Atlantic salmon prices have come down drastically over the last couple of months and have still not stabilized. The market is nervous with buyers hesitant to commit.

Prices rebounded somewhat during mid July as supply from Norway was reduced because of summer closures in some of the slaughtering facilities, but fell back subsequently.
The reason for the fall is a mixture of factors; the gradual come-back of Chile in the US and Japanese markets, the decline in Norway’s exports to China and the USA in 2011, and the accumulated resistance in all markets towards the very high price levels seen during the first half of 2011. Processors and retailers, in particular, had seen their margins and sales suffer and had no interest in entering into new contracts at former levels. During the autumn, however, more Chilean supply will come to market with obvious repercussions in both the fresh and frozen segments.  The big change, however, will come next year from April onwards as the new Chilean production reaches market size in serious proportions.

Supply

Norway exports

Norwegian export statistics for the first six months show almost unchanged export volumes from the same period in 2010 (362 100 tonnes in 2011, 359 100 in 2010). The value of exports rose dramatically to NOK 15 billion from NOK 13.8 billion in 2010, thanks to much higher average prices. Prices, in fact, rose from NOK 38.54/kg last year to NOK 41.50/kg during the first six months of 2011.

Despite growing price resistance in Norway’s markets, export volumes were fairly stable to most destinations as buyers lacked suppliers. The exceptions were Poland, China and the USA, which were all significantly weaker in 2011. Positive development was also registered in emerging markets such as Israel, Ukraine, Republic of Korea, Viet Nam, Turkey, the Philippines and Malaysia.

This tendency was already evident during the first quarter with overall export volumes slightly down.

Faroe exports

After a difficult 2010 with reduced output, the Faroese production and exports bounced back in 2011 with 33% higher volumes exported during the first three months. Thanks to the general high level of prices, values grew by a spectacular 56%.
In particular, it is strong demand in the US and Chinese markets that explains the positive results. Of total exports, 30% went to the US in the first quarter of 2011, up from 26% during 2010, and only 7% in 2008. China has gone from being the 20th to the Faroes’ 6th largest market.

UK 

Salmon exports from the UK were up during the first quarter by 23% with fresh shipments to the US up 51%. It is interesting to see how UK exports are dominated by fresh product with 87% of total volumes.
Chile

Chilean producers are finally seeing the end of the crisis that has severely curtailed production and exports over the last couple of years. During the first quarter, shipments jumped 26% in volume with Japan in particular showing strong demand for Chilean product. US demand was also good with Chilean exports to that market up 30%. Exports to Europe remain a fraction of past volumes and Latin American markets, which had come to replace the EU as Chile’s third largest market, were stagnant during the first quarter.  Better prices increased the value of exports to all markets when stated in dollars; however, the weak dollar to the peso has been a large handicap for Chilean producers.

The increase in Chile’s output continued during the 2nd quarter with export volumes of salmon and trout up 27% during the first five months of 2011 ( May inclusive). Value growth was even more impressive with a 50% increase in US dollars over 2010. The strongest increase was for fresh salmon exports, up 29% in volume and 59% in value.

It is interesting to note that the most exported category is now trout (66 200 tonnes), followed by coho (60 300 tonnes), and Atlantic salmon only in third place (42 200 tonnes). This is explained by the fact that it was only Atlantic salmon that was hit directly by the ISA virus.

The destination of export volumes during the first five months was to Japan (50%), the USA (14%), Latin America (14%) and the EU (2%). Given the predominance of fresh product in the exports to the USA, this market ranks higher in terms of value than volume (21%), but still behind Japan (45%). Chile’s search for new markets is also bearing fruit with 21% of shipments to destinations not included in those above.

Markets

USA

The first quarter again showed falling imports of salmon by the US, including of fresh salmon fillets, the most valuable segment in the salmon trade. This is the second year in a row in which import volumes to the US have declined during the first quarter. Fresh fillets have been in short supply because of Chile’s ongoing problems but Norway has also experienced difficulties with its exports to the US this year. As a result, prices have been higher than usual and US retailers have curtailed their purchases. This trend has continued during the second quarter and by end of May, total US salmon imports were down 2.5% in volume whereas values were up a significant 14%, given the higher prices. It is evident that the US has a potential for higher consumption of salmon than today but that price is more important than ever.

Of note is the large boom in frozen fillet imports in the unspecified category with an increase of 28% to 16 200 tonnes and 63% in value to USD 110 million by the end of May, with China as the dominant supplier with 80% .

Japan

The positive undertone in Japan’s salmon market continues with import volumes up 24% during the first quarter despite the high prices. It is the revival in Chile’s exports that explains the rise, with Chile’s salmon exports to Japan increasing by 24% during the quarter compared with the same period in 2010.

France

The largest market for salmon in Europe saw salmon imports and consumption fall during the first quarter as processors, retailers and consumers showed resistance to the record high quotations. This is a break with the long-term positive trends that saw imports increasing year by year as salmon gained ingress in ever more dishes, uses and distribution outlets, including the commercial catering industry.

The major reduction was in the fresh whole segment where Norway saw its shipments to France fall 12% to 15 000 tonnes.

Germany

A significant market for salmon, Germany saw its imports from Norway fall slightly during the first six months of 2011 to 17 400 tonnes (round weight equivalents). Higher prices caused the value of Norway’s salmon exports to this market to grow 5% to NOK 0.7 billion.
Whereas Norway’s exports of fresh whole and fresh salmon fillets continued to grow during 2011, Germany’s imports of frozen fillets from Norway fell 38% to 2 000 tonnes compared with the first six months in 2010, a sure sign that processors are reluctant to buy at the price levels seen during this period.
Trout

Norway´s trout exports during the first half of 2011 dropped from 18 500 to 14 100 tonnes. Prices were up, however, from NOK 38.96/kg last year to 43.94/kg during the same period of 2011.

Outlook

The increase in supply during June and July that caused prices to drop dramatically shows how exposed the spot market is to sudden supply swings. During the third quarter of the year, supply is expected to be ample and with prices at lower levels than in the 1st and 2nd quarters. Chile will have some quantities for sale but will return to market in force only during the first half of 2012.

The challenge for the sector is to align the increase in supply over the next couple of years, with its seasonal swings during the year, with the underlying positive trend in demand to try to minimise the wide swings in prices. Creating demand in new markets in emerging economies will certainly be part of the solution.