With global demand increased by the brief lull in price levels in late 2017, the upward trend resumed in the first quarter of 2018, culminating in a temporary supply bottleneck in late April that lifted farmed Atlantic salmon prices to record heights. Although the situation stabilised by mid-year, slowing production growth worldwide can be expected to maintain farmed prices at the new high price plateau for the foreseeable future.

Norway

Salmon

Wild swings in prices are not a new phenomenon for the Norwegian farmed Atlantic salmon sector, but the volatility experienced so far in 2018 has been particularly severe. The year started at around NOK 56 (USD 6.90) per kg, following the sharp spike in harvest volumes in the second half of 2017. The tighter supply that resulted from a combination of cold seawater temperatures and positive demand effect due to the falling prices at the retail level kickstarted a steep upward trend. By week 19, the Fish Pool Index had reached a record NOK 80.22 (USD 9.97) per kg, and then it fell steeply to reach NOK 56.15 (USD 6.93) by week 26 as harvesting conditions normalized. While such volatility is problematic for processors seeking to manage their cash flow and minimize risk, these levels are more than sufficient to protect aquaculture companies’ margins.

Overall prices in the first quarter were lower this year compared with the same period in 2017. Total salmon export revenue was 1.5 percent lower despite a 6 percent increase in volume, according to the NSC. Emerging markets in Asia remain the fastest growing export destinations for Norwegian salmon in percentage terms. A combination of marketing campaigns, economic fundamentals and a strong euro continue to ensure robust demand in core EU28 consumer markets as well as from the leading processor and re-exporter, Poland. Italy stands out as a particularly fast-growing EU28 market, driven by increased interest in less traditional seafood options such as sushi. Norwegian exports to Mainland China and Hong Kong SAR were significantly up in the first three months of 2018, largely due to a Chinese crackdown on salmon smuggling through Viet Nam, and further increases are likely after the lifting of veterinary-related trade restrictions for a number of Norwegian farming regions.

Total standing biomass in Norwegian pens amounted to 628 000 tonnes as of the end of May 2018, an increase of 6 percent from the same period in 2017. Forecasted production growth for 2018 remains at around 5 percent after slower than expected growth over the winter prompted downward revisions earlier this year. Demand for Norwegian is still strong and growing in many markets around the world and substantial drops in price from current levels are unlikely.

Trout

After a year of extremely tight supply in 2017, harvest volumes of farmed Norwegian trout have risen significantly in 2018. Prices have dropped somewhat but remain high by historical terms. NSC reports a 6 percent drop in total trout export value to NOK 633 million (USD 65.7 million) and a 14 percent increase in export volume to 9 800 tonnes. Trout biomass in Norway was 8 percent higher year-on-year by the end of May. Fish will be relatively more plentiful for the remainder of the year. However, good demand from diverse markets such as Belarus, Japan and the United States of America suggest that prices can be expected to remain relatively high.

Latin America

The National Service of Fisheries and Aquaculture (Sernapesca) announced that in the salmon industry in Chile there have been fewer outbreaks in 2017. The number of farms affected by diseases fell, as did mortality due to infection.

China continues to grow as a target market for Chilean exports of salmonids. So far in 2018, Chilean exports of salmonids to China have increased, both fresh and frozen. Analysts project an increase of at least 50 percent in shipments by the end of the year. In addition, good average prices are observed.

The Ministry of Production of Peru highlighted that Peruvian production of rainbow trout has been growing in the past 10 years by a remarkable 678 percent, from 7 000 tonnes in 2007 to 54 400 tonnes in 2017. Chilean production of rainbow trout was 75 000 tonnes in 2017. The executive coordinator of the governmental program “To Eat Fish” stressed the importance of public-private sector collaboration so that farmers can sell fish directly to the consumer with fewer intermediaries.

United Kingdom

After a long period of strong growth and rapid gain in export revenues, in 2018 the UK industry has been hit by poor biological performance at Scottish farms, which is expected to cause a 10 percent decrease in total production. Despite good prevailing prices and a weak British pound, the sharp drop in harvests together with spiraling costs related to sea lice and disease treatments makes for a less positive outlook than in prior years. The sector is also engaged in an ongoing campaign to improve the image of salmon farming in response to a number of damaging portrayals in the media.

In the UK domestic market, supplied by both domestic producers and imports, a recent report from Nielsen suggests that persistent high prices for key species are driving many consumers away from seafood and salmon is no exception. In the 52 weeks up to 19 May 2018, the average price of salmon at retail was up 12 percent to GBP 17.89 per kg compared with the prior period, while marketed volumes were down 7 percent to 51 600 tonnes. Imports of Norwegian salmon have increased significantly this year, due to the lower domestic harvests and also lower expected production in the key supplier, the Faroe Islands.

Wild salmon

The wild salmon season started in early summer in the Northern Pacific. Early forecasts are for year-on-year declines in Alaskan harvests and significant increases in production in the Russian Federation. Russian Federation fishery researchers are predicting a record pink salmon run, lifting the total wild catch to an estimated 492 000 tonnes, just below the 2009 record catch of 500 000 tonnes. This figure would represent a 12.3 percent increase compared with 2016 and 39 percent higher than 2017. In Alaska, pink salmon returns will drop significantly as 2018 is an even year, but total harvests are expected to be well above the equivalent levels recorded in the poor 2016 season.

Markets

Global demand for salmon continues to strengthen, helped by a general economic outlook that is still reasonably positive. While rapid demand growth in emerging economies is an ever more important determinant of sector development, salmon import statistics in the first quarter of 2018 illustrate the continued importance of developed markets in terms of their contribution to aggregate demand, consumer trends and prices. Over this period, the United States of America and Japan respectively accounted for around 16 and 9 percent of total global salmon imports in USD terms, while the key EU28 consumer markets of Germany (7 percent), France (6 percent), United Kingdom (3 percent), Italy (3 percent) and Spain (2 percent) took a combined 21 percent share. China is the largest developing country market with almost 4 percent, while Brazil and the Russian Federation with recent economic difficulties that have taken a toll on growth rates, only represent around 2 percent each.

France

Although there have been reports of some damage to previously resilient consumer demand as a result of the exceptionally high price level, overall the key French market remains solid. A recent report from the National Establishment of Agricultural and Marine Products (FRANCE AGRIMER) showed stable sales of fresh salmon in 2017 despite higher prices, although frozen sales fell. Imports in the first quarter of 2018 continued to grow in value terms, although average prices for fresh whole fell to EUR 6.82 per kg compared with EUR 7.56 per kg in 2017. French salmon imports are comprised primarily of fresh whole Atlantic salmon and mainly sourced from Norway, with Scottish volumes falling this year as the sector there struggles with production challenges.

Germany

In contrast to their French counterparts, soaring prices seem to have taken a concrete toll on German consumers’ commitment to salmon, with imports sharply down in the first quarter of the year. In particular, the share of fresh salmon in the German market, which had been increasing on the back of effective marketing by discount retail chains, has fallen to around 21 percent of total value in Q1 2018 compared with 21 percent in Q1 2017. Germany is a price-sensitive market, and competition from alternative cheaper seafood options will grow as long as salmon prices remain elevated. Meanwhile, the volatility of raw material costs has also been causing significant problems for domestic salmon smokers and imports of smoked salmon from larger, vertically-integrated operators based in Poland are up.

United States of America

The United States of America imported 102 800 tonnes of salmonids during the first three months of 2018, worth USD 1 013 million, according to NOAA. These figures represent increases of 14.75 percent in volume and 7.32 percent in value compared with 2016. The main imported product was fresh farmed Atlantic salmon fillets (37 percent of the market share in terms of volume). Three countries accounted for 74.1 percent of the total volume imported. Chile remains the main supplier (43 300 tonnes worth USD 468 million), followed by Canada (19 300 tonnes worth USD 177 million) and Norway (13 640 tonnes worth USD 148 million). Chile and Norway registered increases both in volume and value while Canada saw declines.

Japan

Early year imports by Japan are typically dominated by frozen farmed coho salmon sourced from Chile, supplemented by imports of wild sockeye salmon later in the year, after the start of the salmon fishing seasons in Eastern Russian Federation and Alaska. Farmed Atlantic salmon from Norway, delivered fresh by air in fillet or whole form, is also favoured by Japanese buyers, holding steady at around 20 percent of total salmon import value. Demand for salmon has been improving in Japan despite a general stagnation of the seafood sector, and farmed coho salmon in particular is selling well despite rising prices.

Outlook

Following the low water temperatures and poor biological performance in Europe over the winter, estimates for the increase in total Atlantic salmon production in 2018 have been revised downwards to the 4–5 percent range. The expected drop in Scottish production will be offset by a 5–6 percent increase in both Chile and Norway. Although the upward trend in global demand for a wide variety of salmon products shows no signs of abating, this rate of production growth is projected to be sufficient to keep average prices around the NOK 60 (USD 7.40) per kg for the foreseeable future.

The continuing profitability of the industry is evidenced by strong demand for farming licenses in Norway. In June, a record NOK 2.3 billion (USD 281 million) was paid by 13 different companies for farming licenses equating to 11 879 tonnes of capacity. In the longer-term, growth in open net-pen farming production volumes is limited primarily by sea lice management issues, meaning that demand growth will continue to outpace that of supply until these issues are effectively overcome through new treatments, farming practices or alternative farming methods such as offshore or closed-containment systems.

On the market side, the impact of the trade war between the United States of America and China potentially goes beyond the 25 percent import tariffs recently imposed on US-origin salmon by the Chinese authorities, as the economic implications of further escalation could well negatively affect consumer demand in multiple countries.