GLOBEFISH - Information and Analysis on World Fish Trade

Lackluster ending to salmon market in 2020

16/07/2021

While efforts to shift sales and marketing efforts to retail channels have generally been quite effective, the global salmon sector has certainly not escaped the pandemic’s effects unscathed. A weak end-of-year market dragged down prices and squeezed margins all along the supply chain. Amidst the sweeping market impact of rolling lockdowns throughout 2020, seafood businesses across the world have been scrambling to reposition themselves to take advantage of rapidly changing consumer behaviour. The most prominent themes of the new market environment are a renewed focus on retail, an acceleration of e-commerce development, an emphasis on products intended for easy home cooking, and a general consumer preference for products with longer shelf lives. After many years of profitable growth, the salmon sector has built a truly global market, powered by efficient supply chains, expensive marketing campaigns and continuous product innovation. This has put the industry in a relatively strong position to weather the effects of the pandemic by rapidly diverting volumes to retail, even though foodservice sales traditionally make up a little less than half of farmed salmon sales.

Production

Atlantic salmon

Global output of farmed Atlantic salmon is estimated to have increased by around 3-4 percent in 2020 to 2.7 million tonnes (live weight equivalent). While somewhat slower than the 7 percent growth recorded in 2019, this would represent another all-time peak year for global production. The two largest producers, Norway and Chile, both posted positive growth of around 2 percent and 8 percent respectively, although estimates for Chile vary significantly. These figures would put Norway and Chile’s respective shares of the global total at 51 percent and 29 percent, proportions that have remained relatively steady for the last 8 years or so.

The third and fourth largest producers are the United Kingdom of Great Britain and Northern Ireland and Canada, who accounted for around 7 and 5 percent of the 2020 total. Amongst emerging producers, both Iceland and the Russian Federation continue to rapidly increase farmed Atlantic production. In Norway, the total number of salmon harvested in 2020 reached 376.7 million fish, almost exactly on a par with 2019. Market uncertainty related to COVID-19 earlier in the year meant harvesting was delayed at many sites and the average harvested weight was higher compared with the previous year. These delays also magnified the seasonal spike in Norwegian harvest volumes after the summer, leading to a sustained lull in farmgate prices in the second half of the year that was compounded by new lockdowns. The impact on farmer margins was considerable, with earnings before interest and taxes/kg well down for most companies and dropping into the red for Norwegian-owned operations in some other regions, particularly Canada where mortalities have been very high. Chilean salmon farmers encountered multiple business challenges in 2020, including a truck driver strike, fish escapes and a variety of difficulties associated with the pandemic. Freight restrictions, particularly for air-flown fillets, severely inhibited normal operations and many companies accumulated significant frozen inventories. Required health and safety protocols added more administrative burdens and costs, and although aquaculture firms generally reported production and processing costs in line or below target levels, falling prices and market weakness meant financial losses for many companies.

In Scotland, a strong rebound in 2019 from a difficult 2018 was followed in 2020 by flat or marginally negative output growth. Despite facing the same market difficulties as other producers, Scottish farmers have seen production efficiency gain in 2019 and 2020. Other farmed salmonids Norwegian farmed trout supply was tight in 2020, with a reported 24.6 million fish harvested compared with 25.5 million in 2019. In contrast to the salmon sector, late year biomasses were significantly down year-on-year. In Chile, trout harvests are expected to be flat year-on-year, although full year figures are not yet available. Chilean coho output is estimated to have fallen slightly. Wild salmon Last year’s wild salmon catches were poor in both Alaska and the Russian Far East. The Russian Federation reported a total harvest of around 272 000 tonnes of all species combined, 40 percent lower than 2019 and 50 percent lower than 2018. In Alaska, according to the Alaska Department of Fish and Game (ADF&G), salmon fishery revenues were down 61 percent relative to the previous year as the total catch came in 42 percent lower than 2019, or 12 percent lower than 2018. For the commercially important pink salmon fisheries, comparisons between even and odd year runs are more appropriate due to the presence of distinct populations returning every two years.

Markets

The ease of the transition to a new market landscape shaped by the effects of the pandemic has not been the same for all producer nations, however. Norway has benefitted from its role as primary supplier to the EU market, where foodservice sales have accounted for around 36 percent of the total. An increase in retail sales in major EU markets has been accompanied by strengthening demand for prepackaged convenience products and the launch of new home delivery services. In some markets, such as Germany, the increase in home consumption has more than offset the loss in sales in the foodservice segment. For Chile, dependence on markets like the United States of America, Brazil and China mean that it has been more exposed to the sudden evaporation of foodservice demand.

The very same trends are being observed in these countries, however. In the US market, the increasing trend in restaurant dining as opposed to cooking seafood at home has been sharply reversed by the pandemic. Meanwhile online sales of seafood reportedly more that doubled in the United States of America in 2020 compared with the prior year, with the proportion of all sales accounted for by e-commerce increased from 6 percent to 30 percent between March and September 2020. Online shopping introduces new models for consumer behaviour, notably increasing brand loyalty because the time and effort invested in finding the right product is relatively higher. It also opens up new opportunities and challenges for marketers, with social media simultaneously offering a platform for acquiring customers and represent a potential source of negative publicity. Trade According to full-year figures from the Norwegian Seafood Council (NSC), Norway’s exports of farmed Atlantic salmon reached 1.1 million tonnes in 2020, worth NOK 70.1 billion (USD 7.44 billion). This represents an increase in volume of 2 percent and a decrease in value of 3 percent, reflecting weak

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