The severe El Niño conditions forecast earlier in the year have been downgraded to neutral/weak for the Pacific basin and northern hemisphere winter of 2012-2013. However, reduced quotas and poor weather conditions for Peruvian fleets, combined with strong demand across the market, are likely to put upward pressure on fishmeal prices. Meanwhile, fish oil supply continues to stagnate, and soymeal and oilseed markets remain volatile.

Fishmeal

The most important fishmeal producers, Peru and Chile, as well as Norway, showed decreased production from January to June 2012 compared with the same period in 2011. Despite the lower production, however, Chilean and Peruvian exports of fishmeal to their major international markets were higher during the first semester.

The biggest growth in demand for Peruvian fishmeal is from Germany, with a 90% increase in the first half of 2012 compared with the same period in 2011. Asian markets also posted strong demand in the same period.

China is the biggest export market for Chilean fishmeal, taking a 43% share of exports in the first half of 2012. Chinese demand for Chilean fishmeal increased 11% from the same period last year, while there was also significant domestic demand from Chilean salmon farms.

German fishmeal imports from January to June increased by 60% over 2011. The USA increased fishmeal imports by 30% in the first half of 2012, mainly in response to lower soymeal production and depleting soybean inventories. UK fishmeal imports declined 9% in the first half of 2012 and remain significantly lower than import levels achieved in the same period of 2010.

Fish Oil

Total fish oil production was 22% lower in the first half of 2012 than the same period last year. This is primarily because of production shortfalls in Peru, as well as Chile, where a fishing stop on anchovy fishing was reissued at the end of September. Norwegian suppliers, however, continued to be active.  

Peruvian exports of fish oil increased significantly, by 53%, from last year. The strongest export markets for Peruvian fish oil continue to be Belgium, Chile and Denmark.  Chilean fish oil exports fell slightly as a result of increased domestic consumption by Chilean salmon farms. The other major markets for Chilean fish oil were Japan and China, while Belgium became a new export destination, absorbing 24% of Chilean fish oil exports in the first half of 2012.

Outlook

The outlook for the fishmeal trade remains positive because of good demand even though prices are expected to remain on the high side. While supplies in the first half of 2012 were somewhat hindered by weather conditions and quotas, production in the fourth quarter should be reasonable given that the severe El Nino conditions have not materialized as initially expected. Factors such as growth in import demand and soybean price are more likely to affect the price of fishmeal rather than climatic conditions.

Fish oil demand from Norwegian and Chilean salmon producers continues to grow although salmon production may slow down somewhat in 2013. The fish oil price levelled off in the third quarter of 2012 and should remain steady, although it may be influenced by spill-over effects from the soybean oil and rapeseed oil markets.