Farmed salmon prices are markedly higher in the European market and are expected to remain firm during 2010 although with some seasonal variation.

Tight supplies in 2010 and firming prices

Farmed salmon prices are markedly higher in the European market and are expected to remain firm during 2010 although with some seasonal variation. Supply swings resulting from climatic conditions or holidays will influence prices for short periods. However, the underlying factors that are driving salmon prices remain the following: on the demand side, growth in salmon sales is expected in most markets; and, on the supply side, growth in production in Norway and most other European producing countries will not be large enough to fully compensate for drastic decreases in Chile’s salmon supply throughout 2010.

A record year for Norway in 2009 but some stability in 2010

Norway’s salmon exports for 2009 showed record numbers, again, growing 16.3 % in volume to 834 000 tonnes (round weight equivalent) and 32% in value to NOK 23.7 billion.

71% of export volumes and 70% of values are to the EU with France, Poland, Denmark and the UK as the largest destinations. Non-EU markets such as Russia, the USA and Japan all showed growth in imports from Norway, mainly thanks to the shortfall in Chilean supply. Export growth to the USA in particular was spectacular with 300% increases from 2008.

But not all Norwegian companies have benefited from the Chilean problems. It must be recalled that many Norwegian companies have extensive operations in Chile and these have suffered from the ISA virus to the same extent as the purely Chilean companies. Within Norway, some companies have had production problems in 2009, in particular related to sea lice.

Norway’s record exports in 2009 were undoubtedly the result of growing production aimed at external markets, as the domestic market with only 4.5 million inhabitants is limited. Whether this growth will continue into 2010 is not certain however, with some analysts now predicting a stabilization of Norwegian production. In combination with a record low production in Chile, this would lead to lower overall supplies to many markets, in particular the USA where Norway has taken up some of the slack caused by Chile’s strong reduction in production and sales.

2010 a year of consolidation but 2011 promises to be challenging

Some stabilization of Norwegian production levels in 2010 and 2011 would be beneficial in the longer-term, as the Chilean comeback in 2011 and 2012 otherwise could cause drastically lower prices in all markets and for all producers. Such a scenario with extreme cyclical price movements would not be beneficial for the industry. Although consumers and processors would benefit in the short term from a price fall, Norway and Chile as well as the other producing countries.