The limited salmon production, especially for the first semester, and strong demand are expected to impact prices. Global developments such as high inflation and the war between Ukraine and Russia continue to produce effects. The main producing countries are undergoing important moments of uncertainty with future consequences in the sector, from modification of tax rates for farmers in Norway and also the Faroe Islands, to discussions on a new national fishing law, in Chile.

Production

Atlantic salmon

Global farmed Atlantic salmon supply is expected to be tight during 2022, especially in the first semester of the year. According to Rabobank, some production improvement during the second half is forecasted to offset the supply contraction of the first six months, but the growth will be the lowest since 2016. This tight supply scenario with strong demand should support high prices not registered for at least 6 years.

The good biological performance and strong 2021 for Norwegian production, with an 11 percent growth in harvest volumes, will not be repeated during the year and a marginal production increase (up to 2 percent) is expected from Norway.

In Chile, the Atlantic salmon harvest during the first half of the year reached 352 300 tonnes, down 3.9 percent compared to the same period of 2021. The species represented 47.7 percent of the country's total aquaculture harvests. The second producer of salmon worldwide also registered a fall in general aquaculture production, while several analysts observe that the main competitors are planning to expand production in the medium term. Chile should not remain flat in order not to lose world market share or competitiveness. The idea is to opt for economic and productive activity growth towards more sustainability.

Other farmed salmonids

In Chile, rainbow trout harvest during January-June of 2022 was 34 500 tonnes, only 0.8 percent less than last year's first six months. The only salmonid harvest that grew in Chile in terms of production was coho, which reached 52 400 tonnes, a notable increase of 32 percent compared to the same period last year.

Wild salmon

Analysis indicates that tight farmed salmon supply, increased salmon prices and high household expenditure appears to be an opportunity for wild-caught Pacific salmon species, to fill a gap, with a cheaper alternative. There is a good opportunity for the wild salmon to return to some European markets. According to Alaska's Department of Fish and Game, around 160.6 million salmons are expected to be captured in all 2022, sockeye representing 46 percent and pink salmon 41 percent.

Markets

Global big changes occurred during the first half of the year are impacting on the seafood industry, including salmon producers. The war between Ukraine and Russia, the reactivation post COVID-19 and the new economic situation have brought challenging logistics, high inflation, increased costs, less purchasing power and lower supplies. With the opening of the markets after the pandemic and the global trend to consume healthy and quality food, salmon exports have been restored for the main producers.

Special developments are being observed in the different producing countries that will undoubtedly have repercussions on future production levels and could change the scenario.

In Norway, the government has proposed for 2023 a new tax of 40 percent on salmon aquaculture companies, added to a 22 percent corporate tax, which will mean that total tax rate for salmon and trout farming will rise to 62 percent if approved by the parliament. This is for volumes larger than 4 000-5 000 tonnes meaning that the smallest companies would be exempted from the tax rise due to volume limit but would largely impact earnings per share for producers with bigger shares of volumes in the country. The government argues increased inequality so a more fairly distribution of the values from the national natural resources is needed. The share prices of listed Norwegian salmon players dropped the day after the announcement. The most important companies of the country are considering cancelling or altering their growth plans after this proposal. According to the leading producers, this was unexpected.

Meanwhile, the Government of the Faroe Islands sent a proposal to parliament to increase taxes up to 10 percent on the income of farmed salmon producers, which would modify the one originally introduced in 2014. Local media says this proposal includes three changes to the current revenue tax system: change the number of applicable tax rates from 3 to 5; increase the salmon price thresholds that determine when each tax rate is applicable; link the salmon price threshold to the average production cost for the Faroese salmon industry, which will be assessed annually.

Scottish farmers and producers have faced a number of challenges during the semester, including labour shortages due to Brexit and pandemic consequences, bad weather impacting on harvests, and logistic delays. The sector requested both Scottish and UK governments to take action and support the industry in terms of growth for the UK economy, job creation and increased revenues. Now the Scottish Government has published its first strategy measures to boost Scotland seafood sector, in order to remain internationally competitive and attract skills and talent.

Chilean citizens rejected a new constitution that, according to the main producers, was going to impact the country's economy, including the production and export of salmon, with ambiguities in the writing. Some understand that salmon farms could have been removed from marine protected areas, which could have affected up to 30 percent of Chile's farmed salmon production, according to estimates. However, the government is working on a new fishing law and there is uncertainty in the sector.

Despite inflation and the consequent increase in prices in recent months, salmon remains one of the best-selling seafood in US supermarkets and grocery stores. In the second quarter, there was a 9.1 percent increase in sales, according to IRI/210 Analytics. Significant marketing and communication strategies from major retailers are seen to promote both wild and farmed salmon, from presentations to diffusion of health benefits.

Trade

Despite logistical and cost difficulties emerged from the consequences of the pandemic, conflict in Europe and high inflation, the main exporting countries registered increases during the first half of the year.

Lower production volumes and increasing demand have resulted in record high prices, which is a significant contribution to the export record registered in Norway during the first half of the year. The 534 500 tonnes of salmon exported worth NOK 48.4 billion, which meant a decrease of 5 percent in terms of volume but an increase of 37 percent in value compared with the first half of last year. Poland, France and the United States of America were the most important destinations for the Norwegian salmon in the period. Meanwhile, the largest increases of exports in terms of value corresponded to France (+50 percent) and Italy (+62 percent).

Particularly, salmon exports in June were the best single month ever measured in value (the previous record was from December 2021). The 87 800 tonnes of salmon shipped worth NOK 8.8 billion meant an increase of 41 percent compared with June last year’s value but a decline of 11 percent in volume.

The Russian-Ukrainian conflict had notably impacted some exports in Norway, for example fresh salmon to Asia, as the closed Russian airspace affected shipments to countries, including South Korea (-18 percent) and Japan (-20 percent) in terms of volume. The Norwegian Seafood Council (NSC) explained that the price increase had also led to a distortion in the flow of goods from countries where salmon is largely destined for smoking before re-export. For example, volume exported to Poland dropped by 18 percent.

In addition, Norway exported 23 800 tonnes of trout worth NOK 2.1 billion in the first semester of the year; down 5 percent and up 35 percent, respectively, compared with the same period of last year. United States of America, Thailand and Japan were the main markets of the third largest Norwegian exported species in terms of value. Belarus and Ukraine were the markets with bigger value declines.

Scottish salmon exports during the first semester of the year were valued at £280 million, down 8 percent compared to 2021, across both European Union sales and non-European Union sales. Salmon Scotland explained this has been offset by increased demand at home, with the impact of the pandemic resulting in a shift with some salmon destined for international markets now sent to UK retailers. France accounted for more than half of the total exports.

The Russian Federation is considering temporarily suspending exports of some of the highest-yielding salmon species and salmon roe, as catches fall compared to 2021, which is driving up prices, some as much as 28 percent month-on-month. The initiative of the Federal Agency for Fishery (Rosrybolovstvo) seeks to meet the demand of the domestic market, framed in the priorities of the government, and the issue will be discussed with companies and trade associations.

Meanwhile, Chilean salmon exports also continued to grow despite the difficult global picture. Atlantic salmon was the main exported product of the sector representing 71.2 percent of the total value, which meant an increase of 29.5 percent compared to June 2021, due to better prices. Overall, 242 997 tonnes were shipped worth USD 2 491 million, which meant a decrease of 9.4 percent in terms of volume. Meanwhile, exports of coho salmon and rainbow trout grew both in terms of value and volume. There is a high and sustained demand for Chilean salmon from the main markets such as Brazil, Japan and the United States of America.

Total US salmonids imports accounted for 238 960 tonnes worth USD 3 123 million during the first half of 2022, a figure slightly below (-1.5 percent) in terms of volume but with a notable increase (25 percent) in value compared to 242 815 tonnes worth USD 2 494 million in the first half of last year. Imports from Chile and Norway grew both in terms of volume and value, while volumes shipped from Canada decreased but value also increased.

Prices

The increased supply forecasted for the second half of the year is putting a downward pressure decline on Atlantic salmon prices in the third quarter of 2022, but with future recoveries after buyers started to build up inventories at low prices. According to the Nasdaq salmon index, Norwegian fresh head-on-gutted Atlantic salmon dropped from NOK 90.74 (USD 9.16) per kg at week 25 to NOK 50.89 (USD 5.12) per kg at week 35, rebounding to NOK 56.02 (USD 5.18) per kg at week 39. Prices for fresh Chilean Atlantic salmon fillets (FOB Miami) declined from USD 16.29 per kg in week 20 to USD 12.82 in week 32, also rebounding, to USD 13.43 at week 39. Some market volatility is still expected.

Outlook

The global political and economic developments keep the main producer’s expectant. Already with less negative consequences of the pandemic, there are other factors, drivers and scenarios that take centre stage and generate great uncertainty for the sector. The increased global supply of farmed salmonids by around 2 percent to 3 percent to 3.5 million metric tons in 2023 forecasted by Kontali and based on GOAL inputs could also be modified.

After overcoming the main blows of the pandemic, and remaining one of the main producers worldwide, the challenging political processes in Chile in addition to the production decisions to be made also brought uncertainty to the country. With the export numbers in the first semester, the industry is speculating that could reach USD 6 000 million for the whole 2022, which would be a new record for the industry and more opportunities for development.

The situation of the tax increase, especially for the Norwegian industry, is an issue that will have to be closely followed because it could have very important consequences for the main producers that have volumes in the country and their short-term harvesting plans. The second half of the year could have a year-on-year production growth from the major producing countries. Earlier than expected harvests could occur to anticipate these possible tax changes. Nevertheless, analysts insist that there will be worldwide repercussions even if it is not approved.