GLOBEFISH - Information and Analysis on World Fish Trade

Salmon - December 2015


Norwegian prices stay up but Chilean exporters facing serious challenges

Problems are mounting for the Chilean farmed salmon sector, with prices now down at 2012 levels and production costs already well above other producing countries. Due to a range of different factors, demand for Chilean fish has suffered in all major markets and revenues are well down. In contrast, Norwegian farmers continue to enjoy high prices and resilient EU demand. In the wild salmon market, meanwhile, both Russian and Alaskan fishermen have been seeing exceptionally good catches this year. In Alaska, the total recorded wild salmon harvest is the second highest of all time, at 257 million fish. This is not good news for exporters, however, particularly when the US dollar is as strong as it is now.


Norwegian salmon prices started off 2015 around NOK 5 per kg below 2014 prices as high early year volumes had to be absorbed without the assistance of the Russian market. However, the situation reversed itself in the third quarter. Harvesting switched to a new generation, fish weights decreased, temperatures fell, biomasses dropped and the krone depreciated against the euro, pushing prices above 2014 levels where they have remained. Forward price consensus at Fish Pool would suggest that the market is also increasingly optimistic about Norwegian prices over the next two years.
For Chilean salmon prices, however, heavily depressed demand in the top markets has seen a steep drop in export prices to almost all destinations. In week 42, the price for fresh Atlantic fillets on the US market was at USD 7.23 per kg compared with USD 9.30 per kg for the same week last year. Meanwhile, in the wild salmon market, exceptionally good catches have kept prices down for pink and sockeye in particular.


This year has so far been another profitable one for the Norwegian salmon industry, with a range of market developments that have allowed exporters to increase the Norwegian share of important markets at the expense of other producers. In the USA, shifting consumer preferences have led to the decision of multiple large retailers to turn to Norwegian salmon at the expense of Chile. It is the EU markets, however, that continue to absorb the largest quantities of Norwegian Atlantics, despite the persistent high prices. Norwegian exporters have successfully filled the large gap in the market left by the Russian trade embargo by taking advantage of a weak krone, strong EU demand and new opportunities in the US market. According to the Norwegian Seafood Council, Norway exported 571 000 tonnes of salmon to the EU in the first three quarters, worth NOK 24.8 billion. These figures represent increases of 11% and 14% respectively compared with the same period in 2014. Norway has exported more salmon this year to all of its top nine markets, all of which are in the EU, with NOK prices at or above last year’s thanks to a favourable exchange rate. Poland, a major processor and smoker of salmon, remains the largest market, and increased its share of total export volume in the first nine months of 2015 to 13%.

The US market has also been a growing market for Norwegian salmon, which is increasingly seen as a favourable alternative to Chilean product. Considerable strengthening of the US dollar versus the krone has been another important factor, contributing to the almost 40% increase in exports to the US market in the first nine months of the year. Despite recent Chinese concern over ISA outbreaks in Norway, exports to Asia rose substantially in the first nine months of 2015, to 111 000 tonnes worth NOK 5.3 billion. Total Norwegian production in 2015 is expected to grow by 4-5% in 2015, with a similar growth rate forecasted for 2016. Prices are expected to remain at high levels over the same period, which will see industry revenues increase further. The concern, however, is rising costs. Firstly, the exceptional El Niño weather phenomenon expected in late 2015 could drastically reduce anchoveta catches in South America and drive fishmeal prices steeply upwards. Another major issue is sea lice, which have reached very high levels in parts of Norway this year, prompting mass harvesting that increases price volatility and costs per kg. 


Prices for Norwegian trout steadied somewhat in the first half of 2015, but remain below levels seen prior to the Russian trade embargo. The major sources of demand are now the Belarussian and Polish markets, as Japanese demand has been negatively impacted by a weakening yen. Total Norwegian trout exports for the first 9 months of 2015 came to 35 000 tonnes, worth NOK 1.5 billion, 8.5% less than the same period in 2014 in volume terms and 14% less in value. Significantly higher biomass and heavier fish in the pens than compared with this period last year should see prices remain relatively low for the time being, at least until seasonal demand kicks in at the end of the year.


Salmon farmers has faced falling prices and the devaluation of currencies in target markets such as Brazil and Russia, as well as the advancement of Norway in the United States, one of the main markets for Chile in terms of exports (currently representing about 25% of shipments). During the first half of this year, the Chilean salmon industry has experienced a contraction of 21% in terms of value. According to the Association of Chilean Salmon Industry (Salmon hile), the value of shipments of salmon reached USD 1 814 million, compared with USD 2 312 recorded in the same period last year. The underlying cause is the weaker average price of Chilean salmon, which, according to data compiled by Infotrade, was at USD 6.41 per kg in June 2015, compared with USD 8.12 per kg in the same period of 2014. There was also a significant drop in Chilean salmon harvests. According to the Report on Fisheries and Aquaculture released by Subpesca, Atlantic salmon represented 47.5% of Chilean harvests during the first half of 2015. Total Atlantic salmon harvests totalled 205 900 tonnes, which means a drop of 32.8% compared with the first six months of 2014. As for rainbow trout, cumulative harvests up to June reached 8 300 tonnes, representing a drop of 87.8% over the figure recorded for the same period last year. Coho salmon harvests came to 14 700 tonnes, down by 67.2% over the same period of 2014. Some believe that the Chilean salmon industry is still capable of competing with European producers and overcoming the low prices and poor results suffered by some salmon farming companies during the first half of 2015.


Salmon production in Scotland reached record heights in 2014, at almost 180 000 tonnes. So far in 2015, however, results have not been as impressive. The number one market, the USA, have looked to Canada and Norway to supply the fresh whole segment usually sourced from the UK. A primary reason for this has been the relatively greater gains of the US dollar versus the krone and the Canadian dollar. However, UK exports to the EU, in particular France, have grown so far this year.
On the market side, it seems more Scottish production is being diverted to the UK market this year, as import supply is down due to the Faroe Islands directing salmon traditionally headed for the UK to Russia instead. Import prices for fresh Atlantics into the UK are somewhat lower this year, while canned wild salmon prices are also down, providing an opportunity for retailers to revitalize consumer interest in the product.


The large emerging markets of Russia and Brazil, which have represented a significant proportion of growth in the global salmon market over recent years, are no longer such attractive prospects for Chilean and Norwegian exporters. It is again the US and EU markets that exporters must focus on if current production growth is to be absorbed. However, today’s demand trends in developed markets revolve around healthy lifestyle choices and a general aversion to overly processed food, which also present both challenges and opportunities depending on the capacity of the producer to target these segments. The inability to address consumer concerns over sustainability and quality standards can have serious consequences in today’s markets.


Atlantic salmon has become a scarce species on the Russian market due to the country’s previous dependency on imported salmon. According to the Federal Customs Service, Russian imports of Atlantic salmon dropped to 30 000 tonnes in the first half of 2015, representing around half of the import volume observed over the same period in 2014. Russian imports from Chile included 19 000 tonnes of frozen salmon, while imports from the Faroe Islands included 8 200 tonnes of fresh salmon and 1 800 tonnes of frozen salmon. At present, the Faroe Islands is the only supplying country of fresh Atlantic salmon after the inclusion of Iceland under the embargo in August 2015. 

Pacific salmon species caught in the Russian Far East, however, have become more widely available in the stores of the big cities. Despite booming demand from Asian markets, some of the Russian fishing companies took a decision to support the domestic market by redirecting wild Pacific salmon to the central part of the country. About 3 000 tonnes of Pacific salmon species were distributed by trawlers from the Far East to northern Russia (Source: Murmansk). Delivering Pacific salmon by the Northern route led to a 20% decrease of distribution prices compared with the traditional distribution route.


The French market has remained stable in terms of import volumes so far in 2015, although prices are relatively lower for importers due to the appreciation of the euro versus the krone. The fall in the cost of raw material has been a positive development for French smokers, who have seen their margins squeezed in recent years by high and volatile salmon prices. Salmon has historically battled with cod as the top seafood item for French consumers, but has been hampered by negative publicity relating to farming practices.


German consumers are eating more and more seafood, although their tastes are shifting away from traditional preserved products. A recent study by the Fisch-Informationszentrum, has shown that German shoppers are increasingly turning to the fresh and chilled seafood segment offered by discount retailers and as a result, frozen sales have taken a hit. Smoked salmon, generally imported from Poland, is still popular, however, and remains some distance ahead of fresh and chilled in terms of total import value.


The yen has depreciated substantially this year, meaning that Japanese importers could not take full advantage of lower prices for Chilean coho and Alaskan sockeye which is in plentiful supply. Import volumes for the latter two species have recovered somewhat after the low levels recorded last year, while demand for fresh whole Atlantics has remained stable. An important recent development for the Japanese salmon market is the new trans-pacific partnership, signed by Japan and many other Pacific Rim countries, as it will eliminate 95% of tariffs on seafood products including certain tariffs on frozen salmon products.


The economic outlook for the EU has improved, while retail spending is being boosted by good growth in the USA, and it appears these two markets will continue to be the main focus of exporters for the foreseeable future. However, exchange rate dynamics will continue to be another key influencing factor in determining US supplier composition, while the significant shifts in large US retailer sourcing strategies is set to hit Chile hard. Consolidation is an important step in addressing Chile’s issues, but neither Japan nor Brazil represent very stable alternative markets to the USA at present and such activity will be limited until a clearer picture emerges. In contrast, the outlook for European producers remains positive so long as production costs can be kept under control, with relatively low supply growth expected and prices forecasted to remain high for at least the next two years.

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