31/05/2023

Inflation, increased energy, raw materials and feed costs marked 2022. The volume of global salmon production declined slightly compared to 2021, while exports from the main producers reached historic highs in value terms. Fluctuations in production is expected to normalize in 2023, with an increase of up to 4 percent worldwide, although the definition of the Norwegian tax proposal is an event that is yet undefined and could be decisive for the industry.

 

Production

Atlantic salmon

Global supply of Atlantic salmon reached around 2 863 700 tonnes during 2022, a marginal decrease of 1.1 percent compared to 2021. The main producer, Norway, accounted for 1 511 100 tonnes, down 1.4 percent compared to the previous year.

 

On the other hand, the latest production figures available from the Undersecretariat of Fisheries and Aquaculture of Chile (SUBPESCA) indicate that the harvest of Atlantic salmon during January-November 2022 was 692 800 tonnes, up 3.4 percent compared to the same period last year.

 

The standing biomass in Norway at the end of the fourth quarter of 2022 was estimated to be 1.3 percent less than at the end of the fourth quarter of 2021. It was 8.2 percent lower in Chile, 5.3 percent lower in the Faroe Islands and 6.2 percent higher in the United Kingdom of Great Britain and Northern Ireland.

 

Other farmed salmonids

Trout biomass in Norwegian farms declined by around 4 percent at the end of December 2022 compared to last year.

 

In Chile, the latest figures available for rainbow trout (up to November) show that the cumulative harvest in 2022 was 62 500 tonnes, an increase of 21.4 percent year-on-year, while 174 700 tonnes of coho salmon represented a 13 percent year-on-year increase.

 

Wild salmon

Salmon runs in Alaska and the Russian Federation decreased in 2022, but are likely to increase in 2023 for some species. The only species in 2022 that saw generous harvests was sockeye salmon, especially from Bristol Bay. As for the US pink salmon, it was a normal non-peak year, but still lower than the last five or six periods. Pink salmon underperformed because it is a two-year cycle.

 

Industry sources also pointed out that Japan has been increasing its chum salmon harvest in recent years, and that has helped supply the Asian market. However, the effects of thisincrease  been minimal on the US chum salmon fishery, as US salmon consumers are loyal to their domestic products.

 

 

Markets

Inflation, increased costs of energy, raw material and feed are some of the drivers influencing the salmon market worldwide, along with some key events at the tax level that could set the course of the industry in the near future. At the consumption level, salmon continues to be one of the favorite fishery products for consumers, despite some significant price increases registered in the period under review.

 

Six months after it was first proposed and generated significant domestic and international uproar, the details of the Norwegian government's salmon tax proposal have finally been released. The plan, which must be approved by parliament, proposes a tax rate for fish farming carried out in coastal waters of 35 percent; that is 5 percent less than the initial 40 percent. Although the basic plan was not significantly changed, the government heard all 420 response submissions. According to the government, only companies with "significant profits" will pay resource rent tax, meaning profits above NOK 70 million (USD 6.7 million).

 

The government insists that there is a long tradition in Norway in which the value created from the use of common natural resources is dedicated to benefit society as a whole. In other words, access to common natural resources has enabled this industry to generate particularly high profits, and everyone should be able to derive greater benefit from the significant value that is created.

 

However, some Norwegian salmon farming companies stated that there were not many changes compared to the original proposal and a final clarification is expected before the summer. Companies continue to evaluate and speculate how this tax will affect their strategies and investments. The discussion in parliament may still bring changes.

 

Another salmon producer looking to increase its tax on the industry is the Faroe Islands, and the newly elected government announced its proposal to adjust the income tax for the salmon farming industry, effective 1 August 2023. The proposal is under discussion with the salmon farming industry and would increase the top tax rate from the current 5 percent to 20 percent.

 

In the United Kingdom of Great Britain and Northern Ireland, the Scottish sector is satisfied with the sales in 2022 reporting yet another successful year. Salmon sales at UK retailers amounted to GBP 1.2 billion a year, with fish in general, increasing its market share towards the Christmas period. In the 12 months to October 2022, salmon accounted for 29.6 percent of total fish sales, an annual increase of 28.9 percent, despite lower volumes and higher food prices. With the turkey shortage in 2022 and the rising cost of living, Scottish salmon was in good demand for Christmas dinners. For Salmon Scotland, the organization representing salmon farming companies in the country, despite rising food prices, rising energy bills and rampant inflation, the fact that salmon has increased its share of the UK market demonstrates the popularity of the fish.

 

In Chile, the government has intensified regulations and investigations into overproduction and escapes of fish in the country's salmon farming industry, with heavy sanctions on companies that have violated the parameters of their permits. This, together with the administrative processes for the renewal and approval of concessions, and the production challenges that the industry must face, such as investment in R&D and innovation, somewhat slowed down production.

 

The Salmon Council, a union that gathers companies representing over half of Chilean salmon production by volume, stated that 2022 was a year of recovery in Chilean salmon exports after overcoming the demand disruptions during the COVID-19 pandemic and highlighted the industry's ability to overcome the associated difficulties. Companies have added more value to their products in line with the global trend regarding the consumption of healthy and sustainable proteins such as salmon. It should be noted that, unlike the previous year, this increase does not correspond to a higher production volume but to better prices and a higher added value of the products.

 

In the US market, some trends installed circumstantially during the COVID-19 pandemic seem to have stayed. In particular, the strong demand and consumption of frozen Atlantic salmon fillets in the US market is a development that was notably marked during 2022 and a trend already observed in 2021. This is in line with the country's records of imports of fishery products in the year, in which salmon was one of the most outstanding products. More Atlantic salmon is being consumed, and more is being paid, as prices have risen throughout the year.

 

Industry sources and analysts highlight that in these two years there were higher sales through the retail sector compared to restaurants that suffered from restrictions. In addition, consumers are increasingly looking for products that they can keep and cook at home, so frozen fillets will continue to grow. Nevertheless, fresh fillets remained the main category of Atlantic salmon in the US market.

 

Trade

Some important overall seafood trade flow changes in recent years become apparent. China went from being the main seafood exporter to becoming a net importer, which led Norway to become the new top exporter after a decade in second place. Norwegian exports are mainly coming from salmon exports, which represents more than 70 percent of total export earnings.

 

2022 was the best year ever registered for Norwegian seafood exports in terms of value, and this is replicated for the main species produced in the country, salmon. For the Norwegian Seafood Council (NSC), the reopening of society after the COVID-19 pandemic has positively affected the demand for salmon. Norway exported 1 255 851 tonnes of salmon worth NOK 105.8 billion in 2022, the best-ever export year for salmon as NOK 100 billion was exceeded for the first time. This figure meant a slight decline of 2 percent in volume but an increase of 30 percent in value compared to 2021.

 

In addition, Norwegian salmon has had annual growth in export value of 14 percent over the past ten years. These are extraordinary figures and far above the other exports in Norway. An increase in demand, combined with a slight decrease in produced volume, both globally and in the domestic market, is the biggest reason for the price increase, in addition to increased further processing and a weakened Norwegian krone. Poland, France and the United States of America were the largest markets for salmon in 2022, with Poland being the first largest single market due to its processing industry.

 

Regarding trout, Norway exported 54 979 tonnes worth NOK 5 billion in 2022, a decline of 13 percent in volume but an increase of 24 percent in value. This was also a year with record-high export value for trout. The United States of America, Thailand and Lithuania were the largest markets for Norwegian trout in 2022, with the first one receiving 8 629 tonnes. NSC highlights that a substantial shift towards the export of fillets instead of whole fish contributes enormously to the increase in value in the US market.

 

For Salmon Scotland, despite a series of economic challenges last year, Scottish salmon farmers continued to meet international demand for the UK's most popular food export. Scottish salmon was the UK's biggest food export in 2022, after accounting for GBP 578 million, down 6 percent compared to 2021, while in terms of volume, there was a decline of 26 percent due to tight supplies globally and more Scottish salmon being sold in the UK domestic market. This product was exported to 54 countries, with the EU market absorbing almost 64 percent of sales and France leading as a unique market. At the same time, North America and Asia registered an increasing demand, specifically the United States of America and China.

 

In Chile, record export figures were reached during 2022 after exporting 751 000 tonnes of salmon and trout, worth USD 6 605 million, increases of 3.8 percent in volume and 27.3 percent in value, although the volume remains below levels seen prior to the COVID-19 pandemic. Strong prices in the most relevant markets for the industry, such as the United States of America, Japan and Brazil were highlighted, caused by an increase in the cost of inputs for salmon production, greater global demand and the lack of crop growth, which impacted the supply of salmon.

 

The US market took a third of this volume and nearly half of the value and also meant increases compared to 2021. Japan was another important market, absorbing 21 percent of the volume exported. Regarding the Latin American markets, Brazil and Mexico are the countries where Chilean salmon is highly appreciated by consumers, and registered significant increases in terms of volume and value on exports of salmonids. On the other hand, although China bought smaller quantities of Chilean salmon compared to the other markets, it registered significant year-on-year increases: 58 percent in volume and 83 percent in value.

 

In the United States of America, in 2022, some 499 300 tonnes of salmonids were imported worth USD 6 256 million, up 3 percent in volume and 19 percent in value compared to the previous year. Chile was the leading supplier with 46 percent of the volume share, Canada provided 17 percent, and Norway almost 14 percent.

 

Prices

Salmon prices began the year with an upward trend in both Norway and Chile, while a more irregular trend was observed in Scotland. In some markets, prices rose to record highs at wholesale and consumer levels.

 

However, according to the NASDAQ salmon index, Norwegian fresh, head-on-gutted Atlantic salmon were selling for NOK 101.26 (USD 9.69) per kg in week 13 of 2023, falling for two consecutive weeks. Prices for Chilean fillets exported to the US market reached USD 6.71 per kg at week 12, starting a downward trend since week 8. Meanwhile, Scottish fresh, head-on gutted Atlantic salmon to UK factories were selling for GBP 8.90 (USD 10.99) per kg in week 13, remaining flat since week 11 and compared to GBP 8.70 in week 10.

 

Outlook

Salmon production is expected to normalize by 2023. In particular, for Atlantic salmon production, there will be a "normalization of growth" in production, as Norway and Chile use regulatory controls to moderate supply growth. Global salmon production is projected to increase by approximately 4 percent in both 2023 and 2024, approaching 3 million tonnes in 2023 and surpassing that amount in 2024.

 

In Norway, the tax definition of uncertainty translates into caution regarding investments and the possibility of signing new contracts.

 

The Scottish salmon industry seeks new export opportunities and removes trade barriers after Brexit. The challenges for the coming year also include more investment in research, development and innovation in aquaculture.

 

For Chile, there is optimism in the sector that exports will remain dynamic during 2023. The sector expects to continue with the trend shown in 2022 of sustained demand and price that gives stability to the industry and a long-term growth perspective for the production chain. However, the rise in the cost of raw materials in global markets is a cause for future concern.

 

The US market closely follows all the events that may impact the main salmon supplying countries. However, with so much uncertainty ahead, predicting how it will impact prices and demand is impossible. Norwegian taxes, hatchery closures in Canada and flat production prospects in Chile may affect future contracts.

 

Traders in the US wild salmon sector are uncertain as to how much Russian product will enter global supply chains. After the conflict with Ukraine, many countries sanctioned and prohibited products from this source, but some wild salmon from Russia still enters international trade through third countries for processing, therefore, the excess of pink salmon in the Russian Federation during 2023 could lead to more Russian salmon arriving to western markets after being processed in a third country. Furthermore, the end of China's "zero-COVID" policy will reactivate this important processing capacity.

 

Preliminary forecasts for 2023 show an expected total harvest of 511 000 tonnes of Pacific salmon in the Russian Federation, double compared to 2022, but well below the projected total harvest of 322 000 tonnes. In addition, landings of 375 000 tonnes of pink salmon, 91 000 tonnes of chum salmon, 35 000 tonnes of sockeye salmon, and 9 000 tonnes of coho salmon are expected. It should be noted that in 2021, the Russian Federation caught 520 000 tonnes of salmon in total.

 

According to industry sources, after dealing with two years of complications from the COVID-19 pandemic, Russian salmon companies are now facing possible government intervention as a means of keeping domestic prices low.