The report analyses the market situation during the first quarter 2017

High global salmon prices were maintained in early 2017, spreading from the farmed Atlantic segment into markets for other salmon species such as coho. However, harvestable biomasses are high at farms and industry players are expecting a larger-than-usual hike in supply volumes towards the end of the summer.  

Norway

Prices for Norway’s farmed Atlantic salmon exports have been climbing steeply skyward for around two years now, driven by a range of restrictions on global supply growth, the most fundamental being a limit on the number of suitable sites for salmon farming. In Norway, specifically, regulatory authorities have sought to keep output growth relatively low over the last few years and have imposed conditions on farmers intended to keep sea lice levels under control. With global demand growing significantly more, particularly in emerging markets, the result has been a 70 percent increase in Norwegian krone prices from mid-2015 to mid-2017, when the Fish Pool Index weighted price reached NOK70.73
(US$ 8.34) per kg.

The exceptionally high prices in the first quarter of 2017 translated into a 21 percent increase in the value of Norwegian salmon exports compared with the same quarter in 2016, for a total of NOK 16.1 billion (US$1.91 billion). Volumes were 3 percent higher, at 233 000 tonnes. The volume share of Norway’s top export market, the EU, led by France and Poland, continues to diminish in the face of stiff competition from buyers in Asian markets and the United States of America. In Asia, demand for salmon among the fast-expanding middle class in countries such as China, Viet Nam and Thailand continues to strengthen while in the United States of America, a lack of Chilean supply and a shift in the sourcing policies of major retail chains towards Norwegian product has seen Norwegian-origin imports grow rapidly in recent years.

There is a broad consensus among analysts that the global supply of farmed salmon will rise significantly in the second half of 2016, with the majority of this additional volume coming from Norway, where there is a surplus of 2015 and 2016 generation fish in the pens. However, there is still some debate on the magnitude of this increase, with some feeling that Nordea Bank’s revised forecast of 12 percent year-on-year increase in the second half of 2017 is too high. Forward markets appear to be relatively hopeful that a severe price drop will be avoided, with Fish Pool forward prices at NOK62.10 (US$ 7.45 per kg) for the third quarter of 2017 and NOK63.27 (US$ 7.59) per kg for the fourth quarter.

Trout

While world salmon markets can expect to see some relief from the tight supply over the coming months, export markets for Norwegian trout will continue to suffer from a severe shortage of fish for at least the next year or so. Demand in Japan, Thailand, Belarus, Poland and the United States of America has been boosted by all Norwegian marketing efforts over the last two years, but has steadily depeleted available supply and pushed prices up by almost 100 percent in the space of two years. Norway exported 8 700 tonnes worth NOK680 million (US$80 million) in the first quarter of 2017 compared with 18 590 tonnes worth NOK899 million (US$104 million) in the same period in 2016.

Chile

In recent years, the Chilean salmon sector has undergone several changes. These include reduced harvests, increased export values, sanitary improvements, efficiency gains, and growing demand for salmon worldwide. Indeed, the first quarter of 2017 produced the best financial results for the domestic industry since 2010, according to the Superintendence of Securities and Insurance.

According to IndexSalmón, salmon companies’ revenues for shipments to the United States of America, the main Chilean salmon market, grew 32 percent during the first quarter of the year compared with the same period last year, recording a total value of US$418.2 million. While competitors such as the United Kingdom and Norway registered a higher increase in their income, these countries do not have the market share that Chile has in the United States (44.6 percent). The average unit price was US$12.4 per kg, well above the US$8.25 per kg registered in the same period last year and exceeding that of Norwegian-origin imports, which usually achieve the highest price.

The impact of last year’s algae bloom continues to affect Atlantic salmon exports from Chile (in terms of volume) to all markets, although the 6 percent drop during 2016 compared with 2015 was less than the expected 25 percent. During the first quarter of 2017, however, Atlantic salmon harvests reached 127 000 tonnes, 24.2 percent lower than in the same period of 2016. For rainbow trout, total harvests for March 2017 reached 26 700 tonnes, a decline of 18 percent compared with the same month of 2016.

United Kingdom

Over approximately the last two years, the Scottish farmed salmon sector has seen its steadily expanding output absorbed at increasingly higher prices as demand in its well-diversified major markets (United States of America, France and China) has risen in parallel with a depreciation of the British pound versus the US dollar, the euro and the Chinese yuan. Ongoing challenges related to sea lice management have exerted some pressure on the cost side of aquaculture companies’ balance sheets, but the outlook for producers is generally good.

While a weaker currency is positive from a UK exporter’s perspective, the combination of the relatively greater allure of export markets for domestic producers and the magnification of already elevated prices for salmon produced abroad has added to the strain on the domestic salmon market. Retail margins have been hit as raw material costs soar and UK salmon consumers are beginning to turn to alternative seafood options such as cod in the face of rising product prices.

Wild salmon

Based on current forecasts, this year’s combined wild salmon harvest in Eastern Russian Federation and Alaska should be slightly above 2016, with a drop in the Russian Federation offset by an expected increase in Alaskan catches. In particular, pink salmon catches are expected to rebound in the US fishery after a pronounced drop last year. As high farmed prices are now being transmitted to wild markets, producers should be in a good position for profitability gains.

Markets

The prevailing high price environment in the world farmed salmon market has now been sustained long enough to start to bring about more fundamental shifts in business models, supply chains and consumer preferences beyond those that can be attributed to short-term supply and demand dynamics. First, supply chain intermediaries are procuring a larger proportion of fish through the spot market, fearful of continuing price volatility and wary of high exposure to contracts. At the same time, value addition and innovation is becoming ever more important to generate demand as it becomes difficult to push relative affordability as a selling point for the consumer. Farmed coho salmon and various wild species are increasingly viewed as viable alternatives by buyers, particularly in newer Asian markets such as Thailand, the Republic of Korea and Taiwan Province of China. However, there is still simply not enough salmon to go around at present, and major markets outside the traditional “big three” (Japan, United States of America and the EU) such as Russian Federation and China are seeing steep declines in import volumes. The one notable exception is Brazil, whose proximity to Chile reduces competition from other markets for Chilean fresh whole Atlantics, which essentially make up the entirety of Brazilian salmon imports.

France

Over the 12 months preceding May 2017, Euromonitor International data show that French consumers spent more on salmon than over the previous 12 months, but volumes were down. The same market reports point to a growing demand for wild and organic salmon due to continuing consumer concerns over quality and sustainability of farmed salmon. French import statistics for the first quarter of 2017 show falling overall volume and higher unit values. There were volume declines for all major product groups, particularly for fillets. In terms of supplier countries, the United Kingdom increased its share to 19 percent in value terms, compared with 52 percent for Norway (56 percent last year).

Germany

Traditionally, German salmon consumer preference has been for processed product, particularly smoked, but over recent years the fresh segment has grown largely due  to discount retailers. This trend continued in the first quarter of 2017, with fresh whole Atlantic imports now accounting for 26 percent of the value of Germany’s total salmon imports, compared with 38 percent for smoked. However, import quantities of all other farmed Atlantic product categories declined and total salmon import volume dropped by 10 percent in the first quarter (up 21 percent in value) as high prices took their toll.

United States of America

The United States of America imported an estimated 90 000 tonnes of salmonids during the first quarter of 2017, worth a total of US$944 million. These figures represent a drop of 4 percent in volume and an increase of 31 percent in value compared with the same period of 2016. Three countries account for 73 percent of the total volume imported: Chile was the leading supplier (33 400 tonnes worth US$419 million), followed by Canada (19 800 tonnes worth US$183 million) and Norway (12 600 tonnes worth US$142 million). Chile and Canada registered a decrease in terms of volume, while all three grew in terms of value.

Japan

Japan traditionally imports three main species of salmon: farmed coho from Chile, farmed Atlantics primarily from Norway, and wild sockeye from Russian Federation and the Unietd States of America. Prices rose for all three species in the first quarter of 2017, which can be attributed to supply contraction, reflected in lower import volumes, and a limited degree of transmission across segments. In the case of coho, Japan is also increasingly having to compete with other Asian countries to secure Chilean supply, as buyers seek alternatives to high-priced farmed Atlantics.