As vaccination rates continue to rise across the globe, revitalized retail demand has been supplemented by the return of foodservice. Salmon farmers have responded by sharply increasing harvesting early in the year, but this will leave biomasses lower than expected with the peak of demand recovery likely still to come. 

Production

Atlantic salmon After a production increase of some 3-4 percent in 2020, the initial forecast for 2021 was for flat or minimal growth in global harvests of farmed Atlantic salmon. This expansion was driven primarily by a sharp decline in output in Chile, balanced by an increase of around 3-4 percent in Europe. According to market research firm Kontali, over 104 000 tonnes of salmon were harvested in the first quarter of 2021 compared with the same period last year, as producers looked to take advantage of a rapidly strengthening market. This latter trend has been reported in both Norway and Chile, the two largest producers, although the reduction in biomass has reportedly been significantly more pronounced in Chile’s case. In Norway, production in the first three months of the year was some 6 percent above the same period last year in terms of harvest numbers, at 39.5 million fish. Total biomass fell from 10 percent higher year-on-year in January to 5 percent higher in March amidst heavy harvesting activity.

The biomass of 2020 generation fish has been a relatively higher proportion of the total biomass, pointing to good growth rates last year and some delays in harvesting due to the pandemic. The additional supply pushed prices down from their late year peak and earnings for Norwegian aquaculture firms were well down year-on-year in the first quarter. In Chile, the effects of the pandemic continue to be the primary concern of the farmed salmon industry. Operational changes and investment in infrastructure due to strict sanitary measures has resulted in higher costs for the sector. This compounded the impact of an early year drop in prices, which in some cases fell below production costs. In terms of aquaculture production, 208 400 tonnes of Atlantic salmon were harvested during the first quarter, 8.6 percent more than the same period in 2020. Atlantic salmon thus made up from more than half of Chilean all aquaculture production (including all types of fish and fishery products) during the review period. As the year has progressed however, Chilean supply has tightened. Elsewhere, Scottish salmon producers are seeing a return to a low rate of supply growth in 2021 while they continue to adapt to the post-Brexit landscape.

The farming industry for Atlantic salmon is also growing in several emerging producer nations, including Iceland, the Russian Federation and China, each with varying degrees of focus on the export market. Alternative production technologies, such as offshore and land-based closed containment farming, continue to be explored by the sector. The physical and regulatory constraints associated with traditional open net pen methods mean supply must eventually come from other sources if it is to keep pace with continued demand growth.

Other farmed salmonids

Chilean harvests of rainbow trout amounted to 19 300 tonnes in the first quarter of 2021, 40.8 percent lower year-on-year, while coho salmon production was 38 300 tonnes (-19.2 percent). Meanwhile, in Norway, farmed trout supply is tightening once again, with 6 percent fewer fish harvested in the first three months of the year. This left biomasses down 11 percent in March 2021 compared with the same month last year.

Wild salmon

After a relatively poor wild salmon season last year in both Alaska and the Russian Far East, early projections in 2021 point to significantly higher catch volumes this year. US and Russian salmon fleets target a number of different wild Pacific salmon species, with pink and sockeye making up the bulk of the harvest. The two-year life-cycle of pink salmon is an important determinant of harvest variation from year to year, with comparisons typically made between even or odd years.

Markets

For the salmon industry, the global vaccine rollout programme has allowed for a more dynamic market environment in which many of the innovations brought about by the pandemic are likely to persist even as restrictions are lifted. The post-pandemic salmon consumers have had their preferences and purchasing behaviours modified both by the constraints of the pandemic and by the responses of businesses to these constraints. The shutdown of the foodservice sector has led to a renewed focus on home cooking, and in turn this has prompted the development of a new range of convenience products and meal kits. Frozen and canned products have also enjoyed a boost in their popularity during 2020, and marketers in this segment will be looking to retain their new customers as competition from fresh fish and foodservice returns to pre-pandemic levels. The increase in sales via food delivery services, which provided a much-needed source of revenue for restaurants under capacity restrictions, is another example of a market transformation that has opened new opportunities even as the restaurant sector resumes normal service.

Online sales of seafood, including salmon, increased sharply during the lockdown period due to the e-commerce’s suitability of the species. In the United States of America, e-commerce sales accounted for 30 percent of all seafood sales by September 2020, compared with 6 percent before the emergence of COVID-19. Many consumers have become increasingly familiar and comfortable with this way of buying seafood, particularly in Asian markets, and this trend has been accelerated by the pandemic. In the United States of America, cold weather initially impacted salmon demand and logistics at the start of the year. Traditional holidays during the first quarter of 2021 were reported to be less busy than normal. Changes in consumption patterns due to COVID-19 continue to add complexity to an already complicated supply chain, but with recent weather improvement, demand seems to be on the road to recovery at the farmed salmon fresh whole and fillet markets. The loosening of capacity restrictions in the foodservice sector and the arrival of the summer vacation period saw the market pick up pace, although farmed harvests heavily weighted towards the early part of the year have seen available supply dry up.

According to the National Oceanic and Atmospheric Administration (NOAA), salmon imports during the review period totalled 120 629 tonnes valued at USD 1 199 million. These figures show increases of 11.4 percent in terms of volume and 9 percent in terms of value compared to the same period of last year. In France, the largest European market for farmed Norwegian salmon, a ban on indoor dining was lifted in the second quarter, providing an additional demand boost even as in-home consumption reportedly remains very strong. 

In China, market recovery continues, translating into strengthening demand for the larger salmon preferred by foodservice, which makes up most of the Chinese market. Consumer concern over the perceived COVID-19 infection risk associated with seafood has made Chinese consumers wary of salmon, however, and Chile has had to launch promotional and informational campaigns in response. In Brazil, which is entirely supplied by Chile, the reopening of the HORECA sector has also had significant positive implications for the salmon sector. Like China, the bulk of salmon sales in Brazil are in restaurants.

Trade

In Norway, a strengthening Norwegian krone has made Norwegian seafood more expensive for buyers and this has affected export values in 2021. At the same time, high supply volumes in the first quarter kept spot prices down, and the combination of factors has translated into lower revenues despite increased export volumes. According to the Norwegian Seafood Council (NSC), 297 200 tonnes of salmon worth NOK 18 billion were exported in the first quarter of 2021, respectively representing a 18 percent increase and a 4 percent decrease compared with the same period last year. The average unit value of these exports dropped from NOK 69 per kg to NOK 54.43 per kg over the same timeframe. Countries with large processing industries such as Poland and Denmark are taking a higher share of Norwegian volumes this year, a reflection of boost in popularity of valueadded convenience products that has been a core component of new consumer purchasing patterns since the pandemic.

In the United Kingdom of Great Britain and Northern Ireland, salmon exports to EU countries, including the important French market, were impacted in the first quarter by the significant logistical difficulties faced by salmon traders at the beginning of the year as a result of Brexit-related administrative obstacles at the new EU border. However, the Scottish seafood export taskforce, created in response to the export challenges, has stated that rapid progress has been made in streamlining these procedures. The UK government has also launched a campaign to promote Scottish seafood, particularly salmon, in China, in an attempt to generate new sources of demand.

According to the Chilean Salmon Council, 223 000 tonnes of salmonids (salmon and trout) worth USD 1 284 million were exported during the first quarter of 2021, a 6.6 percent increase in terms of quantity and a -4.9 percent decrease in terms of value compared to the same period of the previous year. In the United States of America, Chile’s most lucrative export market, loosening restrictions and strengthening demand saw imports from Chile pick up in the first quarter of the year. 

Prices

Early year prices for farmed Atlantic salmon were kept low by higher harvest volumes in both Norway and Chile after end-of-year demand subsided. However, as biomasses have been reduced and market reopening has continued, the trend has turned strongly upwards towards the middle of the year. For Norwegian salmon, the NASDAQ salmon index rose from the mid NOK 40s (USD 5.20) per kg in January to peak above NOK USD 7.90 per kg in the second quarter. For Chilean fresh fillets arriving in the United States of America, the tightening market saw prices increase from USD 11.30 per kg in January to USD 13.60 per kg by mid-year, levels that have not been seen since 2018.

Outlook

After higher-than-expected harvests in early 2021, the forecast is for significantly tighter than expected supply of farmed Atlantics in the second half of the year. It is unclear if the original prediction for flat or marginally positive overall growth this year will need to be revised to a more positive one, but upward price pressure is likely to continue if reopening continues at the current pace. This will likely be more pronounced for Chilean salmon but global market integration means that European prices will also be affected. Forward contracts for Norwegian salmon at Fish Pool are fluctuating between the mid NOK 50s (USD 5.76) per kg for the remainder of 2021, with an uptick towards the end of the year.

In the longer term, analysts are predicting a continuation of the tight market balance characterised by limited supply and strong demand growth, despite the range of alternative production technologies being explored. Costs are also expected to remain high, however, particularly in the United Kingdom of Great Britain and Northern Ireland, where industry stakeholders are concerned that additional customs controls to be introduced in January 2022 will bring about a repeat of the long delays and administrative chaos experienced earlier this year. At the same time, exceptional high freight costs will continue to drag on trade.