The global pandemic brought an array of challenges, as well as some opportunities, to the global salmon sector. Foodservice shutdowns have translated into sharply reduced profitability, particularly for Chile, but gains at retail and tighter supply should allow for a brighter 2021.

Production

Atlantic salmon

Global farmed Atlantic salmon supply is estimated to have increased by around 3-4 percent in 2020, with Chile leading the major producers in output growth. Beating predictions by a large margin, the Chilean sector is expected to see a sharp increase in harvests in 2020, with estimates ranging from 10-15 percent for the year. Elsewhere, emerging producer nations such as Australia, Iceland, China and the Russian Federation continue to increase their share of overall production. Meanwhile, the largest producers in Europe, Norway and Scotland, had only small increases in outputs. This is contributing to a slowdown at the global level relative to the prior three years, during which growth averaged around 6 percent. While COVID-19 has had a severe impact on markets and on logistics, salmon farms in most producer regions have generally been able to continue operating at nearnormal
levels after implementing the necessary health safety precautions for employees.

As of November 2020, cumulative Norwegian harvests for the year reached 363.2 million fish, approximately on a par with the same period of 2019. The pandemic pushed up logistical costs and prompted some farmers to delay harvesting due to market uncertainties, while infectious salmon anaemia (ISA) affected farms in several regions. Falling prices saw earnings fall substantially for most operators, particularly later in the year, but years of profitability, consolidation and innovation have allowed the Norwegian industry to build up significant resilience to temporary downturns. Overall, compared with Chile, the second largest producer of farmed salmon, Norway has so far weathered the COVID-19 storm relatively well.

In Chile, salmon companies have taken a proactive approach to protecting their employees by investing heavily in safety and hygiene, and output increased significantly in 2020. However, weak prices, a truck driver strike and the impact of the pandemic on operations, public health, logistics, international markets and trade have created a challenging environment for the sector. As a result, many businesses have experienced significant losses.

According to the Undersecretariat of Fisheries and Aquaculture (SUBPESCA), Chile’s salmonid harvest was 706 000 tonnes during the first nine months of 2020, an increase of 8.3 percent compared with the volume harvested in the same period of 2019. Atlantic salmon harvests reached 564 500 tonnes, 78.9 percent of total salmonids and 53.9 percent of all national aquaculture harvests. Atlantic salmon increased by 9.8 percent compared with the same period in 2019.

Other salmonids

In the first nine months of 2020, Chilean production of farmed coho salmon increased by 5 percent compared with the same period in 2019, to 75 500 tonnes. Over the same timeframe, Chile’s farmed rainbow trout harvests increased by 0.4 percent to 65900 tonnes. In Norway, farmed rainbow trout harvests were flat year-on -year over the first nine months, at 20.7 million fish. While trout productionhas hovered around the same level over the last few years in both Norway and Chile, output is increasing in smaller producer nations such as Peru and China.

Wild salmon

Weak runs and challenges associated with COVID-19 restrictions meant substantially reduced wild salmon catches in Alaska and the Russian Far East in 2020. The Russian fleet reported a total of 272 000 tonnes of all species combined, 40 percent lower than 2019 and 50 percent lower than 2018.
In Alaska, catches amounted to some 241 000 tonnes, 42 percent lower than 2019 and 12 percent lower than 2018. According to the Alaska Department of Fish and Game (ADF&G), the ex-vessel value for all salmon species in Alaska was 56 percent, compared with 2019 at USD 295.2 million.

Markets

In a year of upheaval for seafood markets, the salmon industry’s experiences have been mixed, with the relative severity of the pandemic’s impact generally dependent on the degree of exposure to the hotels, restaurants and catering (HORECA) sector. Restrictions intended to reduce contagion of the COVID-19 virus have seen foodservice companies shut down across the globe, and businesses involved in the production of seafood sold primarily through these channels were the most severely impacted. In the case of salmon, the species has a significant market presence in both foodservice and retail but there are important regional differences in this respect. In the Americas, an estimated 54 percent of salmon consumption takes place in the HORECA sector, while in Europe the equivalent proportion is 36 percent. This points to the more prominent role of retail in Europe as a sales channel
for salmon products. This discrepancy has contributed to the different experiences of the salmon industry of Chile (primary supplier to US markets), compared with Norway (Europe’s main supplier), over the course of 2020.

Norway has a long-established presence in European markets which includes vertically integrated supply chains, extensive knowledge of relevant regulatory requirements, deep experience of European consumer preferences and strong connections to processors and large retailer chains.
This has allowed Norwegian marketers to rapidly adapt to the increased importance of retail trade in Europe on the back of additional demand from house-bound consumers.

In Germany, where salmon is the second most consumed fish species with 17 percent of the market, a significant increase in at-home consumption, including home delivery services, has more than made up for the loss of foodservice demand. According to figures presented by the Norwegian Seafood Council (NSC) in November 2020, at-home salmon consumption in Germany had increased 22 percent. Similar trends have been observed in other European markets, including France, where consumer preferences are changing to include more prepackaged convenience products to supplement fresh and frozen options.

In Chile, salmon companies have been disadvantaged by their dependence on HORECA sales and a large increase in supply just as demand began to dry up. Exporters have struggled to divert these excess volumes to Europe, where their product is yet to be widely accepted by consumers. Instead, they are locked into markets such as the United States of America, Brazil and China, where the switch to retail has been more difficult. In China, these challenges were compounded by the authorities’ decisions to require additional border checks on imported salmon due to its suspected role in virus transmission. As of the end of 2020, however, the US market has slowly begun to recover, with a gradual reversal of the lockdown allowing for somewhat of a recovery in foodservice demand.

Trade

Salmon

Toward the end of 2020, the UK salmon sector faced mounting challenges as the imminent exit of the country from the European Union resulted in mass delays and logistical obstacles at the border.
The Scottish Salmon Producers Organisation (SSPO), mindful of the importance of the French fresh salmon market, has called for the prioritization of fresh goods following the Brexit transition in the new year. After an exceptionally good year in 2019, Scottish salmon export revenues fell significantly in the first nine months in 2020, down 14 percent to USD 612 million. In response to a drop in volumes from the United Kingdom of Great Britain and Northern Ireland, France increased its imports from Norway to make up the shortfall.

According to the NSC, Norway exported 800 000 tonnes of salmon in the first nine months of 2020, approximately on a par with the previous year. The unit value fell slightly however, translating into a 1 percent decline in total value to NOK 51.8 billion (USD 5.4 billion) over the same period. The effects of the pandemic on markets and consumer behaviour has diverted an increasing proportion of exports to processors who supply retail, with Poland remaining the number one destination for Norwegian salmon and increasing its share of total fresh whole salmon exports to 18 percent.
Norway has also started to process more salmon domestically, which has resulted in an increase of 18 percent in the volume of fillets exported.

The total value of Chilean salmon exports fell by some 17 percent in the first nine months of 2020, despite an increase in total production. Export value to the United States of America fell by 9 percent, driven by a sharp drop in fillet prices, with a marked shift in the composition of US imports towards frozen product.
Meanwhile, declines of 15 and 34 percent were registered for Japan and Brazil respectively.
Shipments to China, Chile’s fifth largest market, fell by some 45 percent, as border checks and HORECA shutdowns took a heavy toll.

Trout

According to the NSC, Norwegian trout exports increased 31 percent in the first nine months of 2020, to 53 000 tonnes. However, weaker prices meant total value increased by only 11 percent, to NOK 2.9 billion (USD 302 million). Meanwhile, Chilean trout exports fell by 5 percent in volume and 9 percent in value to 39 900 tonnes worth USD 345 billion.

Prices

Market challenges related to COVID-19, combined with an increase in volumes coming out of Chile, saw Chilean fillet prices drop to multi-year lows in 2020. Prices for trim-D fresh fillets (FOB, Miami) fell to USD 3.39 per kg in 2020, levels that have not been seen since 2015. Norwegian export prices also slid downwards as the year progressed, reaching USD 5.16 per kg at Fish Pool (3-6 kg, head-on, gutted). Similar prices were observed in late 2019, but a notable difference in 2020 was the failure of prices to spike towards year-end, as demand over the festive season fell well short of expectations.

Outlook

After a difficult year in 2020, Chilean salmon producers are expected to sharply reduce their output in 2021. Analysts are predicting a 14 percent decrease, concentrated towards the second half of the year. In contrast, Norwegian supply growth should pick up, with a 4-6 percent increase anticipated.
The net result would be flat or marginal growth for the year as a whole, with positive growth in the first half offset by supply contraction in the second. This is expected to have a positive effect on prices, with Fish Pool forward prices for 2021 averaging NOK 52.68 (USD 6.32) per kg. However, there remain a number of uncertainties both on the supply side and the market side. Chilean production is difficult to forecast and current figures are very approximate, and at the same time there is the possibility of an influx of frozen product from inventories built up over the course of 2020. Beyond this, the HORECA sector’s recovery is dependent on a number of factors, one of the most important being the pace of the global vaccine rollout. A strong uptick in demand combined with a large drop in Chilean output could see prices spike in the second half of 2021, pushing business margins back into more favourable territory, but the pandemic has proven to be an ever-evolving threat and unforeseen setbacks are very possible.