It has been a tough year for Atlantic salmon producers but a better one for retailers and processors as a result of the steep downward trajectory that salmon prices have followed over the past two years.
In Norway, the world’s leading salmon-producing nation, spot prices at the start of 2011 were at around NOK 40 (EUR 5.47, USD 6.97) per kilogram, but by year’s end they had slumped to NOK 25 (EUR 3.42, USD 4.35) per kilogram. The average price for 2011 was NOK 31.99 (EUR 4.37, USD 5.57) per kilogram, down from NOK 37.26 (EUR 5.09, USD 6.49) per kg in 2010.
This year has been more of the same. The average spot price for the first 10 months of 2012 was NOK 26.30 (EUR 3.59, USD 4.58) per kilogram. As a result, for the year through October 2012, the value of Norwegian salmon exports totaled NOK 23.9 billion (EUR 3.3 billion, USD 4.2 billion), and while this equaled the value achieved in the corresponding period of last year, the export volume increased by 23 percent or 153,000 metric tons (MT) to 808,000 MT.
Probably the biggest contributor to the decline in prices is the return of Chile as a force after three years in the wilderness while it dealt with the 2007 infectious salmon anemia outbreak. In 2011, the world’s No. 2 producing nation ramped up its harvest to 220,000 MT and this year it’s expected to harvest 344,000 MT.
Chile’s resurgence is, however, not the sole cause of the price volatility — production is increasing in most regions. Norway harvested more than 1 million metric tons (MT) of salmon last year and a figure of 1.1 million MT can be expected for 2012. Production in the United Kingdom (Scotland), in third place, has also increased for three consecutive years, reaching 158,018 MT in 2011.
Conservative estimates put this year’s total production at 1.8 million MT, up from 1.6 million MT in 2011, but industry executives say a figure in excess of 1.9 million MT is not inconceivable. Barring any unforeseen circumstances, global production can be expected to near or surpass 2 million MT in 2013, which would represent a 37 percent increase in global supply over a period of just 36 months.
What has been the main effect on the salmon market so far? Buyers have said the low farm gate prices have made it possible for current markets to absorb additional supplies and European retailers and processors have been offering salmon products in various attractive deals, but the same buyers have hinted that there are limits.
At the same time, the increased production and subsequent lower market prices have hacked away at the bottom lines of all the major salmon producing companies and record company performances are, for the time being, a thing of the past.
The Norwegian Seafood Council has put a positive spin on the situation, saying the country has seen good export growth to all its main markets. But as an industry, it’s become imperative that producers everywhere establish new, long-term markets.
Many will have taken some comfort from the recent Rabobank industry report “The Dragon’s Changing Appetite,” that documented China’s growing appetite for seafood and its particular affection for salmon.
Based on an optimistic growth rate of 14 percent, China’s salmon imports could reach 120,000 MT by the end of the current decade, says the report’s author Gorjan Nikolik. Last year, China imported 12,000 MT of salmon.
With no global production slowdown on the horizon, the industry could do with more Chinas.
