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Fishmeal and fish oil - November 2015

Fishmeal and fish oil prices continue to rationalize while a strong El Niño will impact the entire sector soon

The start of the second fishing season for 2015 in the Central/North region was recently authorized in early November by the Peruvian Ministry of Production to begin on 17 November. The total limit of permissible capture (LMTCP) for the resource for indirect human consumption in the center-north zone was set at 1.11 million tonnes. The ministry indicates that this authorization applies to the area between the extreme northern border and the 16°00 south latitude (Ático – Arequipa).  The ministry stated that the fishing season will conclude once the LMTCP has been reached or by 31 January 2016.

Production

For the first half of 2015, fishmeal production from the top five producing countries grew by a notable 24%. This growth is largely due to the fact that 85% of the Peruvian fishing season quota (2.58 million tonnes) had been caught by early June, and this quota itself is 65% more than the same quota in 2014. Compared with the production figure 4-5 years ago, 2015’s production is still low, clearly due to the cancellation of the second anchovy fishing season in 2014 based on negative findings by IMARPE on the anchovy biomass. European production of fishmeal fills this gap. Indeed, data from Statistics Iceland shows a 44% increase in pelagic landings when compared with the same period of the previous year, which includes capelin, herring and mackerel (Source: Undercurrent News).

For fish oil, production dropped in most major producing countries for the first half of the year, except in Iceland. Production from Peru and Chile picked up slowly in the first six months, however the total half-year volume is still 34% less compared with the same period last year. In the USA, based on the improved menhaden stock situation, the menhaden quota was raised by 10% from May onwards, which in the long-term will help with the fish oil supply.

Exports

With effects from the 2014 cancellation of the second fishing season continuing in the first half of 2015, fishmeal exports from Peru dropped to 271 900 tonnes, which was almost half of the level for the same period in 2014. Worldwide the market was slow, as all of the major export destinations reduced their import volumes significantly. Neither Germany nor the UK imported any fishmeal from Peru during the first six months of the year. The decline of the Peruvian fishmeal supply will also continue to result in increased efforts to either diversify sourcing origins or seek new feed alternatives. 

In the case of fish oil, both Peru and Chile reported much lower levels of exports during the first half of the year. In addition to the reasons above, the increasing domestic demand for fish oil in Chile for their salmon farming sector contributed to the decline trend. Growing demand for fish oil for human consumption will remain strong worldwide.

Markets

Although on the decline, fishmeal prices were still high in the first half of 2015 and due to this as well as low demand from China, the markets had been relatively quiet for the first half of 2015. As prices became further rationalized, countries began actively building up stocks.

The UK largely imported fishmeal from Ireland and Norway during the first half of 2015, and therefore import volumes were not reduced as significantly as in other markets. For the first six months of the year, Germany increased import volumes from other sources, but with no imports from Peru, it imported only slightly over half of its import amount for the same time period in 2014.

Prices

After fishmeal prices reached a record high in the second half of 2014, prices began decreasing in 2015 towards the normal range of USD 1 600-USD 1 650, but the markets were not active in the first six months. Prices of fishmeal continue to rationalize from their peak level recorded last year. With the opening of the first anchovy fishing season and ample catch, the expectation for even lower prices has kept the market quiet for now. From the industry side, the expectation is that fishmeal prices will normalize with the first Peruvian fishing quota for 2015 set at 2.58 million tonnes, or 600 000 tonnes of fishmeal. Better catches of pelagics from Iceland also helped to ease the pressure on international prices.

Fish oil prices had also witnessed a similar trend since late 2014, with prices lowering. However, beginning in June 2015 the prices have stabilized as the supply and demand gap is increasing as the result of a highly possible El Niño from the end of 2015 to early 2016.

In line with the general trend of fishmeal prices, soymeal prices have remained low from the end of last year. For the past year, the ratio between the prices of fishmeal and soymeal has stayed around 4:1, which was quite attractive for feed producers looking for alternative raw materials.

Outlook

It has become increasingly obvious that for the rest of 2015, the sector will repeat a similar trend to what happened last year, if not be impacted more this time around. To offset the tight supply situation, the first fishing season of 2015 exceeded the first season of 2014 by 65%. Despite these increased catch volumes, the northern-central anchovy stock biomass was 3.38 million tonnes, 48% lower than the expected biomass of 6.4 million, and 41% of it were juveniles, according to the latest study performed by IMARPE.

Last year, the Kelvin waves of warm water were turned away by strong winds blowing from east to west last year, but this may not occur again, making for a super El Niño. With the dominating importance of Peruvian anchovy fishing in global fishmeal production, there is much uncertainty about the amount of anchovy to actually be caught out of the quota that was recently set for the second fishing season (at 1.11 million tonnes). With these developments, it cannot be expected that prices of fishmeal and fish oil will stay at their current low level for long.

Despite efforts to explore other alternatives, such as trimmings from processing factories, vegetable oil and meal, insects, single-cell protein, recycled waste and algae, prices for fishmeal and fish oil will remain firm in the long-term. Whether prices will hike up to last year’s peak in the coming months will largely be influenced by how alternatives can be sourced and how the super El Niño will impact the aquaculture sector. In the long term, prices of fishmeal and fish oil will generally depend on how cost efficient alternatives can be produced on a large-scale with sustainable and regular raw material supplies.

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