In the days before the infectious salmon anemia (ISA) virus decimated Chile’s salmon farms, the United States was the main market for Chilean salmon. Now that Chilean salmon is coming to the market after two years of dealing with ISA, the United States may still be the No. 1 market — but it has competition.
“Where we think we are the most sought-after market — we can have whatever we want whenever we want it — there are other markets out-competing us and outspending us. If it doesn’t sell here it will sell somewhere else,” said the head of one U.S. seafood company that buys a lot of salmon. “The Brazilians can pay more, the Japanese can pay more, the Chinese can pay more, and they’ll get it and we won’t.”
The CEO of another East Coast seafood company said the biggest question with farmed salmon supplies is, “When is Chile going to come on and when is it going to come on with some predictability?”
There is more Chilean fish filling the supply pipelines and it’s added a bit more uncertainty in the market, the CEO said.
“There are different places that are going to be online at different times,” he said. “Some folks said they were going to be in by September, some folks said they were going to be in by April.”
An executive with one Chile-based salmon company says product from its farms is garnering interest around the world. “Brazil has been a huge market for Chile, especially on the big whole fish. Korea and China are starting to become players, where really very little salmon had gone there in the past,” he said. “There’s real strong demand.”
New management rules in place to prevent future ISA outbreaks mandate newly created farming areas, or neighborhoods, be kept fallow parts of the year — one reason for the spotty availability.
“We estimate you have to be present in at least nine different zones to have consistent 52-week-a-year production,” the executive said. “That's causing a lot of these smaller farms to be in and out of the market.”
One executive says Chilean salmon was “flowing in a little bit,” first with frozen first then fresh product.
“When we thought we felt it back in March, there was a kind of resurgence, then all of the sudden prices spiked up again and there seemed to be a lack of supply. So there may be some time before they have any kind of continuity,” he said.
Prices for whole salmon in the United States, according to the same executive, are ranging between USD 4.75 and USD 5.50 a pound, with fillet prices ranging from USD 7 to USD 7.75 for premium-quality fish. How long those prices hold, he doesn't know.
“I think those prices can't hold up, I can't imagine how people can buy at those levels and keep buying at those levels,” he said, adding that he doesn't see Chile being the reason why there be a weaker market the second half.
“It's just a matter of there will be more production available than there has been, starting in June or July. That, and the malaise of summer business at these prices, will both contribute to a weakening market the second half of this year,” the executive said. “A lot of contracts end June 30, so there will be many people with their eyes on the market come May, wondering what they’re going to do for July, myself included.”
Three other factors are in play: the rising price of competing proteins such as beef and pork, the exchange rate of the Norwegian kroner to the U.S. dollar (at the end of April it was NOK 5.27 to a dollar, compared to around NOK 6 at this time last year) and the start of the West Coast wild salmon season.
“There’s real strong demand for the product, and we'll have wild coming in here in the next few weeks, and that should temper the supply side a little bit, that should add some supply,” the Chilean company executive said, “but I don’t see any huge impact of wild on the farmed.”
There won't be significant increases in volume out of Chile until the fourth quarter, at which point there might be some price relief, the salmon seller says.
“You’ve got expensive Canadian fillets or whole fish, and Chile is still a value at USD 6 (for trimmed C, trimmed D fillets, f.o.b. Miami) compared to alternate countries,” he said.
“The Canadian fish now are USD 4 plus; in the Northeast you’re looking at USD 4.50 on the big fish. Take USD 4.50 and a yield of 70 percent on head-on, gutted to a trimmed sea fillet, and you’re looking at USD 6.42 right off the knife. Then you figure from a processing aspect, you’re looking at least at 30 cents and packaging 30 cents, so you’re already looking at a USD 7 fillet price.
“We will see some more volume in the fourth quarter so we might see some pricing relief. There will see some gradual ebbs and flows, but I don’t see any significant downward pressure,” he said.
