjan Nikolik. “In two or three years’ time, possibly due to technological innovation, the salmon farming industry is likely to solve many of the biological and environmental issues that are currently being tackled.”
Rabobank estimated that growth might appear in Chile first. Sanitary conditions were a big part in the slowing of growth there in 2012 and 2013, but already the industry there has implemented changes. Rabobank’s statement suggested “the Chilean industry could emerge in the long term as the leading growth driver of global supply.”
The prices will translate into higher profitability for salmon producers, and Rabobank estimated much of the new cash flow would be funneled into biosecurity and other sustainability measures.
