Salmon production in the first quarter of the year registered a slight decrease. Some of the major salmon-producing nations, Norway, Scotland and Chile, experienced major events that had the industry on edge, although the outcomes appear to be positive so far for producers, or at least not so bad.

Production

Atlantic salmon

Global Atlantic salmon supply totalled around 643 400 tonnes during January-March 2023, down 3 percent compared to the first quarter of 2022.

In particular, Norway registered an output of 335 600 tonnes in the period, a decline of 2 percent compared to the same period of last year. Contrary, the United Kingdom of Great Britain and Northern Ireland’s output increased 18 percent and output from the Faroe Islands was up 6 percent during the same period. In Chile the accumulated harvest accounted for 189 100 tonnes, up 3.7 percent.

Other salmonids

In Chile, the cumulative harvest of coho in the period reached 61 600 tonnes, which meant a significant growth of 18.7 percent compared to the same period of the previous year. A new trend is observed in the industry with some producers increasing their coho output and diversifying markets beyond Japan, aimed at the United States of America and more, arguing that the species has a faster and more efficient production cycle, and requires fewer antibiotic treatments. Some of Chilean Atlantic salmon producers are shifting to coho.

Regarding the Chilean rainbow trout harvest in the period, the 12 700 tonnes meant a resonant drop of 96 percent compared to the same date of the previous year.

Wild Salmon

The Alaska Department of Fish and Game is expecting an increase in wild salmon commercial catches in 2023, up 16 percent compared to 2022, mostly due to a rise in pink salmon harvests, and there is optimism in this sector. The total commercial salmon harvest projection of 189.4 million fish is expected to include 122.2 million pink salmon (+76 percent), 48.2 million sockeye salmon (-36 percent), 16 million of chum salmon (+0.2 percent), under 3 million coho salmon (+58 percent) and 78 000 chinook salmon (-75 percent).

Markets

The Norwegian government implemented its controversial salmon tax plan, but reduced the rate to 25 percent due to political opposition. After long discussions and reviews to reach a consensus on the introduction of an additional 40 percent tax on salmon, the government finally obtained the required votes to pass the revised proposal. The tax, which is in addition to the 22 percent corporate tax already paid by companies, will be applied to the value added to the fish during their stay in the pens-cages. The counties where the farms are located will be guaranteed with increased income from the Aquaculture Fund.

The original tax proposal, which was widely criticized, was accused of limiting investment in the sector and affecting the country's economy. The new percentage had a more positive response from the main Norwegian producing companies. In any case, companies continue to study the details in order to evaluate future investments.

The Scottish government proposed to designate at least 10 percent of national’s seas as Highly Protected Marine Areas (HPMA) by 2026, a move that also caused controversy and discontent from fishers’ and producers’ associations, as well as organizations and some parliamentarians from this country. According to some stakeholders, this action threatened the industry as a whole, affecting jobs in coastal communities and investment, and impacting the nation's economy.

The government explained that the HPMAs aimed to protect the seabed from human activity and allow marine ecosystems to recover from problems such as illegal fishing, framed in a Blue Economy project, but for Salmon Scotland, an organization representing the major salmon farming companies, the consequences of implementing this were against government policies that seek to promote food security and boost international trade. Finally, the idea of the government was discarded; however, a commitment has been made between parties to develop new proposals to protect both the marine environment and people's livelihoods, and a new work plan will be drawn up.

In Chile, the new government has been increasing supervision and regulations on overproduction and farmed fish escapes, with strong sanctions for companies that violate parameters. Talks started in August with different associations of aquaculture farmers and communities to develop the new law that will regulate Chilean aquaculture.

In addition, the proposal to modify the country's General Fisheries Law that would have prohibited new or renewed aquaculture concessions in protected areas, including salmon, was rejected. Thousands of workers linked to salmon farming companies and related activities from different regions protested at streets because they saw their jobs at risk. The industry welcomed the new decision, although opponents claim that the impact of farms is affecting the marine ecosystems. There is now a commitment between the sector and legislators to jointly develop public policies that would support the aquaculture of the future.

Trade

The main salmon producers recorded increased export values during the first quarter of the year as a result of higher prices, as quantities shipped did not grow. Competition is high and demand is strong, so market diversification does not seem to stop, while demanding consumers, such as Americans, continue to absorb the higher price and buy this product.

The Norwegian Seafood Council (NSC) announced that overall Norwegian seafood exports reached a historically strong quarter in terms of value, determined by a weaker Norwegian krone, food inflation and price growth in the markets for species such as salmon. Overall export value in March was the highest ever in a single month.

The declined volume of salmon exported by Norway has helped to lift prices to historical highs. During the period under revision, 263 600 tonnes of salmon worth NOK 28.8 billion were exported; down 6 percent in volume but up 24 percent in value, compared to the first quarter of 2022.

The 37 500 tonnes of salmon exported to the largest single market for Norwegian salmon, Poland, represented a decline of 8 percent compared to the same period of 2022, while other European markets such as France and Spain also registered falls, down 18 percent and 15 percent, respectively.

However, exports to the US market registered the largest increase in value terms (+53 percent) while the 19 000 tonnes shipped meant an increase of 18 percent in comparison. The NSC explained that the higher demand, the strength of the dollar and a weak world supply contributed to this growth.

The US market had a very good start in 2023 for Atlantic salmon imports, even surpassing the trend of the previous year, which had already been qualified as very positive. Consumers continue to increase their interest and preference for this product due to health reasons. The easy access and availability also contributed to increase consumption. In this market, there is a slightly higher purchasing trend towards fillets (both fresh and frozen), and less whole fish, related to lower Canadian production.

Exports of whole fresh Scottish salmon between January and March 2023 reached GBP 134 million, an increase of 18 percent over the same period in 2022. The European Union remained the dominant market, accounting for more than half of sales, followed by North America (29 percent) and Asia (18 percent). In particular, shipments to Asia have more than doubled to GBP 24 million in response to growing demand. While Europe continues to dominate, the other two markets together accounted for 47 percent of overall sales in the first quarter. There are further growth opportunities supported by increasing consumer demand and continued efforts to reduce trade barriers.

Meanwhile, there is an ambitious expansion plan for the premium “Label Rouge” salmon to further enhance international reputation. The plan was well received by the government. This product represents 12 percent of Scottish salmon exports, but is intended to reach 15 percent by 2026. While France has long been the main destination for this product, Germany, Spain and Italy are the new targets. In 2022, some 8 900 tonnes of this salmon were produced and exported from Scotland. Farmers must meet strict quality control standards to be certified under this programme.

The annual growth in terms of volume for Chilean salmon exported to the international market is stagnant. In the first three months of the year, some 121 739 tonnes of Atlantic salmon were exported worth USD 1 236 million, which meant a slight drop in volume of 0.32 percent but an increase of 3.4 percent in value, compared to the same period of the previous year. For coho salmon, the 60 443 tonnes worth USD 465 million meant a slight drop of 1.2 percent in volume but a growth of 15 percent in value, while rainbow trout showed considerable drops, since the 6 509 tonnes worth USD 76.1 million registered represented decreases of 27.5 percent and 19.6 percent in volume and value, respectively.

The Chilean Salmon Council, organization that gathers companies that together represent about 52 percent of Chilean salmon production, expressed that although Chilean salmon production maintains a prevalent place in the national economy, it still has not managed to recover the volumes exported in 2020.

The US imports of Atlantic salmon during the first quarter of the year totalled 108 950 tonnes worth USD 1.5 billion, up 5 percent in volume and 8 percent in value compared to the same period of 2022. Thus eight consecutive months of growth in terms of imported volume since August 2022 were achieved.

Fresh fillets accounted for 49 percent of imported Atlantic salmon during the period (47 percent during the same period of 2022), while frozen fillets rose to 22 percent (21 percent in the first quarter of 2022).

Regarding suppliers, Chile had a 56 percent share and shipped 17 percent more volume of Atlantic salmon in the first quarter of 2023 compared to 2022. Norway surpassed Canada in terms of market share and moved to second place. The neighboring country shipped 41 percent less in volume and 40 percent less in value of fresh whole fish than during the first quarter of 2022. The US market made up for this shortcoming from Canada with greater purchases of whole salmon from Chile and Norway.

Prices

Salmon prices at the time of writing are quite below those observed at the start of the year. In particular, Norwegian salmon prices are going through a rollercoaster of ups and downs. Chilean salmon prices began to rebound after 21 weeks of a strong downward trend. The Scottish ones are falling. 

The NASDAQ Salmon Index averaged NOK 104.8 per kg in the first quarter of the year, up 32 percent from NOK 79.5 per kg in the same period of last year. It is important to mention that the Norwegian krone weakened through the quarter against the most important trading currencies. The Atlantic salmon fresh fillets FOB prices data collected by the NSC posted NOK 143.10 (USD 14.02) per kg at week 31, a decline from NOK 164.32 (USD 16.08) at week 28.

Prices for fresh Chilean Atlantic salmon fillets exported to the US market reached USD 5.85 per kg at week 31, starting an upward trend since week 26 (USD 5.32). This change comes after a long declining trend registered from week 8 at USD 7.20 to the already mentioned week 26. Meanwhile, Scottish fresh, head-on gutted Atlantic salmon (1-3 kg) to UK factories were selling for GBP 5.95 (USD 7.63) per kg in week 31, following a long lasting downward trend since week 16 at GBP 9.35 (USD 11.69) although some spikes in prices were registered during that time frame.

Outlook

There is uncertainty due to a world economy that remains with low levels of growth and persistent inflation, and because of the ongoing conflict between the Russian Federation and Ukraine. Nevertheless, there are some positive signs such as the slight decrease in the prices of some relevant inputs in the salmon production process (feed and freight), and the commercial opening of China, which abandoned the strict policy of zero COVID.

Kontali's initial projections for global supplies of farmed Atlantic salmon are to remain relatively stable in 2023, with a slight decline or even an increase of 2.3 percent compared to the previous year's levels, even as an increase in demand is also forecasted.

By the second quarter of 2023, global volume of salmon harvested could have increased by 2 percent compared to the same period of last year, and by producing countries, +3 percent in Norway, +2 percent in Chile, +6 percent in the United Kingdom of Great Britain and Northern Ireland and +1 percent in the Faroe Islands.

Supply growth in Norway could be impacted by the consequences of the proposed tax, since despite having been set at a lower figure than anticipated, it will still have an impact and companies are beginning to visualize how to approach investments.

Scottish producers seem to be calmer after the limitation on salmon farming in certain places did not prosper with the controversial issue of protected marine areas and now are focused on diversifying international markets.

In Chile, overproduction sanctions for some companies could affect the output of this important producing country. Meanwhile, the sector will continue to monitor the development of the year and aims to work on an effective public-private alliance to design the new Aquaculture Law.

Regarding prices, some analysts forecast that a lack of supply growth in farmed salmon could keep spot prices high until at least 2025. It is not clear which markets will have significant supply growth to stabilize this price situation, although for the second half of the year prices are expected to fall from extreme levels, even though they remain high.